Press release

7 May 2021 London, GB

Tech an issue for UK GCs seeking to manage risk and transform legal departments, finds EY

Tech an issue for UK GCs seeking to manage risk and transform legal departments, finds EY

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Nick Cosgrove

Senior Manager, Media Relations, Ernst & Young LLP

Professional services corporate communications specialist. Reluctant dog owner and long-suffering Watford fan.

Related topics Law
  • General counsel (GCs) report compliance, data privacy and cybersecurity are key risks – but under one-third say they have the tech to do their job
  • 86% of those surveyed are making changes to their legal department
  • 98% of GCs surveyed say they struggle to secure budget for tech investment, while only 50% of GCs have made greater use of tech in the last year
  • Over four-in-five GCs making use of Alternative Legal Service Providers

Compliance, data privacy, and cybersecurity are the biggest risks currently facing UK legal departments, according to an EY survey of general counsel at 170 companies.

On a scale of 1-to-10, where 10 signifies an important business risk, respondents rated these three factors at an average of eight (data privacy and cybersecurity) or above (8.1 – compliance). The next highest rated risks – intellectual property and tax – scored averages of only 6.7 and 6.1, respectively.

However, EY also found that many UK general counsel (GCs) feel they lack the tools and technology to manage these risks effectively. Technology is also presenting a challenge to GCs looking to transform their legal departments and ensure they’re aligned with business strategy.

Seventy-one per cent of respondents said they don’t systematically track contractual obligations, 63% said they do not have access to accurate information on their legal entities, while 62% said they do not have the data and technology they need to respond to a legal breach. Only 30% of respondents said they have the technology needed to do their job.

Meanwhile, only 39% of respondents said they are confident in their department’s ability to manage sudden changes in the business environment.

Anup Kollanethu, EY’s UK&I Head of Legal Managed Services, says: “More than ever, we hear from general counsel that they need to transform their legal functions, and that they are facing unprecedented levels of change. As we’ve seen with both Brexit and COVID-19, the legal department has a crucial role to play in both protecting their business from future crises, and in realising the strategic agenda.

“Better data and technology will be a key factor in building the confidence of legal departments to deal with disruption and uncertainty in the future. Investment in technology will help departments build confidence, although our research also shows that legal departments can sometimes struggle to get the investment they need.” 

While 86% of respondents reported making changes to their legal operations, an overwhelming 98% of the GCs surveyed by EY said they faced challenges securing budget for investment in technology. Only 50% of respondents said they had made greater use of technology in the last 12 months.

Anup Kollanethu adds: “In our experience, the more the case for investment is demonstrably linked to enabling the organisation to deliver on its strategy and fulfil its purpose, the more likely it is to be approved. Our research found that just 44% of the general counsel felt confident that their day-to-day work is aligned with corporate strategy which may explain some of the difficulties experienced in securing the investment needed.” 

Opportunities for legal functions to be better aligned with corporate strategy

EY’s survey also found that many legal departments are under pressure to cut costs, with 81% of respondents planning to reduce spend. Sixty-six per cent of those surveyed said that greater use of technology offered significant or very significant cost savings opportunities – more than double the proportion of respondents selecting the next most common option, ‘insourcing tasks’ (31%).

However, the survey also found that 69% of respondents said they lack the data and technology required to optimise operations, while 83% lack the skills to automate.

Phil Goodstone, EY UK&I Head of Law says: “There are some great examples of organisations reshaping their legal operations, making greater use of technology, optimised processes and striking the right balance between in-sourcing and using alternative service providers. As in any market though, some organisations are further down the change curve than others. This means there is significant catch-up potential available to those legal teams willing to embrace it.”

Almost a quarter (23%) of respondents said they are making ‘extensive’ use alternative legal services providers (ALSPs), while just 16% said they use them ‘minimally.’ Seventy-six per cent of respondents who use ALSPs use them for contract management, 73% for employment law, and 67% for legal operations support.

Phil Goodstone adds: “The best examples of transformation we see are typically where departments are clear about where they want to get to, and explain to stakeholders how they will get there and what they will achieve. In those cases they are able to make a compelling business case to secure investment and buy-in, and create a multi-year change programme. It is a real privilege to be on those journeys with clients and to see the benefits that flow, particularly in terms of talent development and retention.”