Corporate legal departments in Australia are realising that this year may become one fraught with risk, elevated expectations, reduced resources, and a strict need to focus on bringing value as an in-house legal department.
Following the Australian government’s Royal Commission examination into misconduct in banking and other financial sectors, plus new changes to whistle-blower protection laws, organisations are finding themselves on the defensive. Indeed, these two regulatory events have become key motivators for organisations to look inward and establish strong self-regulation in order to rid themselves of any hints of unethical corporate behaviour.
The mood in Australia also is weighed down further by general global economic uncertainty, which carries with it the pressure to mitigate litigation risks, corporate budget cuts, further corporate restructuring, and the strong push to remain commercially viable in the current market. It is not surprising that corporate in-house legal departments in Australia are feeling a lot of that pressure.
A newly published report the ‘State of Australian Corporate Law Departments 2019’, from Thomson Reuters and UK legal research firm Acritas, explores some of these themes that are forcefully impacting the Australian corporate legal department’s role both within their parent organisation and in today’s changing legal environment.
Among the key factors that could impact Australian general counsels (GCs) that were identified in the report include:
Financial constraints: Corporate legal departments and their in-house lawyers and staff are expected to bear the brunt of deeper budget cuts over the next 12 months, the report noted. In fact, legal spend is projected to decrease in Australia at a greater rate than the global average and among corporate law departments in the US and China.
Focus on value: As a result of this budget tightening, more Australian legal departments are likely to elevate the consideration of the value proposition of outside legal suppliers and looking to the value-add as a key component of their selection criteria. Further, as Australian corporations demand a more strategic, proactive approach from their in-house legal departments, GCs in turn are going to be expecting more from their outside counsel and other legal service suppliers.
Corporate legal departments will keep commercial and strategic thinking top of mind as they seek to improve their own efficiency, value, and performance. As a large part of that, strategic-minded legal departments will seek outside legal providers that best demonstrate that they understand the true nature of the organisation’s business and are able to respond with solutions to legal and business problems that show commercial acumen and strategic thinking.
Innovation push: As a further result of continued budget cuts, GCs are increasingly seeking new and innovative ways to manage and deliver their legal work, according to the report, which showed that 48 percent of GCs surveyed are introducing innovative solutions to drive efficiencies and more effective working practices. These GCs also expect the same innovation-driven mindset among their legal suppliers, but the survey showed that just 37 percent of GCs feel their legal providers are modern and innovative enough for the current legal environment.
Adopting legal technology: However, even with this innovation-driven mindset, the adoption rate of legal technologies to support such needed innovations as automation and process improvement among Australian in-house legal teams is relatively low compared to other major legal markets, the report shows. As the pressure from parent corporations continue to increase, in-house legal departments will have to commit to a high-level technology usage if they are to meet their goals in efficiency, process improvement and delivery of value.
Need for global market outlook: While the report shows that 38 percent of foreign multinationals have legal needs in Australia and 71 percent of Australian organisations have a need for advice outside of the country, corporate law departments and their outside counsel firms increasingly need to be able to support these global needs with a strategic and well-planned approach.
These and other challenges are facing Australian corporate law departments in the coming year, and many of these are expected to possibly increase in the future, according to the report. However, with the right tools, strategic planning, and quality outside assistance— GCs and their in-house legal team can rise up to meet these challenges and seek to drive greater value within their own department and to the corporation as a whole.
Toward that end, this report includes a legal department tool-kit that is based on recommended performance metrics and best practices for those GCs looking to accelerate their legal teams’ in-house performance in 2019. The tool-kit features ways to create metrics-based performance improvement, review technology processes and efficiencies, and address what may be stopping your department from developing truly collaborative relationships.
Corporate legal departments should draw on the direction and insights found in this report to improve their value to their corporation, and further maintain their organisation’s resilience and commercial viability for years to come.
Download the full report, the ‘State of Australian Corporate Law Departments 2019’, here.