Looking Glass Report 2020
Section 4: Role of General Counsel and the Board
Technology and Innovation
Clyde & Co is pleased to present Section 3 of the Looking Glass Report 2020, in collaboration with professional member network Winmark. The annual Looking Glass Report investigates trends and developments that impact senior legal leaders, both in-house and in private practice. Section 3 considers Technology and Innovation, following Section 1 on the Risk Landscape, Section 2 on Growth, and the final section looking at the Role of the GC.
Our research has traced how GC and Board technology needs and perceptions of technology risk has been changing as the COVID-19 crisis has evolved and addresses how this will impact their future investment strategies and actions.
Corporate legal functions are at the forefront of introducing technological innovation into their operations, alongside the financial and IT functions.
This is as a result of the substantial opportunities for automation in litigation, case preparation and due diligence processes. There are significant opportunities for General Counsel and their commercial legal teams to be freed up from repetitive tasks and redeployed onto more strategic, complex and value creating work. Technology can also play a vital role in helping organisations achieve a clear, integrated view of risk, such as utilising self-service tools and technology that can track, consolidate and proactively manage risk data.
COVID-19 will have a profound impact on the pace of this technological innovation. It has accelerated digital commerce and automation to an extent that all organisations are re-assessing their digital initiatives. Digital interaction has become essential in all operations forcing both organisations and individuals to adopt technologies at rapid speed. All organisations are thinking in terms of more rapid investment in secure, remote infrastructure; to deal with the current necessity for remote working, to be in a better position for future crises, and to capitalise on the efficiencies and practical benefits that some organisations have discovered, having been forced to try out the technologies at scale for the first time over the last few months.
Data security has become an even greater priority as a result of the move to remote workforces. Common themes emerging from our consultations include a widely held desire to build on the flexibility of remote working, to accelerate digital adoption and to refocus digital efforts to reflect changing customer expectations.
The ability to work virtually and in an efficient, paperless manner has been emphasised. We’ve had to become truly paperless and have acquired a docusign license. There has been an emphasis on online training for both soft and hard skills and we have had increased use of videos/webinars as a ‘shared experience
Head of Legal, Technology
Our survey conducted just at the outset of the pandemic suggests that most General Counsel in large legal departments have embarked on transformational technology projects, but that implementation has often been problematic. 38% of General Counsel say that past technology initiatives have not lived up to expectations, up from 25% last year, and a fifth have experienced schedule overruns.
Technology vs. expectations
However, despite these frustrations, the biggest perceived challenge to the effective harnessing of technology is having access to the budget and skills to resource innovation projects. Although the situation has been improving and the ability to respond to COVID-19 pressures so quickly and effectively has increased confidence, the in-house legal community has been slow to develop its use of innovative technology – budgets remain tight and false economies of under-investment are holding back many legal functions.
There is a significant knowledge and skills gap. 37% of General Counsel see deciding what technology would make the best investment as a barrier, while a quarter cite lack of knowledge. The accelerated development of tech-based partner and supplier relationships is required to fill knowledge gaps and upskill teams.
The GDPR remit of General Counsel, coupled with their crucial role in managing the legal implications of the use of AI and data within their organisations, is bringing them to the forefront of conversations about digital ethics. Developing ethical rules and codes of conduct for data management will continue to evolve as a central responsibility of legal departments, demanding further integration with and understanding of the objectives, priorities and responsibilities of other corporate functions including marketing, HR, technology, operations and finance functions.
Cyberattacks and data privacy breaches remain the top technology threats that pose a risk to organisations. Over two-thirds of General Counsel and Board Directors say they pose a high or very high risk.
Lack of preparedness
Preparedness to deal with all risks remains at similar levels to last year – only 59% of General Counsel and Board Directors say they are prepared for cyberattacks and there are similar shortfalls in General Counsel preparedness to address all areas of potential technology risk. Complexity of systems is also an area of concern with a high perceived level of risk (66% General Counsel, 58% Board) and a low level of preparedness (36% General Counsel, 32% Board).
Board Director perceptions of the technology threats facing their organisations are closely aligned with General Counsel, and they feel similarly prepared to deal with cyberattacks and data privacy breaches.
However, this year Board representatives have become more confident than General Counsel that they are prepared to deal with many of the other technology risks. This may reflect the greater knowledge that Board Directors have of positive technology initiatives and developments within the rest of the organisation.
Despite the significant technology knowledge and skills gap within organisations, and the clear need for legal departments to develop partner and supplier relationships to address these shortfalls, only 25% of General Counsel say they have external expert advice on the impact of new technology within the organisation, and just 25% say that training on new technology developments is in place for legal teams.
This proportion has not significantly changed since the previous wave and will inevitably result in a lack of technology expertise. It is a key area for legal teams to address to ensure future technology initiatives meet business objectives and to meet up to expectations. Without the appropriate external technology advice and relevant internal training organisations will suffer a lack of knowledge at the evaluation stage of technology initiatives and a skill gap at the implementation stage.
Technology is changing the operational and competitor landscape across all sectors, and is fundamentally altering the way all business functions are creating value for their organisations.
For General Counsel, data analytics and artificial intelligence (AI) are the technologies that will have the greatest impact on organisations in the next two or three years.
49% of General Counsel say data analytics will have a high impact in their organisation but only 33% say they have a good understanding of the innovation or its legal implication. There is a clear gap in the level of understanding for this (and other technologies) but there is evidence that this gap is narrowing in relation to the more embedded and mature technologies. For example, last year only 22% claimed a good understanding of data analytics and the use of predictive analytic techniques and this has increased by 11% to 33%.
E-commerce and our digital platforms are becoming increasingly important. Understanding the ways our customers will access the services we provide whether through our retail stores and garages or our halfords mobile expert vans, together with the ways they can finance their purchases are key focus areas for us going forward.
Tim O’Gorman, General Counsel and Company Secretary, Halfords Group
41% say AI will have a high impact and 29% have a good understanding – this perception has remained largely unchanged year on year. There remains more confidence in the understanding of AI (or machine learning) when used for document review, indicating that engagement with and evaluation of this technology is relatively mature.
As was the case last year, Board Directors consistently express greater confidence than General Counsel about their organisations understanding of technology. Boards will have a key role in facilitating advice, training and knowledge sharing to foster co-ordinated and integrated implementation of technology initiatives that deliver genuine value across organisations.