COVID-19 and legal spend: time is money

The COVID-19 pandemic has had an unprecedented effect on global business, with challenges being faced across all aspects of running a company. In-house legal teams are having to react quickly to fast-paced and dynamic situations involving, among other things, their companies’ staff policies, supply chains, insurance, claims management, and the use and management of property.

Although the pandemic is a global issue, there is no global answer. As Clare Francis, a partner at Pinsent Masons notes, the critical challenge for companies with an international footprint will be that different countries are going back to normal at different times but also at a different pace. The message is clear: general counsels (GCs) are dealing with a litany of new risks in uncertain territories. The pandemic is entirely unprecedented. Adequately preparing for legal risks that come along with that is a headache at best, and a crisis at worst.

Depleted resources

In-house legal teams are managing this pressure at a time when many have been forced to freeze promotions and recruitment. GCs are confronted with the challenge of how to cope with the heightened need for legal resources during a pandemic while working with depleted teams and, in particular, how they can minimise liabilities and maximise productivity at a time when their budgets are under strain. Part of the solution to these issues, as for many other problems in modern times, is technology.

Digital transformation

Digital transformation means taking technologies that are capable of streamlining and optimising workflows, and integrating them into a business. Digital transformation has been slowly progressing up most companies’ agenda for some time but this has accelerated as a result of the pandemic. There is cause for optimism given how quickly companies have reacted by using technology to support remote working, operational delivery and changes to their supply chain. However, digital transformation comes with increased understanding that managing legal risk does not just rest with the in-house legal team: there is a need for collaboration across the entire company.

Need for collaboration

In-house legal teams were once viewed as existing solely to protect a company from external legal threats; like a protective shell which was designed to react to threats and neutralise them. However, the position has changed.

Protecting the company is still a crucial responsibility for GCs, but there is increased recognition of the fact that managing legal risk does not just sit in one part of the business. Legal input is an integral part of the business, whether that is in relation to contracting with customers, external suppliers or the company’s own workforce. A GC needs to collaborate with other business functions, external advisers and the supply chain in order to create an effective strategy for the company.

Document automation

GCs should look at their internal processes and consider whether technology that they already use to automate and streamline these processes could be extended for use beyond the in-house legal team. For example, document automation might be fundamental to lowering costs and creating efficiency across the entire company. Document automation allows for the rapid assembly of documents and suites of documents, creating a good first draft that requires minimal editing. It also reduces risk by having fewer errors in the document but also by reducing the need to maintain multiple templates. When integrating document automation into a wider workflow, data from other stages can be re-used without re-entry, populate databases and support analysis.

Improving speed-to-revenue

Another crucial issue for companies is ensuring healthy cash flow. Digitisation of the in-house legal team’s work has the opportunity to help here: automated project management playbooks and tracking of negotiations can help to identify the so-called “pinch points”, which are those avoidable differences between starting positions and what the market will accept. The faster that a GC can draft and negotiate contract terms, the faster they can get those contracts signed, and the faster the company will receive payment. In an environment where clients are not guaranteed to pay, and suppliers are not guaranteed to deliver on time, this is of paramount importance.

Obsolete arrangements

In these times, because of the effect of COVID-19, existing arrangements and contracts are not necessarily fit for purpose anymore. As the environment has changed around them, large parts of them have likely become obsolete and will need to be re-analysed or re-negotiated.

In addition to the COVID-19 pandemic, there are currently a number of external factors that will require GCs to review their existing contractual arrangements (see box “Other external factors”). While technology solutions exist to help with these retrospective reviews, it is likely to be better to construct new contracts digitally, so-called “data-driven contracts”, so that future reviews do not need to involve artificial intelligence or an army of lawyers. Undergoing a digital transformation includes identifying opportunities, such as these, to redefine, standardise and automate processes.