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What Corporate Legal Department Challenges Will Keep GCs Up at Night in 2022?

January 14, 2022

It is fair to say that all of us were happy to close the chapter on 2021 and turn to a new page this year. The COVID-19 pandemic has upended our way of life for the last two years and has take a devastating human toll on millions of families.

For in-house counsel, the pandemic has been disruptive to department operations — but some of this impact has merely accelerated industry transformations that were already underway. As we embark on a new year in 2022, GCs are anticipating the continuation of many of these trends, while trying to look around the corner for emerging challenges to their department operations.

Here are three corporate legal department challenges that in-house counsel will be monitoring in 2022:

Managing costs in inflationary environment

This is a perennial concern for in-house counsel since corporate legal departments are typically evaluated by financial metrics and under executive mandates to manage expenses aggressively. But the stakes are going to be ratcheted up in 2022 as inflationary pressures drive outside counsel costs even higher.

Some law firms already raised their billing rates twice within a 12-month period from 2020-2021, according to The American Lawyer. Corporate legal department consultants anticipate that most law firms will be boosting rates by 5% to 10% in early-2022 in order to generate the revenues needed to absorb escalating costs and especially rising payrolls. In-house counsel may try to push back against these increases, but the realities of the marketplace are that law firms must compete for the top legal talent and the salaries they command.

Managing costs in the current inflationary environment will be a challenge, particularly given the uncertainties of how corporate budgets will be impacted in the event of sustained long-term inflation.

Leveraging technology to increase efficiency

It is no secret that corporate legal departments were laggards when it came to the adoption of technologies into their day-to-day workflows. “The legal industry has a digital gap separating it from business and its customers,” Forbes reported in July 2021. “Business is adversely affected by a digitally laggard legal function.”

However, GCs are now leading the charge for leveraging advanced tech-enabled tools to unlock greater efficiencies and drive innovation, a management imperative that will challenge them daily in 2022.

“Law departments across different industries have been keenly attuned to further integrating different types of technology into their day-to-day operations,” reports Law360.

James Turoff, general counsel for The Hershey Co., shared a variety of ways that his legal team is working to implement technologies that will assist in delivering some of their attorneys’ routine tasks. One example is the adoption of a contract lifecycle management system that will utilize AI to have machines complete basic contracting work.

The proof is in the trail of money. Legal technology budgets will increase threefold through 2025, according to Gartner Inc., as GCs face “unprecedented pressure both in terms of managing legal workload and driving efficiency in their departments.” Specifically, GCs will be seeking tech-enabled solutions that deliver greater visibility into their department expenses, access to data-driven insights tailored to their unique environment, and financial metrics that help them manage expenses as aggressively as possible.

Deeper focus on ESG issues

Companies of all sizes are experiencing an increased focus on environmental, social and corporate governance (ESG) issues, such as climate change, social justice, diversity and inclusion, and overall corporate responsibility and sustainability. For example, while just in one in five large U.S. companies published a sustainability report as recently as 2011, more than 90% of them publish one now, according to S&P Global’s “State of Green Business 2021” report.

GCs have a key role in advising their executive teams and corporate board members when it comes to ESG issues. This means they will increasingly be expected to anticipate areas of vulnerability and identify areas of opportunity in the development of the company’s ESG program in 2022.

LexisNexis® Practical Guidance contributors Jon Ocker, Mona Dasani and Shelia Harvey — lawyers at Pillsbury Winthrop Shaw Pittman LLP — created a comprehensive “ESG Board Advisory Checklist” that identifies specific items that GCs should consider this year when advising their executives and boards of directors regarding the company’s ESG strategy. These include the importance of including diverse members with appropriate ESG skills, the option of issuing green bonds to fund sustainable projects, a clear knowledge of the company’s ESG rankings so they can measure management progress, and compliance with new federal regulatory standards that require greater transparency on ESG issues.

As we enter a new year and the new challenges it will bring, one thing is certain: Companies will rely on corporate legal departments to mitigate external risks to the enterprise, facilitate business development and anticipate internal challenges. This requires that GCs have fast access to the information they need to shape legal strategy and adapt to changing circumstances.

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