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Data Risk Management

CLOs Are Prioritizing and Budgeting for Compliance in 2023

March 2, 2023

Reprinted with permission from the March 1, 2023, issue of Corporate Counsel. © 2023 Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

Difficult decisions are being made every day by legal departments and their executives, who continue to face the many legal and business challenges associated with the ongoing pandemic, global crises, and economic challenges and uncertainties. These challenges range beyond legal strategy, to include business operations, data privacy, regulatory compliance, and even cybersecurity response. To make the best possible decisions, chief legal officers and general counsel must understand not only their business's needs, but also how larger trends are shaping CLOs' and GCs' roles and responsibilities across the US and the world.

The Association of Corporate Counsel (ACC) recently released the results of the 2023 Chief Legal Officers Survey, which surveys ACC members worldwide who are the highest-ranked legal officers in their respective legal departments, including GCs, chief legal officers, executive vice presidents, and other job titles. In its 24th consecutive year, the ACC CLO Survey is the largest international survey of CLOs. The results of this year’s survey reveal CLOs’ preoccupation with several related themes, including compliance and data privacy, legal operations, and the increasing use of technology to address risk, efficiency, and cost concerns.

Compliance Remains a Top Concern

Survey responses show that GCs across the world are prioritizing cybersecurity, regulatory compliance, and data privacy as they begin the new year, and they expect their biggest legal challenges will come from industry-specific regulations and data protection privacy rules. CLOs also anticipate stepped-up enforcement of regulations, with 67% of CLOs expecting the volume of privacy-related regulatory enforcement to increase in 2023, up from the 60% who thought so last year. Almost all CLOs (93%) expect the trend toward increased data privacy concerns to accelerate.

A Slowdown in Hiring

However, even as compliance and privacy concerns increase, it appears unlikely that law departments will have more staff on hand to manage the workloads. Fewer CLOs expect staffing increases across all positions in the year to come: 38% anticipate additional hiring of lawyers in 2023 compared to 45% last year, 25% expect to add paralegals to the team compared to 29% last year, and just 16% are considering hiring privacy professionals compared to 19% last year. This will put increasing pressure on legal departments to manage a growing list of responsibilities – which now include areas like compliance, privacy, ethics, risk, government affairs, ESG, and cybersecurity response – without a corresponding increase in staffing levels.

Increased Investment in Technology

To compensate for the anticipated slowdown in hiring, many of these same CLOs plan to focus on legal operations and cost minimization strategies. In budget-conscious times, demand for more cost-effective and efficient processes increases. Accordingly, legal operations is by far the top strategic initiative for legal departments in 2023, with 70% of CLOs ranking operations as one of their top three strategic priorities, ahead of right-sourcing legal services (45%) and cost minimization (43%).

Forty-one percent of CLOs say they plan on investing in new legal technology solutions in 2023, with a particular focus on contract management technology, document management technology, and workflow tools. Survey respondents are also turning to technology to address data privacy and compliance concerns, and appear likely to seek more powerful ways to automate activities like data mapping, data management and data security. More than half of CLOs say they implemented technology solutions in 2021 to help comply with data privacy regulations, and 84% expect their expenditures for regulatory compliance solutions to increase in 2023.

Advice for Law Departments

Don’t let legal become a bottleneck. In open-ended responses about improving internal client satisfaction, survey respondents report turning to technology to achieve a variety of aims: to automate simple, routine tasks; to optimize contract management and matter management; to provide clients with self-service tools, forms, and resources; and to establishing a ticketing system to monitor turnaround times and generate reports on legal service delivery metrics. CLOs also indicate they regularly seek feedback from internal clients through surveys, meetings, reviews, and in person to build rapport across functions and keep communications fluid. In the words on one respondent, “It’s not enough to be a good lawyer, you have to be more. You need to be a business partner first and then insert your legal expertise.”

Keep the focus on risk. Regulatory issues remain the number one concern for CLOs globally. As regulations continue to expand and evolve over time, and as enforcement increases, many are wary of the risks of falling out of compliance. Whether you are struggling to keep pace with the increasing volume and complexity of regulations across multiple jurisdictions or concerned with increased regulatory pressure in specific industries, it’s important to regularly assess and prioritize the risks as they apply to your business. How confident are you in your organization’s ability to remain in compliance with constantly changing laws and regulations? How prepared is your organization to respond appropriately and decisively to a data breach or to allegations of regulatory misconduct?

Adopt holistic technology solutions. For CLOs and their legal departments, the genie won’t be going back into the bottle. They will be responsible for helping solve legal, privacy, regulatory, compliance, and even cybersecurity response challenges for the foreseeable future. Adopting point solutions, whether processes, technologies, or both, will only increase complexity and make management more difficult. Advanced, integrated technology solutions that provide a holistic view of data-based risk for legal, privacy, and other regulatory requirements can provide answers to these questions in real time and help you become more proactive in your responses to compliance, privacy and data security challenges.

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