Cybersecurity Ranks Among Top Concerns of Corporate Legal Departments

Reducing cybersecurity risks is top of mind for good reason. According to the Association for Corporate Counsel's 2018 cybersecurity report, one in three in-house counsels have experienced a data breach — a significant increase from the previous year, when only 15% reported a breach.

Data security, regulatory changes, and ethics and compliance remain priorities for most companies, and in turn, for legal departments. It's especially telling that cybersecurity concerns rose in the 2018 survey, while reducing outside legal costs and keeping apprised of activities/impact rated less important than in 2016.

Protecting information has long been an in-house priority given the substantial repercussions of a breach or data privacy lapse. As Deana Uhl explains, as threats evolve and companies look to mitigate risks as much as possible “[i]n-house counsel is facing growing responsibility to minimize damage to the corporate reputation, loss of key data, and legal and regulatory penalties.”

Implementing cybersecurity best practices and data protection measures also help law firms adhere to Formal Opinion 477 issued by the American Bar Association's Committee on Ethics and Legal Responsibility. According to the mandate, firms must undertake reasonable efforts to make sure client information is not hacked.

Cybersecurity is a continual concern for the legal industry as a whole given the significant amount of sensitive data legal departments and law firms hold. The risk is not limited to those working in M&A or finance; the nature of any in-house team's work involves information that must be protected. The risk of cybersecurity incidents is high. As Jeff Ton noted in Legaltech News, strong data protection measures are especially crucial “since cybercriminals have increasingly come to view the legal industry as a big payout for cyberattacks.”

For legal departments in 2018, among the factors heightening concern with cybersecurity was the May deadline to comply with the EU's GDPR, which imposed new rules for how companies handle personal data of those in the EU and steep fines for non-compliance. The EU requirement also added a new layer of uncertainty to an already complicated issue. In particular, the new regulations created questions and speculation over whether the U.S. will implement a federal law to legislate how companies manage consumers' personal data.

Regulatory Matters

GDPR compliance is likely among the contributing factors to another headache for legal departments: time spent managing regulatory matters.

Survey respondents reported spending more time handling regulatory matters, relative to a year earlier; 76 % of respondents rated regulatory matters as somewhat or very important to their department.

Of course, the new EU requirement was not the only driver of the increase. With a new executive administration and Congress in the US, a number of regulatory changes affected a range of industries and had a major impact on how in-house teams allotted their time. Continual changes in government regulations — especially in areas including employment, data privacy and immigration — are hitting departments the hardest.

One attorney respondent noted, “Implementing changes to comply with new regulations at the business level,” was among the department's key challenges centered around maximizing resources.

General Counsel's Evolving Role

Dealing with new regulations is not the only new challenge legal departments are confronting.

Another emerging trend shows general counsel are increasingly serving as business advisors in addition to providing legal advice; 63% of respondents indicated they spend time advising their CEO and executive management.

As Liquid Litigation Management recently explained: “In-house counsel's role continues to evolve within many corporations. Increasingly, counsel is regarded not only as an advisor, but also as a partner that's integral in the growth of a business.”

Their increased level of involvement comes with particular emphasis placed on board of director and leadership guidance and advising, alongside expanded business duties. This development is part of the ongoing trend of legal departments being asked to cover more ground in practice areas and duties.

Avoid the Pitfalls

The growing demands on legal departments, alongside budget constraints, can lead to challenges including budget stress, staffing woes and dependence on outside counsel. The Thomson Reuters report revealed several measures in-house leaders are implementing — involving people, processes and technologies – to achieve greater productivity.

Legal department operations continue to be key to department efforts to drive greater efficiencies. The survey found while most operational activities are handled by general counsel and attorneys, there was greater involvement from operations managers since the previous survey; 29% indicated they have someone managing their legal department operations, up from 21% last year.

Re-evaluating how they partner with outside counsel is another way in-house departments are improving productivity. As in-house teams spend more time on cybersecurity practices and regulatory matters, general counsel must consider what to send to outside counsel.

Legal departments continue to use outside counsel most often for litigation (75%), M&A work (57%) and IP requirements (40%). Overall, the complexity of an issue — whether it involves high-stakes litigation, contracting matters or IP requirements — is the primary driver in using outside counsel.

Corporate counsel are also improving productivity by deploying new technologies, including billing software, and by shifting work from lawyers to paralegals and other staff, among other measures.

Technology helping in-house departments realize efficiencies includes billing software, as well as a heavy focus on electronic document storage and business process improvements. Overall, the top used technologies are document management, electronic signatures, and legal hold and matter management.

Another push to improve productivity involves the use of alternative staffing arrangements, which about 37% of departments reported doing, similar to last year. In addition, 62% reported shifting work from lawyers to paralegals and other staff, while 43% said they use contract attorneys. Finally, nearly one-third (30%) of legal departments created new positions — particularly in the areas of contracts and generalists — due to increased workloads and to bring more work in-house.

Advantages of Efficiency

In examining how legal departments make the most of the resources available to them, the report uncovered why it's important to departments to be more productive.

According to 41% of respondents, the top benefit of being more efficient is the ability to focus on strategic work; 24% said the greatest advantage of being more productive is being able to focus on legal aspects of their job.

Commitment to Improving Productivity

Keeping efficiency front and center is challenging as cybersecurity concerns, regulatory matters and general counsel's expanding role put the strain on corporate counsel. Yet legal departments are rising to the challenge and discovering new ways to manage internal resources.

While attorneys appreciate the benefits of efficiency — working more strategically by focusing on legal work instead of operational activities – more needs to be done to fully realize the advantages of productivity. Stronger adoption of technology — including implementing cybersecurity best practices and data protection measures — would be immensely beneficial to attorneys' efforts to achieve greater productivity.

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Chris Maguire is managing director of the Corporate Legal team at Thomson Reuters.