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EY Study: Four out of five companies plan to cut their spending with the legal department over the next two years

EY Study: Four out of five companies plan to cut their spending with the legal department over the next two years

Globally, organizations intend to reduce their costs with the legal department on average by 11%

82% of global companies are planning to cut their costs with the legal department over the next two years and 42% of respondents intend to cut these costs by more than 10%, according to the EY Reimagining the Legal Function Report 2019.

The report, which sums up the responses of more than 1,000 senior lawyers from 25 jurisdictions, notes that, on average, companies are planning to cut their costs with the legal department by 11%, with legal costs now amounting to an average of 172 million USD with domestic legal services and USD 169 million with external legal services.

At region level, the largest reduction in spending is expected to grow in North America by 13%, and in Europe and Asia-Pacific, the smallest cuts are projected to be 9% on average.

Challenges related to skills and innovation

The study highlights the difficulties faced by companies in attracting and capitalizing on specialized staff. Almost three out of five companies (59%) identified difficulties in attracting and retaining employees with skills tailored to the new requirements of the legal department. Employing staff is a problem. Legal departments spend considerable time and effort on routine activities, 67% of respondents allocate 20% of their routine routine routine compliance and "low-value" tasks.

Also, the study's findings show that legal departments are likely to remain behind in terms of innovation. 64% of respondents believe that the legal department has not benefited from innovations just as much as other departments, such as human resources, IT, and the finance department. Respondents indicated the "constant pressure of regular activities" as the biggest obstacle to innovation over the next 12 months, at a rate of 36%, followed by "budget constraints" by 32%, and "lack of managerial skills or interest management ", at a rate of 28%.

The need to re-evaluate the operational models

Looking at the future, key outsourcing trends include increasing service outsourcing: 74% of organizations either outsource or outsource functions such as contract management, document archiving, due diligence, labor law, and document and entity management.

Purchasing patterns are changing, increasingly taking into account the contracting of alternative providers of legal services to increase value added. Although the trend can be observed among companies of all sizes, it is predominant at the level of smaller legal departments. 60% of companies with less than 1,000 employees are considering the possibility of resorting to alternative service providers and the outsourcing of legal processes, marking a 17% increase over the previous year.

Finding the right balance between specialized technical knowledge, workload allocation and efficient use of technology will remain the fundamental challenge of this critical transformation process.

The market in Romania

"The EY study looked mainly at the legal departments of large-scale companies around the world, active in various sectors of activity, such as financial, medical, telecommunication, media, transport, consumer goods, public sector. Thus, given the complexity of this study, its conclusions can not be ignored in Romania, even though here the legal services market and the business environment are generally not yet at the same level of development. By comparison, some participating companies have legal departments and over 1,000 lawyers while on the local market a company with a large legal department has around 50 lawyers.

In Romania, lowering costs as well as attracting and retaining staff are just as up-to-date issues for the legal departments of local companies. As a peculiarity, legislative inflation increases even more the workload of these departments. Finding a balance between addressing legal issues through a properly dimensioned legal department in relation to the needs of the company and outsourcing those services that, in terms of volume and complexity, exceed internal capabilities is essential to streamline the costs of legal services, " said Dragos Radu, Coordinating Partner of Radu and Associates SPRL.

 

 

 

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