There is much to be gained from the careful design of any law department. The current, volatile macro-economic environment creates significant challenges for financial institutions. Many will inevitably look to reduce cost, a step which will affect most functions, including law. Unless properly handled, such a step could endanger the firm's ability to innovate and manage risk. This is problematic as financial institutions operate in an environment which brings both greater opportunity and more legal and regulatory constraint than ever before. Instead of simply cutting headcount, the general counsel should take a more analytical approach to running their department, with a focus on tangible value and an understanding of the key business drivers of legal demand.
Law departments manage high-value and low-value legal needs. There are always efficiencies to be gained when addressing low-value legal activities. It is key for any successful reordering of the department to ensure there is a common understanding of where the line falls between the two categories within a particular business line. It is also necessary to understand how each business activity is conducted and which (typically low-value) elements of legal analysis can be rendered more efficient.
For any proper analysis of the tasks which the department is asked to carry out, the senior attorneys of the firm should work with business leaders to review their function. Decisions need to be made on which matters are to be covered, how and by whom. Those decisions should be informed by data, metrics, judgement and experience. They should be decisions which are made jointly by both legal and business management. Senior business management have a stake in the development of a proactive, effective and cost-efficient legal function, for it is the business which creates most of the risk to be managed. Inefficient or inadequate use of legal resource risks incurring liabilities that are otherwise avoidable.
Originally Published by Global Leaders in Law
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