The squeeze on general counsel and legal departments has reached new heights: report

The squeeze on general counsel and legal departments has reached new heights, according to The General Counsel Report 2023, a joint white paper from global consultancies FTI Consulting, Inc. and Relativity.

“For the first time in the history of the report, legal department leaders expressed deep concern about issues such as increased regulatory oversight; uncertainty across geo-political, social and economic factors; fulfilling environmental, social and governance requirements; supply chain challenges; and employee matters, says Wendy King, FTI’s senior managing director. “While these issues weren’t mentioned in any substantial way in previous reports, they were echoed across the majority of respondents this year.”

One hundred percent of respondents pointed to compliance monitoring, data privacy, ESG, incident response, and other business strategy and risk management activities as the leading sources of demand. Contracting (83), evaluating new technologies and third-party providers (75), governance (67), disputes (62), regulatory investigations (50), and internal investigations (33) followed.

Otherwise, 60 percent of respondents cited new regulations or laws requiring policy refreshes as prompting increased activity for their legal departments. Contract management demands (47) ranked second, followed by M&A activity (33), privacy violations and notifications (30), class action litigation (27), data breaches (23), internal investigations (23), fraud, corruption and employee misconduct (17), intellectual property theft and misappropriation (17), government investigations (10), compliance violations (10), data subject access requests (10) and antitrust investigations (7).

Another stark difference in this year’s findings, King adds, is how GCs rated their organizations’ preparedness to tackle risk.

“Feelings of preparedness dropped notably between 2020 and 2023 in the categories of data privacy, emerging data sources, artificial intelligence and blockchain.”

And while risk has been a growing top-of-mind concern for some time, the latest burst of growth in demand and scope of issues was substantial and came quickly.

“The fact that there was 100 percent agreement about the rising demand related to many of the new issues is notable, if not exponential,” King says. “Other issues, such as declining preparedness and feelings toward the use of artificial intelligence have been more gradual.”

The pressure is such that one respondent opined that the GC is now a “secretary of state” for the CEO.

“There is a sense that a crisis can pop up in a geopolitical way that we [hadn’t thought] about,” the respondent said.

Kashif Zaman, the Toronto-based VP, legal at Toronto-Dominion Bank points out that the complexity of legal issues and risks that GCs face are typically proportional to the complexity of their organizations.

“For example, in highly regulated industries such as banking, the legal department is regularly dealing with highly complex issues in a very broad range of areas. These issues are very hard to predict and are impacted by numerous factors such as prevailing financial market conditions, political environment and geopolitical situation.” 

But as the report reveals, dozens of new and escalating pressure points are adding to in-house burdens generally.

Top of mind among these pressure points is ESG, including diversity, with 50 percent of respondents ranking it among their top five legal risks. Some among them observe that ESG is impacting the allocation of resources inasmuch as GCs are responsible for ensuring ESG coverage, consistency and compliance across the entire organizations.

“I expect ESG to become even more complicated going forward, especially because of political implications,” Zaman says.

The “Great Resignation”, according to participants in the study, has made all this more difficult, affecting issues ranging from flexibility to compensation to management styles and to employee engagement.

“More than two-thirds said their organization has specifically considered the role of automation and advanced technology in enabling a higher standard of professional quality of life to alleviate capacity demands and increase retention,” King says.

But Zaman is of the view that it will be a while before technology has the desired impact.

“Given the high complexity of legal issues and risks we encounter, our legal advice is quite bespoke and nuanced and AI or other technology is not very useful at this point, and we don't expect it will be in the near future.  Such technology certainly can be very useful for certain legal tasks such as due diligence and gathering or collating large amounts of data, but, for now, I don't see it being a viable substitute for complicated legal analysis.”