250 Risk Professionals Provide Their Take on Managing Legal Service Quality and Spend
2020 is well underway, and risk managers are actively keeping a pulse on the top legal and regulatory trends that could impact their daily operations. Everything from an increase in nuclear jury verdicts to ensuring they’re compliant with updated laws has risk professionals alert to the varying legal needs of their companies.
In a survey conducted by Risk & Insurance® and sponsored by Quovant, industry professionals from across the U.S. detailed what they believe are some of the most critical legal and regulatory trends to watch — and through these findings, it becomes evident that companies need the right tools and metrics for adequate spend and performance tracking to adapt to today’s legal landscape.
The most frequently reported concerns thought to drive legal spend in the coming years include:
1) Cybersecurity and Data Privacy
Nearly 37% of respondents say the increase in cybersecurity and data privacy regulation requirements are most concerning, placing this trend at the top of the list.
GDPR, which went into effect in 2018, set the stage for today’s standards in data protection regulation. While the California Consumer Protection Act is slated to go into effect this July, several other U.S. states have followed suit and are in the process of drafting bills to further cybersecurity and data protection efforts.
2) General Compliance
Coming in a close second is general compliance with legal and regulatory changes, with 35.5% of respondents naming this as a top concern.
3) Increase in High-Stake/High-Cost Matters
The increase in complex, contentious and high-stake cases is the third most concerning trend for respondents overall.
This is an especially critical area to emphasize having the right tools in place. Costs can be better managed through spend tracking and analysis and effective monitoring of adherence to billing guidelines, but if companies don’t deploy the right methods and processes to capture this data, it becomes difficult to achieve.
With the right data, upward trends in legal spend can be identified by pinpointing which cases, claims or jurisdictions are costliest, thus allowing companies to better prepare themselves and minimize costs.
4) Jury Verdicts
Large and continually increasing jury verdicts came in fourth overall, with 14% of respondents saying this trend is most concerning.
Numbers like the $8 billion verdict against Johnson & Johnson’s role in the opioid epidemic or the $2 billion verdict against Bayer/Monsanto’s weed killer have risk managers reviewing their risk assessments as jury awards continue on this path of unpredictability.
Also known as megaverdicts, this trend has increasingly changed the way general counsel approaches litigation.
5) Additional Concerns
Additional concerns named in the survey include increases in M&A activity, analyzing and tracking diversity and inclusion requirements with vendors, and investment in new technology.
“The factors contributing to today’s rising legal spend and complexity should be looked at holistically, but it’s important to understand the details,” said Michael Sheridan, president, Quovant.
“Pinpointing areas of over-expenditure is key to managing costs and making better, data-driven decisions moving forward. Operating blindly is never efficient.”
With these legal and regulatory trends on the horizon, companies are increasingly investing in and working with outside legal counsel — and while legal counsel plays a vital role in managing risk, companies should still evaluate how they’re handling their legal spend and the results they’re obtaining.
Seventy-two percent of the survey respondents’ organizations consult with outside legal counsel, but only 68% said they’re actively monitoring their associated spend.
As such, the survey also aimed to gain a deeper understanding of respondents’ approaches to managing the quality and expenses of their legal counsel.
To gauge this, we need to look beyond projected trends and evaluate the specific processes and matters driving legal expenses for today’s businesses:
Claim Severity: For those actively watching their expenditures, claim severity is leading their legal spend, as nearly 41% of respondents listed this as their organization’s top driver of costs.
Compliance: Twenty-one percent of respondents said monitoring and keeping up with regulatory and compliance requirements drive the majority of their companies’ legal spend.
Claim Volume, Staffing and Administrative Work: Compliance is followed by the volume of claims, increased use of outside counsel and increased use of in-house legal staffing.
“With a legal spend management partner working hand-in-hand to analyze legal spend related to litigated claims, ensure billing guidelines are being followed and provide valuable analytics on performance and spend, legal and risk management departments can better focus on their primary responsibilities,” said Sheridan.
It’s one thing to monitor costs, but it’s another to focus on the quality and effectiveness of the outside counsel services being paid for. This gap potentially costs companies a surplus of legal spend that’s failing to be maximized — and this lack of oversight is leaving them in the dark.
Risk professionals agree, with two-thirds of respondents saying monitoring legal counsels’ quality and performance is a top priority while the remaining 34% said cost is a more pressing matter. However, for those who do emphasize monitoring performance, only 32% have specific performance metrics and key performance indicators in place to do so.
Furthermore, 22% of respondents said their organization utilizes the services of a claims adjuster and/or another third-party to monitor quality and performance, but 29% admit they lack the specific performance metrics and key performance indicators for it.
The remaining 17% of respondents said they’re unsure of their company’s approach to monitoring outside counsel quality and performance.
“Legal spend should always be carefully reviewed, but law firm performance is a key component of this relationship,” continued Sheridan.
“The right legal spend management provider monitors every aspect of a company’s outside counsel, including identifying and benchmarking top performers.”
Finding a Partner to Help Evaluate Legal Counsel Needs
The main takeaway from the survey is that companies and risk management professionals are aware of the trends slated to impact their operations, the legal processes that are eating away at their budgets, and that they recognize the need to monitor outside counsel spend and performance — but are they adopting the right approach?
Consulting outside counsel for corporate legal matters is an ever-present component of a company’s budget, but that doesn’t mean it can’t be maximized.
From here, companies must prioritize solutions that act on these takeaways.
This is often difficult and time-consuming to do in-house, so companies are turning to legal spend management providers that have the specialized expertise and technology to uncover cost savings and meaningful patterns in performance.
These partners allow corporate legal departments to stay lean and focus on their most valuable work while giving their companies more control and predictability when managing their spend. &