By Hugo Seymour
In my previous article, we discussed how hidden risks in a contractual stack can lead to lost revenue and sleepless nights for in-house legal teams. We also looked at how these risks can be assessed and mitigated using the latest capabilities offered by artificial intelligence (AI). In this article, we will examine how, more generally, AI can improve operations and processes within a legal department. To do that, we should probably start by looking at what AI is not. In this case, we don’t want to talk about Chat GPT, AI’s ability to create images or play computer games, or fold proteins, instead we will look at AI from the perspective of knowledge. More specifically legal business knowledge.
Today’s AI has evolved into a tool that gives legal professionals the ability to embed knowledge into processes and allow them to run more efficiently. AI’s contribution to legal process improvement specifically is to allow legal professionals to deal with more cases, more efficiently and more accurately. For example, AI is transforming the way that in-house teams interact with contracts and legal documents, giving them the visibility and access to crucial information they need to make informed decisions.
Firstly, helping teams to review documents as quickly as possible and secondly helping them to summarise long and complex documents, by presenting the key information in customisable reports. Using AI to review a contract means you don’t need to specify absolutely every single outcome you’re expecting; you can give the system a bit of latitude and avoid having to have human intervention on every edge case. AI has another crucial role, making these systems easier to set up and use. Adoption has been a problem for the legal-tech sector and AI offers a potentially powerful antidote.
A data-driven approach to measuring value.
The importance of collecting, measuring, and analysing data cannot be underestimated. Data-driven businesses are 23 times more likely to attract consumers, six times more likely to retain customers and 19 times more likely to be profitable. Legal departments are not exempt from the ability to provide more value by measuring data. So, how can a legal department become more data-driven?
“Many departments default to external spend as a metric because it’s one thing that’s easy to measure. But this cannot be a meaningful form of measurement without being mapped to the value of its output to the organisation. It’s better to focus on understanding how legal creates value for the organisation and developing metrics that reflect this.” Jeremy Hopkins, Legal Operations Specialist at Content Square.
As a starting point, understanding what the value of the department is and the goals you are trying to achieve will help to begin to measure the value of the output. With 61% of CEOs pushing for a more data-backed approach to risk management, rather than legalese is music to the C-suites’ ears. With leadership backing and a data-driven approach to running their department, general counsel will find themselves in a position of increased credibility within the wider business, no longer the department of ‘no’ but the department of ‘know’.
Moving from a reactive approach to a predictive approach.
Reacting in time to avoid costly litigation nightmares is an invaluable skill, but having the ability to predict potential risks, and then act on them before they become real is priceless. Traditionally we think about a legal department as a function that supports the rest of the business, whether this be through negotiations, navigating regulatory risk, or providing legal counsel. However, legal departments are now expected to support the business and transition into a role where they also contribute to driving the business forward. They need to report and operate like other business functions.
Deciding to run a legal department like a data-driven business and becoming more proactive as a result is the first step. The second is using this new insight and vantage point to look beyond the objective of simply managing risk and regulations, but thinking about how the legal department can drive new business through faster negotiations; side-stepping legal hiccups to ensure rapid legal response times, which all play a role in aiding business growth.
Today’s general counsel and their colleagues in legal ops and contract ops are evolving into a new role of a business partner. Leading the legal department through digital transformation and helping them to become a data-driven, ‘value-add’ asset to the rest of the business. No industry, department, or team should adopt technology for technology’s sake, but if there are ways to drive value for the business in faster, cheaper, and more efficient ways it should be embraced. That is easier said than done, of course, especially for risk-averse legal teams.
The skills required in these new data driven roles are increasingly at a premium and are subject to bidding wars between the major players, which now include the elite consulting and accountancy firms. It follows that the rise of the legal operations function is changing the skill sets required in a Chief Legal Officer (CLO) and General Counsel (GC). Top class legal skills are still required, but, echoing the evolution of the Chief Marketing Officer (CMO) and Chief Revenue Officer (CRO) positions, the ability to manage and/or implement the systems necessary to run a data-driven legal function is going to move from a ‘nice to have’ to a ‘must’.
To avoid turning a digital gap into a digital chasm between legal departments and the rest of the business, it has become a widely held goal for many general counsels to use artificial intelligence to build a digitally efficient department. There is a lot of Gen AI created ‘fog’ out there, but AI remains a core tool for creating a modern, effective legal department.
Hugo Seymour is an AI/ML product lead for Legisway, Wolters Kluwer’s AI-driven all-in-one legal management software. Seymour was previously COO at AI contract review startup Della, which was acquired in 2022 by Wolters Kluwer.
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See also:
Guest post: The hidden clause – The poisoned needle in a haystack