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Legal14 November, 2023

Why AI is a core building block for creating modern legal departments

The necessity for modernisation in the wake of Covid-19 has pushed several industries to a “technological tipping point”. As the world stood still during lockdown, technology continued to advance at an almost unprecedented rate. The increased accessibility of Amazon’s delivery drones and the redundancy and gradual phase out of cashiers at TSB prove that the aftermath of the pandemic has extended beyond wearing a mask. In order to ride this wave it seems that industries must make a choice: continue to follow established, increasingly ineffective methods or, like others, embrace and adopt technological advancements into everyday processes.
The legal industry is no different, despite its best efforts to escape radical change and remain firmly in the ‘analogue era’, Coronavirus has forced lawyers to face their digital future. This is especially true for in-house legal departments who now more than ever experience the repercussions of the prevailing digital economy. In order to avoid turning a digital gap into a digital chasm between legal departments and the rest of the business, it’s time to take some action.
In this blog, I will explore why building a modern legal department should be the goal for general counsels and why artificial intelligence should be considered a core building block in the journey to digital transformation.

The ‘hidden’ clause: finding a needle in a haystack

No one likes to be blindsided, perhaps no one more than a lawyer, whose job it is to review, analyse and weigh up the risk to avoid being hit by a litigation landslide. However, the unforeseen does happen of course, perhaps more often than we might expect.
It has recently been reported that hidden terms in contracts can cost organisations 9% of their yearly income, meaning that a tenth of revenue is lost despite repeatedly vetting documents.
~ Research by the independent International Association for Contract & Commercial Management (IACCM)

It’s an interesting concept to talk about ‘hidden clauses’ because in reality, no clause is truly hidden, it is simply difficult to find. This is especially true when we consider the conventional contract reviewing techniques employed by legal departments which consists of manually reading through contracts. As contracts become increasingly complex, the more difficult it is to manually discover all the ‘hidden’ information within the contract.
One solution to mitigate this problem is the use of question answering (QA) artificial intelligence to help you discover the answers you are looking for. Rather than searching for the existence (or non-existence) of specific clauses to determine your course of action, wouldn’t it be easier to simply ask a question, like you might do in a google search, and be presented with an answer? Similarly, if you ask a question and no answer is found, this is a clear indication that this key information is missing and will save you many wasted hours searching for a needle in a haystack that doesn’t even exist.

A data-driven approach to measure 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.
~ “Five facts: How customer analytics boosts corporate performance” article by McKinsey & Company

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. In our new white paper “A Pragmatic Approach to AI for Legal Departments” we discuss how legal departments can reorganise their ways of working to ensure value is prioritised.
With 61% of CEOs pushing for a more data-backed approach to risk management, a legal department that speaks in the language of business rather than legalese is music to the C-suites’ ears. With leadership backing and a data-driven approach to running their department, general counsels will find themselves in a position of increased credibility within the wider business, no longer the department of ‘no’ but the department of ‘know’.

From reactive to proactive to predictive

Reacting in time to avoid costly litigation nightmares is an invaluable skill, having the ability to predict potential risks and take action before they become so? 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 not only support the business but actually transition into a role where they also contribute in driving the business forward. They need to report and operate like other business functions.
Deciding to run the 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 actually 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. In our latest guide “How to achieve your business objectives using AI” specifically designed for general counsels, we discuss the ways in which general counsels can evolve into the role of a business partner, leading the legal department through digital transformation and helping them become data-driven and a real 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. This is easier said than done of course, especially for the risk-averse, however, as the saying goes, Rome wasn’t built in a day.


Download our whitepaper “A Pragmatic Approach to AI for Legal Departments”
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