Tips for operating a legal department in an economic downturn from CT Corporation
ComplianceMay 30, 2023

Operating a legal department in an economic downturn

Learn the benefits of outsourcing in difficult economic times. Today's legal industry is challenged by an environment of volatility, uncertainty and complexity. In the face of pervasive ongoing change, legal professionals are under more pressure than ever before. Compliance regulations have become increasingly complex, performance expectations have increased, talent tensions have grown, tech-enabled efficiency is imperative, and new competitors have emerged.

Outsourcing can help your business deal with the economy by reducing costs, increasing flexibility, and improving efficiency. 

More work with fewer resources

Legal teams are familiar with the adage: “doing more with less.” And while a recession remains uncertain, 2023 will likely present continued economic challenges to legal departments.

According to a survey from the legal-talent provider Axiom, deputy general counsels are wrestling with the inherent tension between being good guardians of corporate values while being effective stewards of legal budgets during a downturn.

Findings show that 98% of deputy general counsels say their legal department budget has been cut as a result of economic conditions and ongoing volatility, including more than half (56%) who say budgets have been cut substantially.

Despite this, nearly all deputy general counsels (99%) report their departments are seeing a rise in both the volume and complexity of legal and regulatory matters even as budgets shrink. New laws and regulations are constantly being introduced, so a deputy general counsel must stay on top of changes that could impact their organization while maintaining compliance with existing laws and regulations. Furthermore, legal professionals are challenged by the growth of other areas of focus, such as Environmental, Social, and Governance (ESG) law.

The in-house talent challenge

The "great resignation" has impacted the legal profession worldwide and it has faced unprecedented challenges in recruiting and retaining talent. While some argue that the great resignation may be better described as the "great reshuffling" since legal professionals stay in the profession but change employers, the disruption and cost to organizations remain high.

Worryingly, legal departments do not appear well-prepared to deal with these developments. According to the Axiom survey, 92% of respondents believe their department lacks sufficient staffing and bandwidth to do its job effectively.

Who does the work is changing for legal departments

Corporate lawyers are seeking new ways to manage their increasing workload, so there has been a growing trend in reevaluating "who" does what and how.

While some legal departments are outsourcing more work, they are also increasingly utilizing alternative legal service providers (ALSPs) and corporate service providers as well as non-legal staff. 

Axiom survey results show that 80% of deputy general counsels are interested in maintaining or increasing the involvement of external support, including 49% who would ideally work with more external resources to address their workload. Additionally, nearly two-thirds of deputy general counsel (65%) see flexible talent providers as an effective solution to their department's resourcing issues. Agile legal talent can be particularly useful in under-resourced departments as deputy general counsels look to cut back on administration and focus on managing their legal cases.

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Benefits of outsourcing during a recession

Corporate outsourcing can be an effective solution to resourcing challenges. By outsourcing legal services, deputy general counsels are realizing the benefits of operating their department more efficiently and effectively, while also minimizing legal risks and potential liabilities.

  • Cost-effective: In an era of shrinking budgets, many deputy general counsels are looking for flexible talent providers who offer expertise, quick onboarding, and better value for every dollar spent. It may be more cost-effective to outsource recurring and commodity-type services, such as completing and filing forms with state and local agencies, retrieving documents from state and local agencies, filing and maintaining business licenses, and monitoring entity compliance, to a legal service provider.
  • Expertise: Outsourcing entity management can give you access to legal experts who have experience with regulatory compliance and mergers and acquisitions. This can be exceptionally helpful if your organization does not have the in-house expertise to handle these complex legal matters.
  • Flexibility: Outsourcing helps to fill in the gaps for high-volume seasonal work providing immediate expertise without a long-term commitment. The right corporate services provider should also be able to support work within your existing workflows and adapt to your changing needs.
  • Risk mitigation: Transactions and expansions can be complex, and it is important to ensure that all legal requirements are met. Even a single missed step can put a company at risk of legal action. This is especially true if a non-compliant entity is involved in a transaction.

CT Corporation has many solutions to support your legal department

During prolonged economic downturn and pervasive change, CT Corporation can help legal departments improve capacity without increasing overhead. By delegating time-consuming and perfunctory tasks to the right partner, teams can attend to more meaningful work.

Learn more about our managed services, software, and tools that help support any compliance and due diligence need.

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The CT Corporation staff is comprised of experts, offering global, regional, and local expertise on registered agent, incorporation, and legal entity compliance.

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