The new equation for legal departments of the future in Asia Pacific
Share this article
Asia Pacific organisations continue to face existential pressure to transform as the region navigates its new reality. Our 26th Annual Global CEO Survey - Asia Pacific finds 53% of Asia Pacific CEOs believe their current business models will not survive within the next decade. Even in the midst of near-term threats, large-scale disruptions and megatrends remind business leaders that they must consider transformations that can unlock real, long-lasting change.
This new reality presents a unique opportunity for in-house legal teams. The legal function plays an important role in enabling organisational transformation as the enabler of commercial outcomes and custodian of legal risk management. For example, businesses investing in and adopting new technology can only do so as quickly as their legal team can execute commercial contracts and assess the risks associated with data privacy, cyber security and operational resilience. A business can only expand overseas as rapidly as the legal team has understood and ensured compliance with local law and customs.
The importance of the legal function is even more pronounced in Asia Pacific. Multinational companies in the region have to navigate multiple jurisdictions and legal systems which have different levels of maturity, not to mention the need to keep up with constant developments. They have also faced added scrutiny into their financial decisions due to the increased complexity of macroeconomic environment and stakeholder expectations.
The timing could not be more fortuitous. The latest development in generative AI, led by ChatGPT, has underscored the generational impact of technology on the legal department. Yet it is just one of many evolving and interconnected challenges which reaffirm the urgency to act now and remind business leaders that they must consider long-term transformations of legal departments.
The changing role of legal departments
In response to disruptive forces, the role of General Counsels (GCs) and their legal departments have experienced significant shifts over the past decade. Previously seen as purveyors of practical advice, and as intermediaries between the business and the legal world, they are now regarded as trusted advisors on the executive team.
The legal department of today encompasses all the enabling functions and services that underpin the delivery of legal services to the wider organisation. To cope with the pressures, we have observed the rise of Legal Operations at legal functions that introduced an operational discipline in how legal departments are run.
Legal Operations shapes the legal functions:
Human capital model that supports the legal department (from lawyers to supporting staff)
Knowledge management that drives efficient delivery of legal advice
Processes underpinning workflows which end with a legal document or advice
Technology that enables the legal team and processes to digitise and automate
Legal function’s service delivery models for the wider organisation (from self-service, digitised or automated)
Data analytics that drives business intelligence from legal issues
The deployment of legal spend with external counsels and how legal panels are managed
Increasingly Legal Operations can also extend to the performance of legal work outside the legal function in other business units
GCs and Chief Legal Officers (CLOs) in Asia Pacific agree that their roles have evolved. A PwC survey of close to 100 CLOs and GCs across Asia Pacific shows that on top of traditional tasks (i.e. provide legal advice, draft and review contracts and manage legal risk), they also assume new responsibilities: manage workflows in their team (56%), manage the operations of the team (54%), board matters and governance (51%) and contribute to organisational strategy (46%).
The changing role of CLOs in Asia Pacific
Q: Please select all the relevant activities below that capture the work you do for your organisation
Source: PwC’s survey1
However, they cannot balance these new responsibilities and fulfil traditional duties without real change. According to our survey, here lies the challenge:
Limited budget (54%)
Lack of project or change management expertise in-house (53%)
Limited implementation guidance and support (49%)
Major challenges for GCs in Legal Tech, Legal Operations and Legal innovation journeys
Q: What are some challenges you've faced, or envisage you'll encounter in your Legal Tech and/or Legal innovation journey?
Source: PwC’s survey1
In the face of shrinking budgets and increasing workload, GCs are now waking up to the urgency for optimisation in the legal department. Our survey found close to half have earmarked Legal Operations and legal process optimisation as a priority for transformation and broader business growth.
They recognise that optimising their legal function will help materialise numerous benefits - improving efficiencies, profitability and competitive advantage. It will also help lay strong foundations for digital transformation and automation which can only be enabled when processes are optimised in the first place.
Technology and digital transformation - a challenge and key to success
Real change requires legal teams to extract maximum value from technology. Today, companies in Asia Pacific are still in the early stages of legal technology (Legal Tech) adoption. In our survey, 92% and 83% of GCs and CLOs in Asia Pacific respectively rated their understanding of Legal Tech and digital transformation as below average.
77% think lack of familiarity with Legal Tech solutions available in the market is one of the biggest challenges they are facing. While Asia is home to 33 Legal Tech solution categories, GCs in Asia Pacific are most familiar with e-signature software (86%), document management systems (37%) and file instruction intake / triage tools (28%). Only 28% use contract lifecycle management solutions which have the potential to be the biggest productivity uplift and risk reduction impact for legal departments.
Meanwhile, in terms of broader digital awareness and understanding, there are significant gaps – specifically in legal artificial intelligence (Legal AI) and Legal Analytics: More than 80% of GCs and CLOs in Asia Pacific rated their understanding of Legal AI and Legal Analytics as below average. This is alarming, given the potential impact that these technologies can have on legal functions. Implementing Legal AI and analytics tools is no easy feat, but it is a crucial step for legal teams that want to stay ahead of the curve. If done right, it is key to enabling teams to move at speed and make better data-driven decisions, reduce cost and complexity and be a base for further transformation, new services, platforms or offerings.
The new equation to transform legal departments/functions
Our survey reveals the need for a new equation for legal departments of the future. In the new equation ‘bread and butter’ legal work is performed in fundamentally different and more efficient ways, freeing up time for lawyers to work on increasingly strategic and valuable problems for the organisations they support. For CLOs, the main strategic choices are on people, process and technology.
Strategic decisions on people: A great deal of transformation is about reducing strain on teams, by digitising and automating lower-risk, lower-value elements of work. Understand, train and hire the legal expertise required for your lawyers to successfully deliver on the work being done in-house. Consider the process and technology capabilities required for your legal executives to help optimise your processes. Outsourcing certain legal workflows and partnership can also deliver huge benefits and can accelerate legal transformation. This brings specialist capabilities, an ability to dial up and down resources when needed and a geographic footprint that cannot be matched internally.
To illustrate, PwC joined forces with AI startup Harvey to provide 4,000 PwC lawyers access to a Legal AI tool - built on OpenAI’s GPT-4 technology - which will speed up work on due diligence, analysing contracts and regulatory compliance. The AI will not be used to provide legal advice and will not replace lawyers. However, it represents a generational-leap forward for our legal professionals in terms of insights, research and analysis.
Strategic decisions on processes: Structured processes and standard operating procedures are critical in the transformation journey. Here are our tips for GCs on the best practice frameworks for mapping and optimising legal processes:
Map your process: The Swimlane mapping is best practice to clearly assess your current state. It is valuable for uncovering the stages of work, stakeholders involved, data, documents and technology involved in the process.
Optimise the process: After mapping the process, ‘Lean Six Sigma’ is the best practice to break down and identify waste in those processes (e.g. waiting time, overproduction, etc.). This combines the continuous improvement philosophy of ‘lean’ and the quality improvement methodology of ‘six sigma’ to optimise legal processes. It marries the best of both worlds, lean thinking to increase speed and simplify processes as well as six sigma’s focus on accuracy and client objectives.
Measure your results: Leaders must understand the key performance indicators and metrics that are used to measure the team’s performance. It’s critical to use a broad mix of approaches, including internal and external sources. Also lean into valuable resources in the market – such as our own Legal Metrics Portal which provides in-house legal with the tools to deliver value through metric selection, data collection and data-driven decision making.
- Strategic decisions on technology: Developing a digital strategy and digital transformation roadmap will be key to guide the technology selection, implementation and enablement of legal departments. Get the basics right – ensure you have a digital end-to-end process for how you run your legal function (e.g. how matters come in, how they get allocated, how they are managed, how they interact with documents and knowledge management, and how they interact with vendors). When these basics are in place, you are then in a better position to harness data for better decisions and also better placed to capitalise on bleeding edge technologies, such as contract life cycle management, generative AI, large language models and automated review.
Transforming in-house legal is a must
Transforming in-house legal functions must become a priority for both legal leaders and senior business executives. Legal is now a generator of value, not just a guardian of risk. Transforming legal can unlock wider business transformation, improve efficiencies, increase capabilities, attract and retain talent and drive value. Both legal and the C-suite are waking up to the urgency to act. Legal must seize the opportunity and the c-suite must take action with strategic decisions and investments in people, process and technology, to become a trusted business and one that is part of the solutions for the challenges of today and tomorrow.
(1) About our survey:
From November 2022 to February 2023, PwC organised various legal roundtable discussions across Asia Pacific, including Hong Kong SAR, Malaysia, Singapore and Thailand. In the process, we surveyed 95 GCs and CLOs on their roles and the challenges they face as well as their opinions on the current state of Legal Operations, Legal Tech, Legal AI and Legal Analytics in their organisations.
