How can Financial Services and inhouse teams adopt tech?
Written by Lee O'Connell, Director, Financial Services
The business landscape for all sectors is changing rapidly. Digitalisation and the use of Big Data, enhanced technology, profiling tools and Artificial Intelligence (AI) are all poised to transform the way that in-house corporate teams function, enabling businesses to achieve process improvements, to reduce costs, and to obtain a valuable understanding of their customers’ needs.
Financial services and the legal and compliance functions of large corporates are forecast to be the leaders of this digital and data-driven revolution. However, the degree and pace of technological change can be overwhelming, and in-house legal and compliance teams, known for being prone to caution, are yet to lead this charge. This needs to change if businesses are to secure the potential competitive advantages offered by new technology.
Why adopt?
Financial services and other large corporates are increasingly appreciating that regulation, data and technology can lead to profit and growth. In-house legal and compliance teams are continually being asked to do more with less and to deliver increased output. There is a need to develop people and to continue to deliver quality, cost-effective work, whilst managing volume and complexity. Additionally, the in-house team needs to be at the forefront of strategic work, to manage potential business risk and to ensure the business stays aligned with continuing regulatory change.
In response to such developments, a range of regulatory technology (RegTech) solutions has emerged aimed at resolving both complex and simple regulatory or compliance issues. Businesses – and particularly legal and compliance teams – must identify those solutions that provide real added
Lee O’Connell considers the challenges and opportunities of implementing new technology from the perspective of
inhouse legal and compliance teams value, demonstrate efficiencies and support long-term cost savings. This can be achieved by maintaining a curious outlook about the various technologies on the market, looking at ways of improving people skills and exploring the
opportunities presented.
Compliance is now gaining a reputation as somewhere that the business can go to for valuable customer or client data, which can help to create a competitive advantage internally and for the business as a whole. Understanding the value of customer data and its ability to support commercial growth through meeting customers’ individual needs is therefore key to the adoption of technologies
based on AI and Big Data.
The use of diagnostic data or predictive analytics for the identification, investigation and projection of barriers to workflow efficiency and risk factors, either real-time or forecasted, provides invaluable insight for all the business teams, and a further incentive for the adoption of such technologies. Legal is being seen as an area that can provide real cost savings through transforming the way it undertakes contract drafting and review; the rise of smart contracts using blockchain technology for the automatic verification or even enforcement of a contract; advancements in E-Discovery for assisted litigation review; and the use of outsourced legal managed services for all the high volume, low value transactional work (e.g. T&Cs, NDAs to name a few).
Regulation and compliance is now so much more than
a pure box-ticking exercise and, with customer attitudes
becoming more sophisticated and tech-savvy, businesses
are having to step up to meet the customer and client
demands through the use of data and new technology.
Taking advantage
The use of new technologies, smart data analytics, and innovative partnerships with third party suppliers will release time for senior in-house lawyers and compliance professionals to focus more on strategic risk priorities.
The consensus within many corporate sectors is that technological transformation and advances in data management will play a pivotal role within in-house legal and compliance functions. In-house teams are therefore looking closely at the latest developments in AI and smart contract innovation to plug the gap between declining resources and reducing legal costs, with many considering the increased use of effective automation, outsourcing to alternative legal services providers (ALSP) or hybrid legal managed services,
utilising both in-house and external counsel.
Furthermore, we are seeing increased recruitment of tech-centric employees across the board, including within the legal sector and particularly within in-house teams and large corporates; the rise of ‘legal and compliance technologists’. Through such activities, firms are aiming to develop internally (or through work with a law firm partner) their own technology to lean and streamline current processes.
Corporates are also looking for the ability to self-serve. This is being achieved through intuitive or online portals or chat-bots that use algorithms to provide instant legal information without direct interaction with a lawyer, to allow routine contracts to be obtained with minimal resource effort, and to facilitate decisions that are driven with objective data at the click of a button.
It is well known that efficiencies can be created through the automation of simple but resource-hungry tasks, and AI and automation of rote work practices are seen as a significant solution in this regard. The use of contract AI is becoming a huge external market, due to the tangible and easily identifiable time and resource savings that can be demonstrated by the in-house teams, both in cost and time available for more strategic initiatives.
Varied approaches
In 2019 we conducted research to identify some of the pressures that in-house legal teams are facing from this rapidlychanging landscape. The report ‘The New Landscape: An In-house Perspective’ revealed the ways in which teams’ use of technology and their approach to processes, people and suppliers has been impacted as the digital revolution takes hold.
The report also uncovered the main priorities of in-house teams and examined how they will be supported by the external legal sector in the future, identifying key areas that many teams will be focusing on in the coming 12 months.
For example, 48% of respondents were looking to provide proactive and holistic risk management. Respondents were also looking at new ways to manage legal risk and to protect the organisation through engagement with the business through enhanced processes, technology and data.
Some 39% of those surveyed planned to make more effective use of data, through more organised and efficient data management within the team to improve efficiency, better manage risk and demonstrate value. This is coupled with 33% wanting to digitise the function and increase the level of technology utilised within the function to improve team performance. It is worth noting that almost half (49%) said that technology is required to act as a solution for routine and lower-value tasks and work, with 69% feeling that, without relevant consultative expertise, any technology strategy is likely to fail.
These results demonstrate the varied approaches that in-house legal teams are taking, not just wanting a commoditised technological solution, but envisaging a more holistic approach by combining data, technology and AI. The wide-reaching conclusion of the study is that the ability of teams to move to a more strategic business role depends upon the appropriateness of the alternative solutions adopted and the quality of the technology or expertise delivering
transformational change.
Transformation takes time
Digitalisation of these functions and of legal and compliance tasks will not only improve operational efficiency, increasing revenues, but will also provide an opportunity for the collection and analysis of key data and management information. Moreover, providing greater visibility to key customer data for senior managers will ensure, in future, the relevance of the services being provided.
With constant regulatory change and customers becoming increasingly connected to technology and data, all that is required now is for the in-house teams of large corporates to move forward and fully embrace the potential of data analytics, new technology and the cost-effective use of ALSPs.
Transformation of this magnitude takes time. It requires a strong commitment from any corporate and cannot be simply about buying new software and presenting to employees. It may in the very short-term further intensify an already expanding regulatory workload of the in-house team. However, businesses that ignore these advances run the risk of falling behind the competition.
It is envisaged that this expertise will drive forward tech initiatives to their full strategic growth potential, balancing the cost to income ratio. Therefore, in-house teams must remain flexible in their approach to processes, people, third parties and technology in order to position themselves at a C-suite level, with a Chief Legal/Compliance Officer, and assume their new strategic role.
This article was first published in inCOMPLIANCE, the official magazine of the International Compliance Association www.int-comp.org