Introduction: A Bit of History
In general, legal departments’ importance has grown significantly over the past 10 years. In-house counsels nowadays provide legal advice not only with regard to strategic decisions, big transactions and major litigation, but also on a day-to-day basis as a business partner for internal clients.
Most General Counsels (GCs) are either part of the managing board or report directly to the CEO. The procurement of legal services has been in the hands of in-house lawyers for some time now. Thereby, the image of the legal department has clearly changed, as well: from being perceived as an antiquated department, a semi-academic ivory tower in the company, to being perceived as a modern, well-managed service provider to internal clients. Hence today, the added value of legal departments is commonly accepted, and many in-house lawyers are fully integrated into the day-to-day business of the company.One reason for this change is the ever increasing importance of legal risk. When in 2013 Accenture asked executives from 446 organizations across seven industries and two public services subsectors which risks they foresaw rising most over the next 2 years, 62 % of the respondents named legal risks first, followed by business risks (52 %), regulatory requirements (49 %), market risks (47 %), credit risks, operational risks and strategic risks (all together 46 %, see Accenture 2013 Global Risk Management Study: Risk Management for an Era of Greater Uncertainty). The increasing significance of legal risk means that legal departments are becoming more and more important in multinational companies. Although legal and compliance risks are not exclusively owned by the legal department, executives understand the importance of involving the legal department when it comes to managing risk and making legally compliant decisions.
These seem like golden times for GCs and their legal departments. However, the growing prominence and changing role of legal departments does not necessarily lead to a growing budget. What is known as the “more-for-less” challenge describes the expectation of most companies to manage the growing need for legal advice with a shrinking, or at least stagnant, budget. This leads to a greater emphasis on efficiency in legal departments.
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