Integreon CEO Bob Rowe and EVP Jeffrey Catanzaro
Only a minority of law firms in the US and UK are confident they have the internal resources to help their clients adequately prepare for and comply with new regulations, according to a new study by global managed services and alternative legal services provider Integreon.
The Regulatory Readiness Report found that just 37% of firms are certain they have sufficient resources, while almost two-thirds (62%) said they are under client cost pressures when delivering legal solutions and services in support of regulatory change. As such, only 45% of firms expect their regulatory and compliance fee income to increase over the next 12 months. Some 41% of firms said they respond to those cost pressures by either using ALSPs or relying on their offshore operations.
Against a backdrop where regulatory requirements have risen five-fold over the past decade, Integreon CEO Bob Rowe said the report shows the substantial impact this is having on corporations and their law firms.
He said: “Achieving compliance with current regulations while preparing for upcoming transitions like LIBOR, Brexit and IM5 is a massive undertaking which requires highly skilled people, innovative technology, and experts on change and programme management.”
The report found that 82% of companies agreed that responding to regulatory change creates operational pressure for their business, while 68% said it increases their business’s risk profile and another 69% said it is having a negative impact on profitability and growth. Meantime, only 35% of companies are completely confident they have the resources and budget to adequately achieve and maintain compliance.
That could explain why 38% of corporations are still not fully compliant with the EU’s General Data Protection Regulation—despite coming into force more than two years ago—and why so far only 55% are fully compliant with the California Consumer Privacy Act, which was introduced at the start of this year.
The survey also found that companies are consistently delaying seeking advice from external counsel on new regulations. Some 51% of companies said they wait until six months or less before any given regulatory change before they seek advice, with 13% leaving it until three months or less. Law firms said that trend is even more pronounced—43% of firms surveyed said their clients don’t usually seek advice until three months or less before a regulatory change event.
Jeffrey Catanzaro, EVP and head of Integreon’s contracts and compliance services practice group and LIBOR task force, said: “Both corporations and law firms are seeking assistance to shoulder the overwhelming workload resulting from regulatory readiness activity.”
The survey was conducted by Pensar Media and polled more than 200 compliance and legal professionals in the US and UK.