Changing the game: how AI can help in-house teams work better
In the face of ever-increasing data and responsibilities AI can enable GCs to keep more work in-house, writes Luminance’s Luke Taylor
Artificial Intelligence has been embraced by a number of law firms for close to a decade. It has transformed the way firms deliver their services to clients, from advising on M&A deals to managing complex investigations and everything in between.
At the same time, a shift has occurred in the in-house legal community. General counsel, while respected, were historically often confined to ‘pure’ legal issues and seen as specialists to be consulted only in this regard. More recently, though, the role of GCs has dramatically expanded in scope: now they are often seen as business enablers and expected to help navigate a range of complex issues for their organisations. Reflecting this is the 2020 ACC Chief Legal Officers Survey, which found that 93% of GCs are now members of their company’s executive management team. To keep up with their vastly larger mandate, GCs and their in-house teams are realising that AI can enable them to directly solve complex business issues, rather than having to rely on their private practice advisers. And there are good reasons why this is happening.
The explosion in enterprise data creation and storage means that we are producing data at an exponential rate. Every interaction we have online leaves a trace – on average, every human created at least 1.7MB of data per second in 2020. This growth in data is affecting every business – from contracts to emails, tax returns to board minutes, this data production is having a growing impact on in-house teams, which are now required to analyse a huge variety of complex legal documentation to understand exactly what information is contained within their organisations. Using manual review methods, the whole review is slowed down and the risk of missing something crucial is increased.
And in an age of increasing data protection regulation such as the Global Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act, the financial and reputational damage for non-compliance can be crippling. In 2021 alone, data protection authorities imposed fines of more than €1bn on businesses for GDPR breaches. A survey conducted in the same year by EY of GCs at 170 UK-based companies found that compliance, data privacy and cyber security were considered the biggest risks currently facing UK legal departments. Despite this, the same survey found that 70% of in-house counsel do not have the right tools at their disposal with which to face these challenges.
This is not to mention the huge and growing compliance challenge for companies in understanding and demonstrating their environmental, social and governance (ESG) credentials. Organisations must have a deep understanding of their contractual landscape and subsequent risk profile across their entire supply chain, in all operations and jurisdictions. This includes their climate risk, use of raw materials and modern slavery commitments, not only in existing contracts but all incoming contracts too. This is without mentioning sanctions. We are in the midst of what will likely be the fastest-moving and most severe sanctions imposed on a major economy that the modern world has seen. For non-Russian organisations, ensuring they abide by the sanctions, which will involve large numbers of companies, banks and individuals deeply embedded in cross-border business, will be a complex task.
AI that reads and forms an understanding of legal documentation and presents key information back to the lawyer has become an essential extension of in-house legal teams, helping them to quickly analyse large numbers of contracts for their company and identify key risks and areas of non-compliance at a much earlier stage. For example, AI can provide rapid insight into a company’s existing ESG position by flagging all anti-bribery clauses present in its contracts – as well as highlighting those where such provisions are not included. Furthermore, AI could highlight out-of-the-box all governing laws across contracts, allowing the company to easily gauge its operations and exposure to any volatile regions or countries that have not, for example, signed up to the pledges made at COP26. In the same vein, AI has a role to play in helping companies quickly assess if their contracts involve newly-sanctioned entities, helping them to effectively manage their liabilities.
By helping them to understand their contracts with greater speed and ease, AI is enabling GCs to keep more legal work in-house, reducing reliance on external counsel and affording them more oversight of the business conducted within their organisation. This in turn allows them to collaborate more cohesively with other parts of their business.
It will be fascinating to see how the adoption of AI by in-house teams changes their relationships with their external legal advisers. In our view, the result can only be positive. If both parties have cutting edge technology at their fingertips, then they are both free to focus on the work that machines cannot replicate, namely creative and critical thinking. What’s more, matters can progress at a quicker rate and with a reduced level of risk, with teams no longer forced to trade thoroughness for efficiency.
The legal profession has undergone a sustained period of positive disruptive influence on the business world and the use of AI by in-house teams at corporates, financial institutions and even private equity and other investment funds guarantees that this welcome trend will continue.
Luke Taylor is a subject matter expert at Luminance, a London-based company producing AI technology for the legal processing of contracts and documents.