In-house legal departments are bracing for significant adjustments in their spending amidst the fallout of the global pandemic, according to a recent survey conducted by RollOnFriday. The survey, which polled over 130 in-house lawyers, revealed a marked shift in budget expectations and strategic priorities for legal expenditures over the coming years.
Current Landscape of Legal Spend
A substantial 44% of respondents indicated that their legal spend for 2020 and 2021 is expected to decrease, attributing this downturn to broader cost-cutting measures implemented across their organisations. “The firm is cutting external spend in all areas, so external legal advice is no exception,” noted one respondent, reflecting a widespread tightening of financial controls (RollOnFriday).
Moreover, tighter restrictions on budget approvals have become commonplace, with some companies requiring sign-off from the global head of legal for any external legal expenditures. This stringent oversight aims to ensure judicious spending amid economic uncertainties.
Shift towards In-House Expertise
In response to budget constraints, many in-house legal teams are intensifying efforts to insource legal work. This strategic move not only aims to contain costs but also involves upskilling internal resources to handle a broader spectrum of legal tasks. However, challenges arise as some teams acknowledge the need to manage workloads that may exceed their traditional skill sets. “Even tasks well outside our expertise are being managed in-house,” remarked one respondent, illustrating the dual imperative of cost containment and skill development.
Impact on Legal Practices
The survey underscores a notable decline in M&A activities, a trend exacerbated by postponed projects and delayed deals. As a result, legal expenditures related to refinancing and equity injections have been curtailed.
Conversely, 19% of respondents anticipate an increase in legal spend, primarily driven by escalating disputes and regulatory challenges stemming from the economic downturn. Sectors such as insurance and financial services foresee heightened demand for legal advice on litigation, regulatory compliance, and strategic restructuring.
Looking Ahead: Future Outlook
Despite the prevailing uncertainties, a significant segment (37%) of respondents expects their legal spend to remain unchanged. This group cites a mix of ongoing projects and new initiatives that sustain consistent budget allocations, albeit amid a backdrop of cautious optimism.
In conclusion, as in-house legal departments navigate the complexities of reduced budgets and shifting priorities, strategic decisions around legal spend management will be pivotal. The evolving landscape demands agility, innovation, and a proactive approach to meet the diverse needs of organizations in a challenging economic environment.
For further insights into the evolving trends in legal spend and the strategic responses of in-house legal teams, refer to RollOnFriday’s comprehensive survey here.