Why legal and compliance teams are struggling with the tech gap

Legal Brief

13 June 2022

Todd Marlin, EY global forensic and integrity services technology and innovation leader, discusses the challenges legal and compliance teams face with the technological gap and factors to consider when choosing the right technology for your organisation.

Global legal and compliance teams are at a crossroads on their transformative journey as they strive to balance managing a rapidly changing regulatory environment and business growth. These functions are expected to transition into more value-based and strategic roles, while maintaining agility, efficiency and addressing the escalating risk of fraud, non-compliance and misconduct.

Technology plays an integral role in a company’s compliance strategy. Adopting the right technology helps mitigate legal and compliance risk, but it can also play a key role in strengthening a company’s overall integrity agenda — helping organisations to stay true to its missions, keep its promises, respect laws and ethical norms, and foster public trust.

Global legal and compliance teams are at a crossroads on their transformative journey as they strive to balance managing a rapidly changing regulatory environment and business growth. These functions are expected to transition into more value-based and strategic roles, while maintaining agility, efficiency and addressing the escalating risk of fraud, non-compliance and misconduct.

Technology plays an integral role in a company’s compliance strategy. Adopting the right technology helps mitigate legal and compliance risk, but it can also play a key role in strengthening a company’s overall integrity agenda — helping organisations to stay true to its missions, keep its promises, respect laws and ethical norms, and foster public trust.

According to a recent EY study, legal departments plan to automate 50% of legal work related to major corporate transactions, replace 20% of generalist lawyers with non-lawyer staff, and increase spend on legal technology by three-fold in the next four years.

It’s a similar story in compliance and ethics departments too. Technology budgets are estimated to have grown 180% since 2019 in response to new business needs, and 69% of businesses plan to increase their level of investment in data and technology for risk management in the next 12 months.

Solving the challenges for legal, ethics and compliance teams

As organisations face a growing number of challenges, we are now more than ever seeing legal, ethics and compliance departments turning to technology solutions.

While different businesses and different departments have different challenges, one key challenge for many is navigating regulatory changes that are increasing in both number and complexity. Not only are these regulations expensive and time-consuming to adhere to, but they can also further complicate risk analysis. The data that is available to most legal, ethics and compliance teams is typically very fragmented, and so it can be difficult to generate strong insights.

Internally, there are increased pressures to transform digitally, improve efficiency, and drive costs down. Externally, the pressures of rising social consciousness has also led to a new wave of demands from stakeholders — including improved corporate sustainability. As environmental, social and governance (ESG) considerations are swiftly making their way to the top of the agenda for many businesses, many firms are concentrating on improving their ESG programmes and making improved governance a priority.

Finally, while most teams have been surprised at how easily they have been able to transition to remote working, for many this has come at the expense of their organisations’ cyber and insider risk security defences.

Technology can play a huge and strategic role in minimising these challenges. For example, the adoption of a platform with end-to-end functionality can harness what was once fragmented data and provide artificial intelligence (AI) driven and actionable insights. This allows teams to focus on analysing the data rather than gathering and trying to unpack it themselves.

Recently, Microsoft adopted the EY Virtual platform as part of its Spend Risk Monitoring Modernisation programme. The platform allows Microsoft to speed up risk rating processes around its global spending and consolidate existing siloed compliance programs, removing more than 10,000 hours of work annually across its business.

These types of efficiencies can lead to significant cost savings. In fact, the EY study found that 59% of general counsel agreed that technology offers significant or very significant potential for cost savings — far ahead of any other opportunities.

Choosing the right technology for your organisation

With increased numbers of legal technology solutions available, it’s important for businesses to think about what exactly they are trying to accomplish, and then look for the technology that will best suit their organisation.

One factor to consider is that many ethics and compliance officers are specialised in their field and may have limited experience working with technology solutions. In this case, an organisation should opt for a modular platform where additional capabilities and analytic applications can be added as and when needed to complement its existing technology investments. Scalable solutions also offer flexibility for companies to build up its legal and compliance analytics suites as and when its compliance needs evolve.

Another consideration should be the growing preference to work from home. The number of lawyers who want to work remotely at least one day a week has doubled since the start of the pandemic. This shift toward remote working means that legal and compliance teams require tools that can support flexible working structures without disruption.

In this instance, the adoption of a secure, cloud-native platform will mean it is accessible online, and has features such as messaging and commenting capabilities that will more effectively support teams that need to collaborate in a hybrid-working environment.

Aligning technology with the corporate integrity agenda

Businesses should treat the growth in data volumes as an opportunity to aid the fight against fraud, not a threat. Data can be used to detect irregular behaviour and guide responses to prevention and investigation. It also creates opportunities to collect data that supports an organisation’s ESG journey.

By focusing on tech-driven and data-centric ways to measure integrity culture — and building the right controls, processes and insights — companies will be more informed and better equipped to transform their compliance programmes to create long-term value.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.




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