Last year was a year of uncertainty for legal departments—and from the looks of it, they’re bracing for more of the same in 2023. The biggest geopolitical and economic issues of the last year—war in Ukraine, inflation, market uncertainty, and the potential for a global recession—still loom over businesses across the world, but they aren’t stopping the momentum of other forces acting on corporations across the globe. Data privacy authorities and other regulators are flexing their muscles, increasing the frequency and severity of enforcement actions under GDPR, CCPA, COPPA, and other regulations. Bad actors, both within and outside organizations, are conducting ransomware attacks and data breaches, causing significant financial and reputational damage to companies. Chief legal officers (CLOs) are increasingly responsible for regulatory compliance, privacy, and cybersecurity, as well as fulfilling their role as advisors to CEOs. No wonder legal departments feel under pressure these days.
To get a better sense of how these trends are impacting legal departments, Exterro sponsors the Association of Corporate Counsel’s (ACC) annual Chief Legal Officers Survey, hearing directly from the highest legal officers of major domestic and international corporations about their concerns, priorities, challenges, and strategic initiatives. The 2023 ACC Chief Legal Officers Survey contains insights from 892 participants from organizations spanning 20 industries and 35 countries, from small legal departments in companies under US $25 million in annual revenue to large multinational corporations with revenues larger than US $50 billion. Three trends it highlights are critical for legal professionals to understand as we begin what is certain to be another eventful year.
Trend #1: Chief Legal Officers are much more than just “the top lawyer” in the business.
While CLOs and general counsel are the top lawyers for the business, they have a wide range of other responsibilities—and they’re continuing to grow. CLOs serve as top business advisors, with 77% reporting directly to the CEO. A substantial majority “almost always” attend board meetings, meet with other key business leaders to discuss the operation of the company, and consult with their fellow executives on key business decisions. In addition to overseeing the legal department, most CLOs have responsibility for compliance (78%) and privacy (51%). Other corporate functions CLOs head frequently include ethics (47%), risk (44%), government affairs (29%), corporate social responsibility (23%) and cybersecurity response (20%).
Trend #2: Cybersecurity, regulatory compliance, and data privacy are critical issues to businesses.
In addition to frequently being responsible for these issues, CLOs also identify them as very important to the business. When asked to rank 16 separate issues on a 1 (very low importance) to 10 (very high importance) scale, including important financial and operational issues like taxes, corporate social responsibility, remote workforces, and supply chain management, the highest ranking three were cybersecurity (8.2), regulatory compliance (8.1), and data privacy (7.9). With regulatory and privacy enforcement actions frequently reaching into the eight- and nine-figure range, and the financial and reputational costs of data breaches and ransomware attacks rising, it’s no wonder that CLOs are focusing their attention on these fields. In fact, two-thirds of CLOs expect privacy-related regulatory enforcement to increase in 2023, an acceleration from the 60% who foresaw increases last year. A similar proportion felt industry-specific regulations (66%) were likely to cause the biggest legal challenges for their organization, followed by data protection rules at 59%.
Trend #3: While fewer CLOs are hiring than in the recent past, they continue to invest in legal technology.
Fewer CLOs are hiring than in recent years. Across six categories of professionals including lawyers, paralegals, legal operations, and privacy, the percentage of departments anticipating increases was down from last year—and there was also a slight downward trend in the number of CLOs planning to outsource more work in 2023 than 2022. That said, 41% of CLOs plan on investing in legal technology in the coming year, as they collectively recommend automating simple and routine tasks and optimizing business processes to satisfy their internal clients. Recognizing the importance of privacy issues, over half reported implementing technology solutions to help comply with data privacy regulations.
Learn more from leading legal professionals by downloading the 2023 ACC CLO Survey today.