Eight out of 10 corporate legal departments are unprepared to support their organisations’ digital initiatives, according to a Gartner report out today (12 December) which analysed the impact of legal engagement and governance strategies on business outcomes. We should add that this doesn’t come as a huge surprise.
Gartner studied 1,715 digital projects across industries, geographies and types, interviewed or surveyed 100+ general counsel and privacy officers, and surveyed over 100 legal stakeholders on information governance.
“What we learned is critical for legal and compliance leaders to know: What your lawyers do before a digital project matters even more than what they do while on a digital project,” the report finds.
“Legal departments that are “digital-ready” — properly prepared and positioned to support digital initiatives — can increase on-time digital project delivery by 63% and increase appropriate legal and compliance risk taking by 46%.
“When legal successfully achieves digital readiness, it can better support business agility while maintaining rigorous governance. In this way, legal reduces the potentially crippling risk to an enterprise of failing to act quickly enough to capture the new market and business opportunities of digitisation.”
Headline findings include:
Digital Realities Require a New Legal Framework
The report finds that legal departments must reorient themselves around digital project challenges that accelerate existing legal and compliance risks.
Three key challenges are:
Changing sources of corporate value: Data rights, customer trust and networks are increasingly valuable assets that need legal safeguards.
Faster and less centralized decision making: This exerts extreme pressure on traditional legal and compliance controls and risk management practices.
A reliance on customers’ trust and data: This demands new models of information governance.
“The majority of corporate legal departments are not ready to address these challenges,” the report says. “The 19% of legal organisations that are digital-ready deliver three-and-a-half times fewer projects with inappropriate risk taking and two-and-a-half times fewer delayed projects.”
“General counsel are concerned that existing legal and compliance practices are incompatible with the speed at which digital business operates,” said Abbott Martin, research vice president at Gartner. “Most attempts we have seen to remedy this don’t strike the right balance between responsiveness and appropriate risk management; few legal departments have developed a comprehensive framework for digitisation.”
The Keys to Digital Readiness
General counsel that are seeking to make their organisations digital-ready should prioritise four key changes to their department’s processes, according to Martin:
Clarify stakeholder roles — A typical digital project has six team members, 10 stakeholders and a wide network of partners on whom value capture relies. Many of these stakeholders have unclear mandates and ill-defined roles. By clarifying roles and decision rights at implementation and removing unnecessary points of involvement, legal departments can avoid the slowdowns, handoffs and frustration endemic to digital projects.
Build rapid-response capabilities — The needs of a digital business change rapidly, so legal must respond quickly and at scale. General counsel should address common obstacles, such as lack of time and poor change management skills, to build a department capable of service model change and innovation.
Develop digital skills — Digital business raises new types of legal work and issues. This requires a mental shift away from traditional legal duties toward a development approach that focuses on needs-based skill identification and on-the-job expertise transfer.
Design “fit for business” information governance — Despite increasing information governance risks, only 37% of legal and compliance leaders indicate they have a formal information governance structure, and most early adopters have struggled to create agile, authoritative and consistent models. Gartner has identified a new, “fit for business” information governance framework that trades an inflexible rules-centric approach for a decision-centric model, that is better able to keep pace with digital projects.
“As digitisation spreads across industries, so does the severity and variety of information risks for organisations to manage,” said Martin. “The good news is that a ‘fit-for-business’ governance model is flexible enough to account for the type of real-world trade-offs inherent to digital initiatives. It is not merely checking the boxes of regulatory requirements.”