In-house legal professionals entered 2022 with the optimistic hope they could turn the page on the disruptions caused by the pandemic and refocus on strategic plans unencumbered by the worry of COVID-19 test results. And while COVID-19 variants have forced us to remain nimble as the virus continues to affect the workforce, the declining hospitalization threat has at least allowed most corporate teams to go back to worrying about more fundamental business challenges.
At the start of the year, we took a shot at forecasting what corporate legal department challenges were likely to keep GCs up at night in 2022. In hindsight, all three of those predictions have proven to be accurate, but some of the most impactful developments year-to-date have been triggered by events that few people even saw coming last winter.
Let’s take a quick look at the three corporate legal department challenges we expected in-house counsel to be monitoring in 2022:
Managing costs in inflationary environment
If anything, we underestimated the seriousness of this challenge. Inflation was at 7% in December 2021 and has not yet returned to that level, peaking at 9.1% in June 2022. While law firm billing rates have only increased roughly 6% so far this year, more increases are likely in the months ahead. Managing costs in the current inflationary environment have indeed proven a stubborn challenge in 2022.
Leveraging technology to increase efficiency
We correctly surmised that GCs would accelerate their investments this year in that deliver greater visibility into their department operations — corporate legal technology budgets will increase threefold through 2025, according to Gartner Inc. — but recent surveys indicate there are still roadblocks that must be navigated. For example, a June 2022 report in Legaltech News said that 39% of corporate legal professionals report they lack the budget to obtain the new technology tools they need.
Deeper focus on ESG issues
With corporate executives placing an increased focus on environmental, social and corporate governance (ESG) issues, we forecast that GCs would play a more important role in advising their executive teams and corporate board members when it comes to ESG issues. Indeed, the Association of Corporate Counsel’s 2022 Chief Legal Officers Survey revealed this year that chief legal officers are being tasked with the oversight of more functional areas of the business — with responsibility for ESG policy rising faster than any other single issue (up to 24% of respondents, from 15% the year before).
But as is typically the case, some of the biggest challenges that GCs have been forced to address so far in 2022 were sparked by events that very few saw coming at them this year. Here are three prime examples:
The Russia-Ukraine War
Severe economic sanctions were imposed on Russia in the immediate aftermath of their invasion of Ukraine on February 24th. In the months that followed, various types of economic and trade restrictions were levied on major financial institutions, business entities, government-owned funds, technology and individuals—including President Vladimir Putin, his family and members of his inner circle—by the U.S., the U.K., the E.U. and other nation states. At the same time, one of the intriguing aspects of the Russian sanctions regime is the manner in which government agencies are using selective exemptions in an effort to avoid counterproductive collateral damage to businesses. GCs are under pressure to understand the Russian sanctions and ensure compliance, while also taking advantage of any relevant exemptions.
The landmark U.S. Supreme Court decision in Dobbs v. Jackson Women’s Health Organization, which overturned Roe v. Wade on June 24th, reversed decades of established precedent that established a woman’s constitutionally protected right to an abortion in the first two trimesters of pregnancy. Dobbs returned the U.S. to the pre-Roe world in which individual states can decide for themselves on whether to allow or prohibit abortion within their jurisdictions. In-house counsel and senior HR executives have been seeking counsel to assess whether their existing employee benefits policies are placing their organizations and/or its leadership in civil or criminal jeopardy, as well as what steps they need to take in response to the many changes happening from state to state regarding abortion access.
The Great Resignation, that labor market phenomenon in which workers began leaving their jobs in record numbers over the past two years, has hit corporate legal departments in 2022. A study found that “66% of in-house lawyers do not want to return to the office full-time,” according to a March 2022 article in Law.com International, and LawJobs.com pointed to recent moves in which in-house counsel for companies such as CME Group, Cognizant, Magellan Midstream Partners, Continuum Energy and OPKO Health all left for law firm roles. This disconcerting trend has many in-house counsel scratching their heads in search of their key team members.
Whether the major challenges of 2022 were reasonably foreseen or were sparked by sudden “black swan” events, GCs need fast access to the information and tools required to help them mitigate external risks to the enterprise, shape legal strategy and adapt to changing circumstances.
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