Increased costs, rising insurance premiums, and pressure on fees are squeezing margins for many law firms.
With tighter margins, senior leaders and finance directors are struggling to prioritise IT expenditure and budgets: should your law firm digitise and innovate – or focus on cyber protection and funding insurance increases? Can you do them all at the same time?
Regardless of the size of a law firm, we are seeing the IT function (whether insourced or outsourced) being stretched and challenged like never before as a direct consequence of the current trading conditions. The stretch is coming from dealing with business-as-usual activities, an increased cyber burden, and firms needing to use (and clients expecting) technology to be more efficient or innovative.
What is happening?
Alongside the spiralling energy costs and rising wage bills seen across most industries, the legal sector is also seeing:
- Clients demanding more value for money – either by paying less, capping their legal fees, or just wanting more for less.
- Cyber insurance costs rising dramatically, with UK premiums rising an average of 102% in Q1 of 2022.
- Cyber threats and ransomware attacks are increasing. There were 2.7 million cyber-related frauds in the 12 months to March 2022)
What can be done?
While each subject could easily be a lengthy topic in its own right, Lights-On has consolidated some brief counsel into a quick and easy read. Each firm has a unique set of challenges and therefore we have purposely kept this high level.
1. IT Programme Management
Be aware of the programme of projects across your firm as they invariably all make demands on the IT team, which can easily become a bottleneck as a result.
As a minimum, your firm needs to have or know:
- An understanding of resource (people) demands versus available capacity.
- Costs associated with each project – this includes any contingency budgets, extra costs such as customisation, consultancy, training, and change management.
- How long each project is expected to take – taking into account seasonality and resource constraints
Cyber security projects in particular are becoming more onerous, impacting on the already busy IT workload.
2. Insurance Premiums
Cyber insurance premiums are rocketing as the insurance sector reclassifies the risk and tries to reduce its liability.
The level of protection your firm must demonstrate is increasing significantly, and this is reflected in cyber insurance proposal forms increasing from one page to thirty pages! IT budgets and capabilities are not keeping pace. Engage with your cyber insurer or broker and remember that protection, while expensive, is cheaper than being a cyber victim.
In addition to financial protection and the advice insurers teams can provide in the event of an incident, your firm must also invest in technical prevention. This is changing from just “better locks on the doors” to paying for “patrols” looking for anything unusual. It’s no longer “fix and forget” but a continuous service.
It is worthwhile moving the cyber risk from IT to a business risk and ensuring that the correct roles in the firm are governing and managing cyber and information security.
3. Data is King
Digitisation, innovation, and cyber protection all share a common factor: data.
If the data classification, organisation, structures, and management are not in place, a firm can struggle to make headway. As a simple analogy: if you have an archive box of matter papers it is difficult to move it forward, identify what is important, remove redundant information and keep it protected.
If you have an archive box full of lever arch files containing the same amount of papers with colour-coded tabs you can make quick progress, identify what is important by the tabs and keep it protected in the lever arch file. The same is true of data – ensure your data is organised and managed (lever arch file and tabs).
Simple tools and processes can highlight areas where you can make big gains, such as removing a third of the data estate due to “junk and duplicates”, implementing retention in the DMS/CMS reducing risk, and capturing simple analytics that can be made available to clients to provide added value.
Knowing where your data is and who has access is just the start. Don’t be overly ambitious, start small but, fundamentally, start!
4. Digital Law
The digitisation of law, or the processes within a matter or a transaction, is key to efficiency but beware of buying technology for the sake of it. Cloud technology allows you to purchase and deploy quickly, but your firm must be ready, and have the controls to measure the success.
Without changing your processes to utilise the new technology, then the “great idea” can soon become a sunk cost.
5. Hybrid working
Hybrid work is changing the fabric and culture of law firms. Support teams are struggling to meet new demands and careful consideration of initiatives and technology programmes is needed. The world is changing at a considerable pace and strategies created two years ago can now appear archaic.
It is worth noting that as firms begin to adapt, the pandemic measures previously taken may not have been “stress tested” for long-term use. These may need to be reworked now hybrid working has become the dominant model.
Lights-On regularly works with the senior management teams in law firms to help with challenges like these. By listening to you, we help identify and quantify the challenges, ensure the firm is fully appraised and understands the start, commitment, and end. We can then translate that into actionable activities that deliver results.
If you are wrestling with any of the above – or simply have too many projects on your plate, we would be happy to listen and share some of our experiences.