Higher demands, fast pace and more risks – the challenges for the legal department continue to increase with the growing economic and regulatory demands on their companies. The role of legal teams is constantly evolving and the expectations on their cooperation in legal issues as well as their support in operational processes are increasing.
This doesn’t come without consequences. Therefore, one focus of the legal teams is to optimise legal processes and introduce legal technology. But what are the challenges facing the legal department? And how can they be mastered?
Why does the legal department face challenges?
Limited budget, lack of resources and increasing contract review volumes – the legal department quickly becomes overburdened by increasing regulatory demands in the company. The legal landscape is in a constant state of flux: since the pandemic, labour legislation has changed, data protection and data administration are being recalibrated and the importance of compliance issues is growing in companies.
An increasing number of contracts and the growing complexity of their supervision place a high workload on legal teams. With changing business models and regulations, the workload for drafting, reviewing, negotiating and managing contracts is expanding. The requirements for transparency of content and the availability of data and legal knowledge continue to grow.
While the demands on the legal department and companies are rising, there is a lack of resources available to process the contracts and overcome these challenges. Manual processing of contracts takes time – and with every day it takes to process them, opportunities are lost due to misplaced or late contracts. Thus: the faster contracts are processed, the more valuable time is regained for strategically important tasks.
Bottleneck contract review
The legal department is the company's legal advisor – it accompanies strategic decisions, ensures compliance with laws and guidelines and excludes liability risks. However, often only a few experts are available for the tasks required of the legal department, including the processing of contracts.
Meanwhile, contract review alone takes an average of 24 hours – and costs around 800 euros. With hundreds of contracts to be processed every month, other tasks quickly fall on the backburner. If different departments are involved in the contract review, the whole process is delayed, particularly in this phase. In this way, the contract review process quickly becomes the bottleneck of the entire company.
5 challenges during contract review
Lack of capacity
Available resources are scarce in the legal department. In addition, their capacities are often occupied with administrative and repetitive tasks. This means that the workload of legal department staff grows while orders pile up, quickly making the legal department the bottleneck of the company.
Not every contract needs the same level of support. However, with an increasing number of contracts, new business models and regulatory requirements, the support of new and existing contracts becomes a more complex challenge. This increases the effort – and time – required for contract review. Thus, time management and efficient contract support are becoming important factors in mastering complex challenges.
Digitalisation and cost pressure
Margins are getting smaller and smaller as a result of a highly competitive market. New providers are entering the market all the time. This puts both companies and their legal departments under cost pressures. To increase efficiency, the digitalisation of processes is taking place in every department, including the legal department, with a focus on expensive, lengthy processes such as contract review.
When relying on manual means, maintaining quality requires a lot of time and effort. The legal department, for example, has to check contracts for legal compliance and possible risks, read each clause individually and examine it for admissibility. Contract review is thus dependent on individual-level processing, while adherence to corporate guidelines is becoming more demanding and compliance is gaining in importance. Legal tech applications standardise legal requirements and thus ensure the quality of contract processing.
Legal departments are quickly becoming overwhelmed by repetitive work. 7 out of 10 requests to legal teams involve repetitive, highly standardised contracts. This is tedious and time-consuming and leaves little capacity for value-added tasks. Repetitive work slows down the speed of processing and poses risks of human error.
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How can the challenges of the legal department be mastered?
Overloading legal teams quickly leads to delays in processes in all areas of the business. Optimising legal processes and mastering the challenges of the legal department is therefore an asset for the whole company.
Legal Tech for more efficiency
The challenges of the legal department are mainly based on three factors: few resources, growing demands and the overloading of the legal team with repetitive work.
To make sure that it doesn’t stay that way, there are customised legal tech solutions out there that can be used in individual phases of the contract life cycle or to support the entire processing process, digitally. This way, resources can be conserved, requirements and knowledge can be centralised and repetitive tasks can be minimised.
Software solutions for document creation and contract review support users in the pre-signing phase. Other providers offer solutions for signing contracts. And there’s also innovative support on the legal tech market for analysing contracts in the post-signing phase.
To really support legal teams, some legal tech applications also use artificial intelligence (AI). During contract review, for example, legal concepts and wordings can be "read", recognised and checked for admissibility with the help of AI. Company guidelines are digitally stored for this purpose and are then compared with the contents of the contract, so that contractual discrepancies can be automatically marked and corrected.
Legal tech solutions accelerate processes, relieve legal departments and facilitate repetitive, tedious work. Finding the right solution is a game changer for optimising legal processes and at the same time ensuring the quality of contract processing. In this way, innovative legal tech solutions enable reliable deals for sales, leaving more time for constructive communication and value-added tasks.
Legal tech solutions offer reliable support when mastering the challenges of the legal department as efficiently as possible. With their help, internal processes can be optimised and contracts can be concluded more efficiently. But speed is not the only advantage of digital solutions in the legal department; the standardisation of contract processing makes tedious work easier for legal teams and frees up time for value-added tasks.