Corporate legal professionals at the largest oil, mining, and commodities companies are facing challenges brought on by worldwide industry contraction. As I write, the price of oil has risen in recent weeks, but remains depressed around $30-$40 per barrel. This comes only after prices reached their lowest level in 12 years in January; and most forecasters are predicting another fall.
Prices of other commodities, particularly metals, have also slumped over the past year. Copper prices are at a six-year low following concerns about China’s economy, the world’s largest consumer of the red metal. And the cost of scrap steel is down 70% from this time last year.
Within this environment, it is important for corporate legal departments to find ways of maximising the long-term value they bring to their organisations. In order to maintain margins in a challenging business atmosphere, operators are looking to boost efficiency, reduce costs, and mitigate legal risk.
Focus on Efficiency
On the operational side, efficiency is about rapid and flawless execution and deriving the highest value from both internal and external resources, including the legal department where Enterprise Legal Management can support increased value across the business by:
- using metrics and data analysis to identify and achieve efficiency improvements, control costs, support decision making, and mitigate risk
- improving day-to-day management of legal and other work – by making sure it is allocated at the right level of seniority and expertise internally or with Law Firms
- facilitating collaboration between teams from across the business, and with external partners, to support legal, risk and compliance activities
- automating routine (legal and administrative) work – for consistent processes and rapid and flawless delivery
The corporate legal department touches every part of the business, and a comprehensive Enterprise Legal Management platform should support an ecosystem that connects technologies, departments and people – including external stakeholders. This includes allowing straightforward access to data in systems and departments across the business, as well as from suppliers, providing the ability to benchmark and compare.
Controlling Costs and Increasing Value
For corporate legal departments, balancing work between in house resources and external law firms, and achieving the best value for money from firms, is a key consideration. And as most large corporations employ multiple legal services suppliers, depending on their need in terms of workload and specific expertise, the right software and analysis helps manage the company’s external resourcing strategy and legal spend, compare the quality of service and fees of different firms, and provide the hard data to support speedy, well-informed, long-term decisions on panel appointments and who to instruct on particular matters.
Matter and spend management software should include data reporting and analytics solutions that enable corporate legal departments to get the best possible value and quality from their firms – on a long-term basis. A dashboard user interface that provides the ability to quickly drill down into the detail of matter and billing data enables general counsel to compare external firms on price and performance for similar matters and to assess individual firms’ performance over time – for example looking at lawyers’ charge-out rates for particular tasks. It also simplifies the administrative burden for lawyers of managing matters and law firm billing approval, allowing them to spend more time on providing their legal expertise to the business.
Managing Risk and Compliance
Although automated processes can expedite service and increase productivity, they still need to be monitored so that standards and outcomes are not only consistent, but acceptable to clients and other involved parties. Retaining control mitigates risk – which can arise in any part of the business. The legal department needs to access, check, and analyse data from across the company in order to protect it from legal and business risk ranging from ensuring compliance across borders and sectors to implementing information security measures, environmental responsibilities and visibility permissions. All the while, the department must continually manage agreements with suppliers, agents, law firms, and outsourcing partners.
In a highly-regulated sector that spans multiple industries and jurisdictions, and involves high-level environmental and safety considerations, compliance must always remain top of mind for the legal department. Investment in effective management tools is therefore key to protecting margins while mitigating risk and demonstrating compliance.
Despite being a global economic force, at the root, commodities companies are engineering businesses. Like any engineering business, they rely on hard numbers to make strategic decisions about projects and tactics. It is particularly critical during difficult financial times for legal department processes to reflect this same culture. Within the legal department, as this approach is incorporated into increasingly sophisticated and automated workflows, lawyers are able to concentrate on the challenging and skills-based elements of their roles, rather than administrative tasks. These workflows also support closer collaboration with outside counsel, strengthening those key relationships.
Legal department management is no longer simply about incremental productivity gains. The legal function must now fully adopt the industry-wide ethos of cost control and value recognition, making this the optimal time to begin building a sustainable solution. Contrary to the knee-jerk reaction that falling margins mean a halt on investments, now is the time to invest in Enterprise Legal Management that allows the legal department to better understand the business and make long-term, data-led decisions that benefit the entire company. This proactive approach enables holistic management of legal, risk, and compliance activities across functions and positions the company well to ride out the slump and – eventually – benefit from a rising market.