Tech-Enabled Legal Risk Management
Suppose you are a managing partner at a major law firm and receive this email from a champion – perhaps an alum – working in the legal department of a large corporate client in financial services.
Heads up! Our GC met with a firm offering to help us manage our legal risk using software that collates data from organizational processes, performs legal risk analysis, and generates management decision support.
Our leadership has been pushing us to manage legal, reputational, and business risks comprehensively. They expect us to use data-driven insights to manage mitigation efforts and control costs.
I do not want our GC to redirect the regulatory compliance work we were planning to send you. I’d like our GC to hear what your firm has to offer, so it can continue serving as a trusted strategic business partner.
Senior Corp Counsel
Some of your most important clients are facing Ruth’s dilemma. Even though they may have a long-standing relationship with you and respect your legal expertise, their executives seek partnerships offering them the most significant strategic benefit.
Here is Bob’s response to Ruth’s email:
I genuinely appreciate the heads-up. We were just about to contact you to introduce our new legal risk and knowledge management systems. Let me provide a quick overview of these significant new force multipliers for our legal expertise.
Our legal risk management system (LRMS) profiles a company’s business operations and legal environment, monitors information to identify and prioritize risks, and recommends best-practice risk mitigation measures.
The LRMS dashboards show risk portfolios at the levels of different types of risk over time. Clients can:
- Drill down into the underlying analytic models and datasets transparently used as inputs
- Monitor KPIs and compare to benchmarks
- Read our relevant thought leadership publications
- Engage with in-house and external counsel attorneys and business decision-makers to collaboratively author risk management plans with mitigation interventions, budgets, and accountabilities.
Our new Risk Intelligence Analytics team – composed of attorneys, economists, data scientists, social science researchers, historians, former intelligence analysts, and actuaries – builds risk models and analyzes risk.
They use risk modeling and assessment tools that store information in new knowledge management systems powered by ontologies and knowledge graph technology from Mind-Alliance. These tools include
- A regulatory alert management system, which helps monitor regulatory change events and draft informative client alerts by leveraging relevant reference content, subject matter experts, and reader personas.
- A risk briefing system, which helps analyze the connections between legal, regulation, business, and reputation risks as well as prepare executive briefings that distill complex issues into concise, concrete language.
- A client intelligence system, called MindPeer, that populates custom report templates with the specific information each lawyer needs to know about a business.
Contract review and drafting tools that automatically display contextually-relevant information and set up monitoring for events that may trigger contractual provisions.
- Tools for annotating regulatory documents (e.g. legislation, regulations, internal policies, contracts) and mapping textual semantics into structured knowledge and machine-readable business rules.
- A legal risk management learning center, which provides online content resources for attorneys and staff about how to help clients gain a business advantage through proactive legal risk management, as well as how to efficiently monitor a business enterprise and relevant policy, regulation, and litigation changes.
I look forward to meeting with you to discuss how our new capabilities will help LargeCo integrate its legal and enterprise risk management efforts and align them with business strategy to better protect the company from future difficulties and help it grow.
How to Prepare Your Law Firm
Legal service firms that wish to compete at the top of the industry must help their clients’ law departments identify legal risk exposures, quantify potential legal losses, and integrate legal risk management into their broader operational risk management efforts.
To be an indispensable strategic partner, outside counsel needs to have a deep understanding of risks associated with their businesses, relationships, processes, and products. These may be legislative/regulatory risks, dispute risks, contract risks, intellectual property risks, or risks associated with non-legislated, non-contractual duty-of-care obligations. Understanding these legal risks in context requires data about the client’s business plans and operations and other types of risks, including:
- Strategic risk, such as making poor, significant decisions about either the launch or withdrawal of a product or service, or entry to or departure from a market
- Reputational risk, such as executive remarks that backfire or damaging news stories
- Operational risks, such as labor problems impeding manufacturing ability or regulatory actions impeding service provision
- IT and digital risk, such as cybersecurity failures and privacy problems
- Financial risks, such as capital investment, borrowing mistakes, or cash-flow problems
Modeling the client’s business, legal and regulatory ecosystems with a system dynamics model like the one that illustrated the complexity of the war in Afghanistan can be highly-valuable. Models can foster a greater shared understanding, for example, of how politics drive policy, which influences regulation, the economy, and transactions. Models can facilitate productive discussion of potential courses of action in light of legislators, regulators, and competitors’ intentions, plans, and capabilities.
Knowledge graphs and ontologies are becoming key technologies for building the models used in the context of legal risk management, strategic account marketing, and business development intelligence. Semantic technology underpins applications that analyze data about a company’s operations and legal environment, and detect events (e.g. litigation and changes in regulations) that trigger business rules related to risk management and business development, such as sending alerts to clients and partners.
Mind-Alliance believes that in the next few years an increasing percentage of RFPs for legal services will ask law firms to explain how they use technology to help clients anticipate and prevent problems, reduce legal costs, and lower the impact of reputational damage. If your law firm is not prepared, it will be at a disadvantage.