So, you’re a lawyer? Or maybe you work closely with lawyers? We, at Libryo, know a little something about lawyers since some of us (as lawyers ourselves) have, to some degree or another, been in your shoes before. Sure, no two lawyers or law firms are exactly alike, and the role of in-house counsel is largely characterised by the company you work for but, if you really think about it, there are some shared experiences and challenges which all lawyers encounter - some on a daily basis.
Let’s start by looking at one shared experience which, we believe, all lawyers face to some extent. Simply explained, there is an incongruence between things we know we could or should do and things we ultimately choose not to do for practical or “commercial” reasons. Sound a little vague? Let us explain through some examples, at least one of which is likely to apply to you right now.
Scenario 1: The catch 22 - keeping clients v creating loss leaders
You might work in a law firm, which means you probably bill by the hour. If it’s a medium-sized or large law firm, with generally higher bill out rates, there are certain types of work which are time consuming but not necessarily complex, and which clients therefore perceive as ‘low value’ work which they refuse to pay for at your bill out rate. So here’s the catch 22: Do you tell your client (who may be using you or your firm for other services) that you simply cannot or will not do the work and risk losing that client or, do you do the work and end up writing off significant amounts of time, creating a work-stream that is a consistent loss leader? It’s a hard one but RegTech can help.
Scenario 2: The law firm reach and/or resource gap
You might work for a relatively small or niche law firm. You may have clients who operate across a number of industries and even possibly a number of jurisdictions. They come to you for some aspects of their business but have to go elsewhere for others, as you lack the resources and /or multi-jurisdictional experience to expand the services you offer to them. You run the risk of losing those clients to firms that may be able to cater for all of their business needs. You know value-add service offerings would go some way to providing security and client loyalty but you don’t have the capital or appetite to scale up for practical or “commercial” reasons. What should you do? RegTech can help.
Scenario 3: The in-house counsel conundrum: I am not responsible. But I am responsible
This one should pique the interest of law firms and in-house counsel alike, as there is a tension between law firms wanting to secure, maintain and increase the work they get from their in-house counsel clients, and the often constrained and scrutinised budgets of in-house counsel, who constantly need to justify how their chosen law firms add value and justify their fees.
If you are in-house counsel, you’ll probably be the most familiar with the pervasive problem of the divide between what should be done and what was not done for so-called “commercial” reasons. When trying to explain or investigate why certain obligations or compliance steps were missed, the reasons might include anything from either perceived or real timing, resource and/or cost implications, to simply being unaware that a particular obligation existed (which is by no means a comment on your capabilities or those of your colleagues, but rather an acknowledgment of the often overwhelming scope of your job).
We know that you, as legal counsel (whether you are part of a larger team or are fighting the good fight alone) are often the first, last or only line of defense in ensuring compliance across the board in often multi-faceted, multi-jurisdictional companies. We also know that this overwhelming responsibility is often coupled with few internal resources and a carefully managed budget which prevents seeking the help of law firms as often as you would like - particularly in relation to tasks which your company might perceive as having low complexity.
In addition, operationally, the time and cost involved in knowing all of your company’s obligations can be so overwhelming, or practically prohibitive, that people within your organisation will often make a “commercial” call and move on with their projects with the view to plugging the legal holes later on.
For these reasons, most law never makes it to law firms, and you might find that most of the law which your company, as a corporate client, faces is not prioritised by your legal team. Needless to say, this exposes your company to significant legal risk. If you thought accepting the status quo was your only option…. RegTech can help.
Ok so let's get to it - how does RegTech work and how can it help?
Staying with the in-house counsel scenario, it is significant to be aware that in-house legal teams, the general counsel and their armies of lawyers (typically the people at companies that interact with and brief lawyers at firms) are, apart from transactional work and a limited number of other matters, not the people who are immediately responsible for ensuring that legal limits are not transgressed.
Think about a massive oil spill in the ocean in domestic waters from a burst pipe. Who was immediately responsible for this regulatory transgression? The engineers and risk managers or the legal team at HQ?
Aside from the time and cost issues we have identified, there are also often gaps in communication between what it takes to comply with legal obligations at an operational level and the way that operations are actually carried out. What is worse is that in many companies those who are responsible for making sure that the law is not transgressed (let’s call them “Those Immediately Responsible”), do not actually know what the law really requires of them, and certainly do not know the consequences of non-compliance. Too often, this ignorance of legal thresholds and legal risks, flows all the way from those at the coal face to those in the boardroom.
The reason that many in-house lawyers (let’s call them “Those Ultimately Responsible”) are not able to empower Those Immediately Responsible with the simple knowledge of what is required situation by situation, on demand, is once again largely a resource, time and cost problem. Lawyers are expensive (whether in-house or retained) and each question of operational regulatory limits that Those Ultimately Responsible pose, can get in the way of the bigger fish that Those Ultimately Responsible have to deal with. These seemingly insignificant questions are often systemically overlooked as larger matters (often transactional in nature, with a large dollar value, and an end date in sight) are prioritised by those Ultimately Responsible, and indeed by the law firms they brief.
So, Those Immediately Responsible often resort to common sense, whether or not this falls outside or inside the bounds of the law that they need to know, in order to manage compliance with it, or even report against it. Those Immediately Responsible also often rely on legal research conducted themselves, often from inferior legal resources or Google. Alternatively, they take advice from their other consultants (many management system consultants such as data protection, quality, environmental or health and safety management system consultants provide legal advice as part of their services). This kind of advice is often prone to the risk of inaccuracy or being outdated. Many companies thus live in a state of transgression of the law, simply because Those Immediately Responsible do not know what the law requires of them and thus operations continue in breach of applicable laws and regulations. It’s only when the breach is found out or is of a nature that it hits the media that it comes to the attention of Those Ultimately Responsible.
The obvious solution is to get the right law, to the right people, at the right time...but how? If Those Ultimately Responsible decided that they would position themselves in order to keep doing everything that they currently do on transactional matters and, in addition to that, provide the on demand legal knowledge that Those Immediately Responsible need (protecting them from themselves, their own legal inabilities, and those consultants that masquerade as legal advisers), they would have to increase their team size (at a massive cost to their company) or they would have to brief their law firm. The law firm would then most likely be faced with the catch 22 envisioned in Scenario 1 above.
In any event these legal services face the awkward problem that once they have been completed, they will soon be out of date as the law is frequently changing and the report [Libryo_regtech] will need to be created again in a years time, again at great expense. Moreover the reports are often delivered in a format not capable of integration into the management systems of corporate clients and are too often not of any practical utility for Those Immediately Responsible.
Enter RegTech. Regtech enables Those Immediately Responsible to know the precise regulatory obligations faced in any situation on demand and then manage and report oncompliance to Those Ultimately Responsible. It’s enabled by smart organisation of regulatory text segments with relevant real world and data in sophisticated databases and tailored to each operation or operating location.
If you work for a law firm, your initial reaction to this might be that by putting the law into the hands of your clients, you are losing potential work. But, informing and continuously updating clients with a basic knowledge of the law which relates to them (with no interpretive nuances applied) is perceived as low value work, which clients are increasingly unwilling to pay significant fees for. It is almost inevitable that the research and time taken to keep clients up to date with all of their obligations across the breadth of their businesses will never align with the bill you are ultimately able to impose on them. By arming clients with RegTech solutions, you are ensuring that your clients and Those Immediately Responsible within them are not relying on inferior means of determining applicable legal requirements. Rather, as their trusted advisor, you are ensuring that they are constantly aware of their legal obligations and are then able to engage you on the nuances and complexities of how these might apply. This is the quality, value-adding work you want to get because clients acknowledge its inherent value and are willing to pay for it. This means no write-offs and increased client loyalty.
Most regulation is not that complicated, it is just terribly organised. Regtech provides a simple, efficient, cost effective solution to a shared legal problem that need not exist.
Most regulatory law that Those Immediately Responsible must comply with is actually pretty clear once you get to it. It's the getting to it that is the problem. Regulatory law is terribly organised and it’s this terrible organisation that makes finding the simple answer to the question of what sections of regulation Those Immediately Responsible face, one that is frustratingly time consuming and thus expensive to answer. Finding relevant legal provisions should not be done manually. Technology is much better suited to solving this problem.
Legal counsel and Law firms alike are now able to employ regulatory technology to close the gaps identified in scenarios 1, 2 and 3 above. This means that those Immediately Responsible and Those Ultimately Responsible have access to the best available regulatory information allowing them to know, in any situation, what regulation requires of them without having to resort to inferior methods of obtaining such information. And when they require legal advice in relation to their obligations, their lawyers will not have to start from scratch and conduct extensive legal research. Regtech now enables lawyers to do what lawyers do best. Give quality legal advice!
This novel approach of law firms and corporate clients jointly implementing RegTech solutions enables them to be sure that they are doing all they can to ensure that all of their legal obligations are known and that operations are carried out within the limits of the laws which apply to them, to the mutual benefit of all involved.