In its 24th consecutive year, the 2023 Chief Legal Officers Survey published by the Association of Corporate Counsel (ACC) continues to bring into focus the immense value that Legal brings to the businesses it serves. While last year’s results were collected at the height of the COVID-19 pandemic, this year’s respondents were (and are still) facing many of the legal and business implications associated with the ongoing pandemic, war in Ukraine, and economic challenges.
As the role of the CLO continues to expand, the position is increasingly being seen as critical to the success of any business, with those filling the role acting as valued and trusted partners throughout their organizations. With the priorities of CLOs shifting due to the constantly evolving nature of the business environment, it is important for us to consider what is top-of-mind for CLOs over the coming year.
The respondents to the ACC Chief Legal Officers Survey for 2023, almost 900 general counsel and chief legal officers from 35 countries who represent 20 industry sectors, listed the main topics preoccupying the minds of modern CLOs. These participants noted that cybersecurity, regulatory compliance, and data privacy continue to be the most important issues to their businesses, with industry-specific regulations posing the greatest legal challenge.
What are the biggest concerns?
The majority (67%) of CLOs expect the volume of privacy-related regulatory enforcement to increase in 2023, up 7% from 2022. More CLOs in the US see regulations as the biggest challenge (68%) compared to those in Europe (52%), and more than 40% of CLOs in Asia and Europe expect political changes to be the top challenge, compared to just 32% in the US. In fact, it has been highlighted by German survey participants that the most important emerging risks currently facing their organizations were selling services and software products with the wrong T&Cs and templates, and non-aligned partnerships.
The report notes that CLOs are still facing many of the legal and business implications associated with the ongoing pandemic, the war in Ukraine, and inflation. These concerns highlight the growing influence of the CLO within company leadership and further increases in oversight and responsibilities, particularly in the areas of privacy and cybersecurity, which pose significant challenges to businesses with increasing regulatory pressures.
Despite these challenges, only 38% of CLOs said they plan to hire more lawyers this year, compared to 45% in 2022. Additionally, fewer CLOs reported that they plan to send more work to law firms and alternative legal service providers this year than last year. Most CLOs are instead choosing to focus strategically on advancing legal operations and cost-minimization strategies, likely due to the pressures of the recessionary environment. The number of legal departments with at least one legal operations professional also remains stable at around 6 out of 10 participating departments. (Fig. 1)
The ‘age of the CLO’ shows no signs of letting up. In fact, the survey shows that the CLO’s role and responsibilities within their organizations continue to expand and diversify. The value of applying their unique training and experience to roles outside the traditional legal function is increasingly being recognized as beneficial to the strategic and operational needs of their organizations. It does remain to be seen if this slowdown in hiring is a signal that legal departments are nearing their target operational sizes or an indication of a larger pullback in spending due to economic concerns.
What are the top priorities?
CLO priorities are shifting to accommodate the convergence of legal operations, privacy, regulatory compliance, and cybersecurity response, and responding to this growing scope of responsibilities with new strategies and technologies. Legal operations were listed as the top strategic initiative in legal departments by 70% of CLOs, followed by right-sourcing legal services (45%) and cost minimization (43%). (Fig.2)
The CLO’s role as an integral business partner continues to grow, with most CLOs reporting directly to the CEO (77%), a result that has remained stable for five years and that has substantially increased from 64% in 2018. In addition to legal, the role of corporate function oversight is increasing for CLOs, with at least 20% saying they oversee one or more of the following: compliance, privacy, ethics, risk, government affairs, ESG, and cybersecurity response. Many also oversee human resources, public affairs, and real estate/corporate facilities. A higher percentage of CLOs in smaller companies tend to oversee a greater number of functions than those in larger companies.
The survey also highlighted macro trends that influence the role CLOs play in helping their organizations to improve compliance efforts, with German participants noting the main drivers in their country were ESG, certification of products, and new industry regulations.
Data management saw a 5% increase from last year in those who selected it as a top strategic priority for the legal department. This is why 41% of CLOs said they plan to invest in new legal technology solutions in 2023. Contract management remains the top technology for investment as reported by 67% of CLOs. Document management (34%) and workflow tools (30%) were also listed as important technologies that CLOs were willing to invest in. However, 26% of CLOs say they will not invest in new technology any time soon. There has also been a consistent decrease each year in the number of departments planning to implement e-signature technology, which is often one of the first tools implemented due to the cost savings and efficiencies it brings.
Finally, 67% of CLOs believe that the volume of privacy-related regulatory enforcement will increase in 2023, up from 60% who thought so last year. In the information technology industry, 87% of CLOs expect an increase, while in construction just 46% expect an increase. Last year, over half of CLOs implemented technology solutions to help comply with data privacy regulations, and 84% of CLOs expect their expenditures on regulatory compliance solutions will increase this year.
The role of the CLO is forever changing and expanding, and as the world’s organizations keep adjusting to new challenges thrown their way, legal professionals must also continually and proactively redefine themselves and their legal departments to match this rapid global transformation. In doing so, they can further establish their influence throughout the organization, their industry, and make their mark beyond the traditional confines of just the legal department.
These are just a few of the many findings captured in the most recent iteration of the ACC Chief Legal Officers Survey. To find out more, download the entire 2023 CLO Survey here, and check out these ACC resources that might have the solution you are looking for:
- Join our panel of in-house thought leaders, and uncover how CLO responsibilities are increasing, and why investment in legal ops remains the top strategic priority in 2023. Watch the free online program now from your desk.
- Two-thirds of CLOs say that industry-specific regulations will likely pose the biggest legal challenge to the business, followed by data protection privacy rules, and M&A. Tap into the wisdom of the crowd when tackling corporate ethics and compliance issues.
- CLOs continue to place cybersecurity, regulation and compliance issues, and data privacy as the top three issues posing the biggest legal challenges this year. Check out the ACC Data Steward Program, a data security standard for the legal industry.