Zara Yusuf analyses four current commercial challenges for law firms.
Like other businesses, law firms face a number of commercial challenges that they need to navigate through, especially in the current climate. This article will explore some of the key commercial challenges that law firms will be encountering at the present time, including Covid-19, AI and technology, competition from non-legal providers and Brexit.
One obvious challenge that law firms are facing is the coronavirus outbreak. Not only have law firms had to rapidly transform their ways of working, but they have also had to leverage technology, to allow their employees to work remotely and communicate effectively with the team and with their clients. Commercial clients will require more legal advice and support in a time when many industries are at risk of collapsing. Moreover, lawyers will need to adapt to new ways of meeting the needs of their clients, since face-to-face meetings and travel are not possible or are restricted. They will need to be able to deliver a friendly service over virtual calls and ensure that the targets are met while the team are working from home. This would be challenging for trainee solicitors, who benefit from the guidance and training that would have taken place in the office, whether this is in the form of workshops, help from the team or picking up knowledge from conversations. Law firms therefore need to ensure that a collaborative environment is maintained and that alternative ways of training their trainee solicitors are adopted. Moreover, the impacts of the pandemic are also affecting law firms themselves. This has led to law firms reviewing their business continuity plans and making difficult business decisions, such as cuts to newly qualified solicitors’ wages and halting any M&A plans.
Competition from non-traditional legal service providers continues to pose as a threat to law firms. This includes the Big Four accounting firms who have their own in-house lawyers, some of which have even more lawyers and/or operate in more jurisdictions than some City law firms. From the perspective of commercial clients, it is more convenient if they are able to have multiple services granted by the same provider.
The evolution of technology and artificial intelligence, along with their many applications, can benefit law firms while also proving to be a challenge. Technology and AI can complete smaller tasks, such as reviewing contracts efficiently, thus enabling lawyers to focus their efforts on more rewarding and challenging work, however it can be a large and risky investment for businesses. In order to compete with rivalling law firms for clients, lawyers may need to demonstrate that they are keeping up with the latest technology that can best help their clients.
Even now, Brexit brings political uncertainty and causes for concern for law firms. For law firms that are particularly dependent on EU-UK relations, there may be negative consequences, while many US and global law firms may continue to grow in the coming years. The uncertainty surrounding Brexit will deter numerous commercial businesses from investing and growing, thus leading to a decline in some legal services. Although there is likely to be a demand in advisory work for clients, who are hoping to prepare for the aftermath of Brexit. Of course, there will be substantial changes to legislation itself, including EU and GDPR laws, which lawyers will need to stay informed about. There will be other impacts for law firms themselves, such as barriers for recruiting talent from beyond the UK and potential restrictions on UK-qualified lawyers working in the EU.
Of course, there are many other challenges that law firms will be facing, such as cybersecurity, diversity and inclusion, climate and sustainability, mental health and staff retention, plus there will always be new challenges that present themselves. Law firms need to be able to embrace change and find ways to navigate through the various challenges that they will be confronted with.
By Zara Yusuf.