Study “Digital Economy & Law” – Key Findings

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The joint study on “Digital Economy & Law” prepared by the German Association of General Counsel (Bundesverband der Unternehmensjuristen) and commercial law firm CMS in Germany published in late 2016 addresses the legal challenges presented by digital transformation and the effects on corporate legal departments. For the survey 1,050 companies were contacted, 305 answered the questionnaire, resulting in a return of 29.0 %. Findings are based on the opinions of German corporate legal departments from 25 branches. The study thus represents a broad spectrum of the German economy.

The majority of in-house legal departments (roughly 69.9%) agrees that digital transformation is having a considerable influence on their company. Nonetheless, tendency shows: The larger the company, the stronger the sense of impact. Companies and groups with an annual turnover of EUR 10 billion and more consider that the consequences of digital technology are particularly far-reaching. When asked whether the digital transformation offers more opportunities than risks, there also is a clear picture: Most of those asked expect a positive impact. On a scale of 1 (high risks) to 10 (large opportunities) two-thirds assess the situation at 7 or higher. Conversely, the group which considers that the development conceals risks, is very small at 6.3%.

In-house lawyers still see a long way to go, both with regards to their own abilities and skills, as well as competences relating to digitalisation. For example, only roughly a quarter of in-house legal departments considers that they are “very well” (4.5%) or “well” (23.3%) prepared for the challenges brought about by digital transformation. Nearly half (48.5%) award themselves a 3 (on a German school scale of 1 to 6, 1 being the top mark). The most frequently named reasons given by the in-house legal departments for not being best prepared for digitalisation are as fol-lows: The existing budget is too low and urgently required resources are not available. In addi-tion, the topic of digitalisation has frequently not percolated through sufficiently, so that the measures required are not undertaken. Some other critical issues are: not enough willingness to change, colleagues are too old for the topic, lack of in-service training, slow adaptability.

Today, on average nearly every third member of in-house legal departments (31.4%) is involved with digital topics. They use 1/5 to 2/5 of their available time for aspects and issues relating to digitalisation. Barely 1/5 of those asked (17.1%) have a digital work focus, defined as more than 60% of their time spent on digital aspects. It is agreed that the digital economy requires, among other things, additional competencies, new focuses and more resources. However, not even eve-ry 10th company (9%), is setting aside a higher budget for this aspect. But the few companies which do allocate additional funds for digital transformation in their legal departments are aim-ing to increase their legal budget by quite significant 18.9%.

The answer to the demand for more resources does not have to be an increase in personnel. Thus, 39.9% of those taking part in the study hope to compensate for the extra work caused by digitalisation with improved processes and organisation, including the use of Legal Tech. Thanks to digital technology, it is possible to carry out high-calibre tasks in many areas with the assis-tance of specific software. Hence, legal departments want to make more use of the opportunities offered by Legal Tech. The suggestions often made include: processes which can be standard-ised and which do not required any express legal competence should be outsourced increasingly to shared services platforms. Those responding to the survey consider the greatest potential for the use of shared services platforms to be in the area of reviewing and drafting simple contracts. Recommendations are often given to make available on digital service platforms the work of the legal department and to bundle it on these platforms, provided no specialist know-how is re-quired. Those responding to the survey expect that the use of digital tools and programs will speed up their work and processes. In this way the degree of optimised legal advice will increase and the range of digital services will be extended.

For obtaining the full study (available only in German), please visit the following link.