Gartner Says 81 Percent of Legal Departments Are Unprepared for Digitalization

• Legal Teams’ Digital Readiness Is Crucial to Risk Management and Business Speed

Eight in 10 corporate legal departments are unprepared to support their organizations’ digital initiatives, according to Gartner, Inc. “Digital ready” legal departments — those properly prepared and positioned to support digital business efforts — can increase on-time digital project delivery by 63 percent and increase the number of digital projects with appropriate risk management measures in place by 46 percent, according to research by Gartner.

“General counsel are concerned that existing legal and compliance practices are incompatible with the speed at which digital business operates,” said Abbott Martin, research vice president at Gartner. “Most attempts we have seen to remedy this don’t strike the right balance between responsiveness and appropriate risk management; few legal departments have developed a comprehensive framework for digitalization.”

Digital Realities Require a New Legal Framework

With two-thirds of respondents to Gartner’s CEO Survey expecting their business models to change in the next three years, digitalization looms large as a key driver of near-term business change. Legal departments must reorient themselves around digital project challenges that accelerate existing legal and compliance risks.

Three key challenges are:

1. Changing sources of corporate value: Data rights, customer trust and networks are increasingly valuable assets that need legal safeguards.
2. Faster and less centralized decision making: This exerts extreme pressure on traditional legal and compliance controls and risk management practices.
3. A reliance on customers’ trust and data: This demands new models of information governance.

The majority of corporate legal departments are not ready to address these challenges. The 19 percent of legal organizations that are digital-ready deliver three-and-a-half times fewer projects with inappropriate risk taking and two-and-a-half times fewer delayed projects. 

The Keys to Digital Readiness

General counsel that are seeking to make their organizations digital-ready should prioritize four key changes to their department’s processes, according to Martin :

1. Clarify stakeholder roles — A typical digital project has six team members, 10 stakeholders and a wide network of partners on whom value capture relies. Many of these stakeholders have unclear mandates and ill-defined roles. By clarifying roles and decision rights at implementation and removing unnecessary points of involvement, legal departments can avoid the slowdowns, handoffs and frustration endemic to digital projects.
2. Build rapid-response capabilities — The needs of a digital business change rapidly, so legal must respond quickly and at scale. General counsel should address common obstacles, such as lack of time and poor change management skills, to build a department capable of service model change and innovation.
3. Develop digital skills — Digital business raises new types of legal work and issues. This requires a mental shift away from traditional legal duties toward a development approach that focuses on needs-based skill identification and on-the-job expertise transfer.
4. Design “fit for business” information governance — Despite increasing information governance risks, only 37 percent of legal and compliance leaders indicate they have a formal information governance structure, and most early adopters have struggled to create agile, authoritative and consistent models. Gartner has identified a new, “fit for business” information governance framework that trades an inflexible rules-centric approach for a decision-centric model, that is better able to keep pace with digital projects.

“As digitalization spreads across industries, so does the severity and variety of information risks for organizations to manage,” said Martin. “The good news is that a ‘fit-for-business’ governance model is flexible enough to account for the type of real-world trade-offs inherent to digital initiatives. It is not merely checking the boxes of regulatory requirements.”

More detailed analysis is available in the Gartner e-book, Make Legal Digital Ready.

The report explores what it takes for legal departments to be digital-ready, and how they can begin to get there. Gartner clients can explore all the book’s themes in more detail at  Gartner for Legal & Compliance Leaders.