Tech Adoption, Cybersecurity, and Professional Services Firms: 2020 Mid-Year Review

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“To be prepared is half the victory” –Miguel de Cervantes.

McKinsey published a report in May 2020: the competitive rankings of law firms often reshuffle after an economic downturn. How firms fare depends on their preparedness to cope with the changing market and their ability to help clients move forward.

FortNynja E-Fintech School hosted a web panel on June 17, 2020, where the speakers including myself exchanged cross-industry and regional perspectives on how professional services firms have addressed tech adoption and cybersecurity under recent market and COVID-19 pandemic conditions. 

Web Panel: Navigating Tech Adoption and Cybersecurity Trends

Please see video link:

Technology adoption

While many considered COVID-19 a Black Swan event, a few firms have weathered well the storm so far. They have long-implemented disaster recovery and business continuity plans. They have committed technology resources to support remote work, including VPNs and virtual conferencing tools (pre-COVID, these endeavors might have been driven by the need to provide flexible work arrangements).

In March 2020, Intapp published a survey noting that: 95% of responding law firms globally had teams working from home; 77% increased IT spending; 85% cancelled in-person meetings categorically.

Tech adoption in the last few months has shown lawyers that:

  • Speedy digital transformation in legal practices is possible;
  • Technological investment is worthwhile, both as an immediate necessity to do business and for long-term growth; and
  • Cloud-based technologies are here to stay in the legal practice context.

A firm’s capacity to adapt determines its business success in times of crisis. Some law firms have moved their entire operations online in a few days.

While it is too early to say what are the lessons for the legal sector during the COVID times, let alone post-COVID, it is interesting to hear these recent anecdotes from the profession:

  • Unsurprisingly, technologies supporting remote work have quickly proven value.
  • Tech adoption for us is more about better utilization of existing IT resources and integrating industry best practices than finding and onboarding the next shiny product from the market.
  • Virtual meetings can save a lot of traveling time and allow a lot to be done, although they may sometimes be more exhausting than in-person ones. 
  • eSigning and online transaction management tools are pretty useful (e.g. when clients and counter-parties get stuck, quarantined abroad).
  • We need to better use our time-recording and case management tools to minimize billing leakage.

Market changes

  • Right now, the top-of-mind issue for many law firm partners is business survival in 2020. Clients are tightening their belts and major economic activities have stood still.
  • Economic downturns tend to see upticks in general commercial and employment disputes and business restructurings. But a pandemic-driven recession has certain unique characteristics.
  • A lawyer’s letter of action is likened a paper tiger when you cannot even start a claim in jurisdictions where courts have been shut down and where court services limited drastically due to social distancing measures.
  • In the longer term, the massive case backlogs built up will mean a buoyant disputes market in 2021-2022. We can see strong growth in COVID-related insurance claims and enforcements over frustrated deals.
  • Many firms have reduced working hours and implemented “A/B team” rosters to staff the office while maintaining social distancing safeguards. These arrangements have some impact on service delivery capacity.
  • But the greater issue here is maintaining team morale in the mid to long term. Indeed, professional news abound that staff members are asked to take salary cuts and no-paid leave days, and partners delaying or significantly reducing drawings.

Cybersecurity

From March to May, many networking and integration projects were accelerated to accommodate remote working arrangements, timeframes drastically compressed. The pressure on IT support teams has been enormous. 

Given the duty of client confidentiality and the sensitive nature of client information, the legal profession for the most part is conservative in adopting technology. Yet, as firms rely more on Web Apps, SaaS, and other online technologies, there is greater network traffic and increased cyber incidents. The IT footprint exposed to cyber risks has simply grown, exponentially in many organizations.

By now, we are well aware of the data breach of the Panama law firm, Mossack Fonseca, in 2016, even a film has been produced about it. Experts have speculated that an outdated WordPress plug-in of the offshore firm’s website provided the loophole for hackers to gain access to the firm’s sensitive data. Supposedly, it could have been fixed easily with an update patch.

In January 2020, five U.S. law firms were attacked by the Maze ransomware, all within the span of 24 hrs. In May, an entertainment law firm which has represented many Hollywood stars was also hit by ransomware. On average, the cyber criminals have been asking US$ 2-4 million in each case to decrypt and destroy copies.

Obviously, it would be counter-productive to reduce technology usage to avoid the risks where technology has proven value. Most cyber incidents arise from social engineering and neglect. A workforce educated and disciplined in following cybersecurity protocols goes a long way to preventing and managing data breaches and other cyber incidents.

So, even though cybersecurity and managing cyber incidents may require the leadership and support of technical experts, everyone should be responsible for their own and their team’s “cyber hygiene.”

Strategizing for the way forward

No one strategy wins out. Every firm needs to look at what are the strategies and resource commitments that fit their practices.

The adoption of electronic execution practices, for example, impact firms differently depending on whether the jurisdiction and their practice focus (e.g. general contracts vs. conveyancing documentation). The further development by the judiciary in eSubmissions and virtual hearings may not be all that relevant to legal practices focused on corporate transactional matters. They may not need to consider committing resources to remote hearing technologies.

It boils down to keeping your clients happy and your staff motivated. Firms should find better ways to keep in touch with clients, as their inboxes are no doubt flooded by email updates, newsletters, and webinar invites!

Moving on from business survival mode to recovery mode, firms should reflect on how technology could be better utilized to enable their practices: what worked well and what didn’t over the past few months when massive changes needed to be managed; how they can better support work arrangements for flexibility, collaboration, and connectivity.

It is also good time to consider business innovations as clients seek greater cost certainty. Firms should review their options in providing pricing and volume relief, and securing client trust and loyalty with strategic use of flexible payment terms and credits toward future services, and, of course, alternative fee arrangements.

Some firms and businesses are eligible to obtain government COVID relief funding. They  should consider applying these funds to technology: upgrades, staff training, and consultation.

LawTech Training Course

As the profession shifts to a greater uptake of online training, please check out FortNynja’s new online lawtech course

The course has five (5) modules (see below). It covers several key aspects of the legal innovation journeys taken by law firms and legal practitioners and related challenges in adopting lawtech.

Basic Modules 1 and 2 (two hours each)

Advance Modules 1 to 3 (three hours each)

 

 

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