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Minimising the Cost of ‘Regulation Creep’

November 22, 2022

regulatory compliance subpoena response DSAR data breach non-discretionary spend

For law departments, the old quip that “nothing is certain except death and taxes” seems only two-thirds correct. General counsels and their teams know that come what may, every passing year brings more regulations with which they must comply. In an era of frozen or shrinking law department budgets, hiring freezes, and demands to ‘do more with less,’ the certainty of ever-more regulations seems bound to further increase non-discretionary law department spend. What are law department leaders to do to ensure compliance while controlling costs?

At first glance, regulatory compliance – such matters as data breach notification, subpoena response, and handling DSAR requests – seems like an unlikely activity for savings, especially as the scope of regulations seems to expand endlessly. However, several factors militate against such a pessimistic stance. Rather than be resigned to cost increases for regulatory compliance, law departments should view them as a prime opportunity to trim non-discretionary spend for at least five reasons:

Economies of scale. Regulatory compliance requires more than ongoing monitoring for new or expanded regulations. It also necessitates operationalising the activities involved in complying with such developments. Legal services providers that handle regulatory activities for corporate law departments are a lower-cost option because such providers distribute the cost of monitoring and operationalisation across their customer base. This allows a law department to remain up-to-date on and comply with relevant developments at a fraction of the cost of using in-house resources.

Geographic leverage. Savings also result from using a legal services provider with resources in lower-cost locations. This is a significant consideration as salaries for in-house lawyers remain high in the wake of the recent ‘salary wars’ that drove attorney compensation to previously unheard-of levels. Providers of outsourced compliance support can quickly take advantage of lower labour costs in locations; few, if any, law departments can do so.

Best practices and optimal processes. Companies providing outsourced compliance support are repeat players. As such, their business success rests on figuring out, implementing, and refining approaches that deliver excellent quality at a lower cost than incumbent (e.g., in-house) solutions. Unlike most law departments, these providers already have playbooks, workflows, and expertise to handle regulatory compliance. The savings can be substantial: one Fortune 500 cloud data services company saved approximately 30% by having Elevate handle subpoena response.

Innovation. Legal services providers committed to continuous improvement of processes and practices pursue innovation with resources typically unavailable to law departments. One result is new, more efficient, and faster ways of addressing large-scale regulatory compliance matters. Elevate – which develops innovative technology for law organisations – frequently leverages its technological and organisational expertise to deliver new approaches to important but repetitive legal work. A testament to Elevate’s success as an innovator, Financial Times named Elevate as a winner of an FT North American Innovative Lawyers Award for work related to the LIBOR phase-out.

Opportunity costs. Although difficult to quantify, there is no dispute that in-house lawyers working on routine compliance matters have less time for other work. Likewise, it is hard to imagine any law department leader asserting that such work (e.g., subpoena response or handling DSARs) is their organisation’s primary basis for adding business or strategic value. Maximising the value of a law department’s activities requires freeing up in-house legal professionals to focus on more complex, high-value work. That is a significant source of value from outsourcing regulatory compliance activities. When deciding whether to engage a provider, law department decision-makers should remember that beyond the costs of such services, they provide substantial returns by freeing up lawyers to concentrate on matters that contribute the most to their business’s success.

Law departments cannot escape the ever-rising tide of regulatory requirements. However, they can soften compliance’s budgetary blow by availing themselves of service providers that enjoy advantages in scale, location, processes, and innovativeness. In an era where every penny counts more than ever, the time is ripe for exploring new approaches to meeting regulatory requirements.

Although regulatory compliance activities may seem like an unlikely realm for cost savings, multiple factors make them a prime opportunity to trim non-discretionary spend.

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