Law, data, machines – these are not words that historically have had much to do with one another.

However, as the number of laws increases, communications traffic increases, and, as the fabric of the law can be read by machines, the interaction between these words will become ever more important.

90% of data in the world has been created in the last two years – and it’s not slowing down. [1]  As regulation increases, the ability of financial institutions to manage the legal risk flowing from that regulation becomes ever more challenged.  The resources being devoted to this increase every year and lawyers are starting to turn to technology to assist.

Recent research[2] found 82% of General Counsel have introduced various forms of technology into their department but 60% of lawyers don’t understand how that technology could help them.  This, at a time where the pressure on resources (both human and financial) means that there is a real need for technological assistance.

The regulatory environment has imposed an unprecedented burden on firms.  Legal risk has become increasingly complex and difficult to manage but is under-examined and often poorly understood.  Due to the massive technological, political, regulatory and cultural shift over the past 30 years, the model by which we manage legal risk is outdated. This has led to increased fines, customer loss and higher operational costs at the least.

Poor management of data results in missed opportunities and increased costs as businesses rerun regulatory change and other projects.  Effective management and exploitation of legal data could provide new business opportunities in addition to saving costs for business as usual (BAU).  There needs to be a more formalised data flow between Business and Legal, leading to an effective and efficient end-to-end framework.

The in-house legal model needs to change.  Technology can help. 

But while the market is saturated with ‘RegTech’ and other legal solutions, these are disparate point solutions that do not address the underlying issues.  Lawyers are reluctant to spend time training machines unless results are proven.  This reluctance has resulted in suboptimal take up of the various solutions.

Machines are best at repetitious, low level tasks.  Much of the law is to do with context, relationships between ideas and situations and nuance at which humans are better.  While the race is on for machines to solve the problem of unstructured data, a tool pointed currently at the unstructured data lake that is ‘legal data’ results in unhelpful returns.

A new legal services operating model is needed to diminish the disjointed nature of legal and business issues.  This new operating model needs to take into account not only new technology, but also the underlying data efficiencies to appropriately assemble and deploy solutions seamlessly across legal and business units.

Firms can gain most value by structuring data to best deploy legal technology.  If firms do not make decisions about these issues now they will find themselves trapped in a never-ending loop of manually adjusting data to achieve the required results.

The hardest part of adoption of an “in the round” solution is implementing a framework within the firm which allows the various legal software tools to work optimally. A clear pathway needs to be created to reduce silos, create standards, appoint golden sources and create an enterprise architecture.

Law, data and machines can all work together successfully but it will take vision and hard work.

 

[This is part 1 of a 10 part series where we will consider the role of Legal Technology within Financial Services, how it can and should be applied, and what a ‘utopian’ target operating model for in-house legal departments looks like in FS]

 

[1] Presentation by Dr Joanna Batstone, VP IBM Watson & Cloud Platform, Legal and Technology Procurement 2018 – Thomson Reuters conference 8 November 2018

[2] Legal Technology: Looking past the hype, LexisNexis UK, Autumn 2018

There needs to be a more formalised data flow between Business and Legal, leading to an effective and efficient end-to-end framework.

A new legal services operating model is needed that takes into account not only new technology, but also the underlying data efficiencies to appropriately assemble and deploy solutions seamlessly across legal and business units.

the market is saturated with ‘RegTech’ and other legal solutions, these are disparate point solutions that do not address the underlying issues.

Meredith Gibson

Meredith Gibson

Leading Point Financial Markets

Senior regulatory lawyer with over 20 years’ experience in providing advice to a range of business areas in global banks. Content specialist and problem solver with expertise in regulatory change and legal programmes across a broad cross-section of EU regulatory initiatives, including MiFID, SFTR, MAR, PRIIPs, BRRD and shadow banking. Practical experience in legal, operational risk and technology solutions. Regular speaker at regulatory, operational risk and data management conferences. Solicitor of the Supreme Court of England and Wales.

Alaric Gibson

Alaric Gibson

Leading Point Financial Markets

Regulatory Change, Data SME, RegTech Propositions

Analyst with expertise in regulatory analysis and implementation, customer reference data management, and data driven transformation & delivery.

Has worked for a number of RegTech start-ups within Capital Markets.

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