Small Biz Legal Teams Lag Behind Larger Ones In Data Mgmt

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Legal teams at smaller organizations lag well behind larger ones in having a comprehensive data management strategy in place, according to a new report based on a survey of chief legal officers.

The report is based on the 2021 ACC Chief Legal Officer Survey released in January, but this analysis by ACC partner Exterro focuses on key trends and takeaways for small and midsized legal teams. Of the 947 CLOs who answered the survey, 760 of them reported working for companies with revenue under $2 billion — the focal point of this report.

"No matter the department size, the top areas of concern for CLOs remain cybersecurity, compliance and data privacy," ACC Chief Legal Officer Susanna McDonald told Law360 Pulse on Friday. "This year's survey, however, found cybersecurity taking the top spot away from compliance, which is not surprising given the constant cyberattacks and breaches that companies must protect against almost daily."

In a statement on Thursday, Exterro, which provides legal software platforms to businesses, said the new report will allow organizations to compare themselves against their peers with similar annual revenue, as well as learn how organizations with a higher headcount and revenue are managing risk.

In looking at the data across company sizes, Exterro said it noticed a variety of differences, including key points that smaller legal teams might consider as they build and implement strategies for 2021.

"While a majority of organizations now have a comprehensive data management strategy, smaller organizations lag behind by about 8 points compared to their larger counterparts," the report states.

That majority is slim, however, with only 59% of respondents reporting a comprehensive strategy for managing their data, while 41% have yet to implement one.

Both large and small organizations reported moderate to great confidence in their ability to mitigate against emerging risks, such as legal, regulatory, cybersecurity and others. But the smaller entities were about 3½ times more likely to say they were "only slightly confident" or "not confident at all."

On cybersecurity alone, the report says smaller organizations are twice as likely as larger ones to say they were "only slightly confident" or "not confident at all" in their ability to consistently and defensibly respond to cyber incidents and breaches.

While a majority of both large and small companies reported implementing tech solutions to comply with data privacy regulations in the past 12 months, some 27% of the smaller businesses tended to outsource the compliance work to nonlaw firm vendors. In contrast, more than a third of the large businesses said they began employing dedicated legal operations professionals.

The report states that 45% of smaller businesses employ no legal operations professionals, while nearly the same percentage of larger businesses — 44.3% — have at least four.

Large businesses that invest the most in their legal operations, those in the 75th percentile, employ at least 11 legal ops professionals, whereas smaller legal teams that invest the most among their cohorts —again in the 75th percentile — have a minimum of only two on their teams.

At both small and large companies, CLOs and general counsel reported that providing legal advice was their top priority, but that's more common for legal leaders of smaller teams, 29%, compared to those of larger ones, 23%. The report says this could be because, as the top legal officers among a smaller number of legal advisers, more decisions are on their plates.

In another trend at both large and small companies, a majority of CLOs report to the chief executive officer. But, the report states, "The size of the business appears to have a major impact, as [small business] CLOs are far more likely to report to the CFO (48%) than at larger businesses (27%)."

Both large and small businesses said they anticipate an increase in the volume of regulations in the next 12 months — along with an expansion in regulatory enforcement — and are considering new tech solutions to improve efficiencies.

But while 59% of large businesses reported being confident in their ability to obtain technology, smaller businesses were much more split. Among the smaller ones, 37% said they were confident and 33% said no, with another 19% not sure at this time.

--Editing by Steven Edelstone.


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