Senior PE legal leaders plan to gain more control over legal spend management with the use of the latest technologies. Here is a quick rundown from the recent studies.
The pandemic has created new pressures and challenges for PE firms across the globe such as the deployment of capital amid unprecedented economic and geopolitical uncertainty; meeting the rising stakeholders and customers’ expectations; raising the bar amid increased and strong competition; driving strategic growth, and creating value throughout the business cycle.
Further, the senior PE legal leaders were put under scrutiny for managing huge volumes of legal spend without a defined process or tools to do so. Let’s discuss the two major challenges – distributed accountability and cost overruns faced by senior legal leaders here.
Before understanding the challenges of the senior legal leader, let’s understand who is accountable for the decisions like instructing legal counsel, approving budgets, tracking costs on legal matters, and more in an organization. It is totally distributed as depicted.
Accountability breakdown: Team responsible for decisions/actions in an organization
When multiple teams [both internal and external] are involved and much of the ability to monitor, analyze, and manage legal spend, senior legal leaders cannot be expected to take sole responsibility.
PE legal leaders should seek alternative means to gain visibility and manage legal spending. One way of achieving this is to equip teams with timely, accurate, context-rich data and insights by using technology.
While legal spend management is a key issue, another strong botheration that prevails in the PE houses is the friction caused by cost overruns.
Budget breakdown: Things that run over the agreed budget in an organization
79% of PE legal leaders report that surprise legal bills that often come with little warning or a pre-emptive call creates friction between the legal team and the wider business.
To improve the relationship among the teams, it is critical to improving the predictability, transparency, and legal spend management. Proactive legal spend management practices and implementation of modern cloud-based software will give a real-time view of the status and spend.
Draconian levels of control are a definite NO! A strategic input is the way out for this fast-paced with high-throughput PE industry. The studies suggest that -
This benefits all parties involved in the PE firm including the law firms. Let’s hope 2021 will bring all these changes and many more.
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