By some estimates, the cost of internally managing routine legal work can be 10x in-house counsel salaries.
4 ways to manage the hidden costs of routine legal documents
Asset management firms typically address high-volume, repetitive legal work in one of two ways. Either managers assign it to in-house resources or send it to expensive outside law firms.
Fortunately, advancements in both legal tech and legal outsourcing services offer asset managers a new, better way to conquer these tasks. For example, Ontra combines artificial intelligence (AI) and a network of highly trained freelance lawyers to automate high-volume, routine contracts, like nondisclosure agreements (NDAs).
What are the hidden costs of routine legal work?
Many asset managers underestimate the cost of insourcing legal documents and other repetitive tasks. Often, firms determine how many employees handle these tasks, then multiply the time these employees spend on the tasks by their salaries. That calculation fails to consider employment taxes, benefits, cross-functional support, software licenses, equipment, training, and other employment-related expenses.
And still, there are other hidden costs. Recurring legal work tends to pull experienced lawyers and deal professionals away from mission-critical tasks. Task switching — the moving back and forth between high and low-value tasks — is detrimental to employees’ productivity.
Additionally, many in-house lawyers and deal professionals don’t enjoy working on high-volume legal documents. These repetitive tasks can lower morale and, in the worst circumstances, contribute to employee churn.
In addition to these direct and indirect costs, asset managers have another concern: They could lose out on deals when their internal teams or outside counsel can’t turn around contracts quickly. In the private markets, where managers are competing for a finite number of deals, slow processes are unacceptable.
How to allocate legal resources efficiently
Asset managers should consider how legal technology and legal outsourcing services can reduce the direct and indirect costs associated with high-volume, routine legal work.
1. Use freelance lawyers
In previous years, asset managers hesitated to use legal outsourcing for their contracts and other legal tasks because outsourcing was synonymous with offshoring and low-quality results. However, times have changed. Modern-day legal outsourcing providers use ex-Big Law lawyers with years of transactional and corporate experience. As a result, outsourcing can mean high-quality legal representation without the Big Law price.
2. Adopt legal tech
Too many asset managers and law firms continue to rely on manual workflows and spreadsheets for legal tasks. While these tools get the job done, they’re inefficient and prone to human error.
The better option is to invest in legal technology that enables the firm to automate workflows and approvals. Contract automation is one example of the current capabilities of legal tech.
Ontra’s Document Processing solution automates negotiations for routine contracts, saving all parties a significant amount of time. Thanks to AI-driven technology and predetermined contract playbooks, Ontra’s freelance network of lawyers can quickly negotiate favorable terms and move the parties through the eSignature process without ever leaving the platform.
3. Establish contract playbooks
Another method of speeding up contract execution is to create playbooks of preferred and fallback terms for specific contract types. Often, in-house lawyers and deal professionals negotiate each contract without predefined parameters, drastically slowing down the review process. Conversely, a playbook limits the amount of back-and-forth between the parties, whether the firm handles contract negotiations in-house or outsources them to freelance lawyers.
4. Reassign higher-value work
Advanced technology and legal outsourcing allow asset management firms to reduce the time internal resources spend on routine contracts. With those repetitive tasks off their desks, firms can perform mission-critical work in-house and rely on outside counsel less. This new division of labor can significantly reduce asset managers’ spend on outside law firms.
The benefits of legal technology solutions
The right combination of technology and outsourcing to skilled lawyers can dramatically affect asset management operations.
Take contract automation as an example. When asset managers outsource their agreements to a contract automation provider like Ontra, they:
- Reduce contract turnaround times
- Free up in-house lawyers’ and business professionals’ time
- Reallocate internal resources to higher-value projects
- Reduce spend on outside counsel
By also adopting a contract management solution, such as Insight from Ontra, asset managers can save time later in the contract lifecycle, when managing their obligations to investors.
How contract automation solves asset managers’ pain points
Private fund managers are in the midst of a complex economic environment in 2022. Despite inflation, the Russian invasion of Ukraine, and the stock market drawdown, managers are still competing for deals. They’ll adjust their strategies, but they have too much dry powder to stop dealmaking altogether.
This competitive environment means it’s even more critical for managers to have efficient and fast internal processes, whether for deal sourcing or contract negotiations. By investing in contract automation technology and legal outsourcing, they can speed up the typical NDA process and move on to the heart of their deals. Ultimately, the faster they close one deal, the sooner they can move on to the next opportunity.
This blog was originally published December 2018.
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