Demands on in-house legal teams are growing all the time – legislation such as GDPR, the Employment Rights Bill, and advances in the legal frameworks around AI are just additional burdens that legal teams need to bear in addition to their business-as-usual roles. As a result, legal outsourcing is becoming an increasingly important tool for managing workload. In addition, as businesses grow, new product lines, jurisdictions of operation and improvements in operational arrangements can also often mean that the legal team’s focus needs to be wide to ensure legal risk is being properly managed.
The key strength of a legal team is its detailed knowledge of the business and its relationships with the internal stakeholders. Often it can only be the legal team that would have both the legal knowledge and experience of how the business operates to identify and remedy legal issues. However, as the burden grows, it becomes clear that in-housing all legal work is simply not feasible or achievable, and as taking on more fixed headcount can often be a difficult argument to win, legal outsourcing can become a necessity to ensure all legal risk is properly managed.
At In-House Legal Solutions, we are experts in helping in-house legal teams to become more efficient by managing legal work as an extension to our clients’ legal teams. However, where should you start when deciding what structure your legal outsourcing should take? Which contracts should be outsourced? Not all contracts are equal—some are far more suited to outsourcing than others, and getting the balance right can mean the difference between a successful and optimised legal team and potential disaster. In this article we set out the common parameters a legal team should consider in order to select the most optimal work-streams to outsource.
Outsourcing low-risk or low value contracts makes a lot of sense for in-house teams. Due to the lack of risk involved with documents like NDAs, terms of business for the supply of low-risk services, or acquisition of low-risk goods or materials which don’t typically require high levels of legal analysis or strategic input, the legal team can have confidence that any potential issues arising from legal outsourcing would cause little harm to the business. The benefits in this situation massively outweigh the potential downsides. While a high-risk contract would likely require the oversight and control of an in-house team who fully understands the business needs and can consult with the wider company directly, there are many contracts that can simply be outsourced along with a playbook. Furthermore, if a low-risk contract becomes more impactful and higher risk, the outsourcing partner can be instructed to refer back to the legal team to ensure legal outsourcing is still appropriate.
Contracts with a reasonable risk level or value may still be suitable for legal outsourcing where the content of the agreements is straightforward. Whilst the risk of breach or potential costs may be more than negligible, the fact that the contract is of low complexity means there is a lower risk of a provider misunderstanding the terms or their application to the business.
Outsourcing standardised contracts is a highly effective way to expedite turnaround times and reduce internal workload. Given that the form of contract should be consistent, and parties take similar positions, the legal team can create a playbook of what positions can and can’t be accepted, together with fallbacks. This guarantees consistency and compliance while significantly speeding up the process and allowing these contracts to be successfully handled via legal outsourcing.
Often, there are strategic or executive priorities which dictate that certain agreements are given focus by the legal team. An internal reorganisation, for example, or a material outsourcing may be matters that have strong visibility at board level. Where a legal team is employing legal outsourcing and these agreements are low in complexity or potentially standardised, it may still be necessary for the legal team to retain these in-house rather than outsourcing, in order to prove to the executive or board that they are being given strong internal oversight.
Where the capacity of the in-house team is under significant strain but, due to demands of the business, the team has no choice but to outsource contracts that do not fall neatly into the parameters set out in this article, another viable option can be for a partial legal outsourcing approach. This could take the form of the provider being tasked to review the majority of an agreement save for certain clauses requiring in-house review, or to have certain clauses signed off by the legal team as negotiations progress. This significantly increases contract turnaround times while still giving your in-house team the necessary oversight and control to ensure the best possible outcome, even for complex, business-specific contracts.
While the above options are the most common factors that in-house teams consider when looking to engage in legal outsourcing, there will be others that depend on the structure and operational basis of each business. By shifting these contracts to an experienced outsourcing partner, in-house legal teams can focus on more complex and high-impact work without sacrificing quality or control, while still meeting internal stakeholder expectations. Legal outsourcing such as this not only drives efficiency but helps legal teams deliver faster, more scalable support to the wider business.
At In-House Legal Solutions, we can assist with putting in place legal outsourcing frameworks while offering low fees, fast turnaround times and high-quality document reviews from in-house specialists. Together with access to AI software such as Luminance, your legal team can increase its efficiency and remove bottlenecks from contract approval by outsourcing contracts to our team.
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