This article* is by Tim Pullan (pictured above), CEO and Founder of legal AI and risk analysis company, ThoughtRiver.
2018 looks set to be as unpredictable and challenging as any in recent memory for the legal industry worldwide.
This is certainly the case when looking at the substantive changes looming: a rapidly evolving trade agreement landscape; new regulations with global impact such as GDPR and MIFID II; and new deregulation with global impact such as the net neutrality repeal. Here in the UK, there is also the imponderable complexity of Brexit and the fast approaching exit date.
Good lawyers: expect to be busy.
Front and centre of this revolution in most people’s minds will be the developing capabilities of artificial intelligence (AI), but it would be a mistake to see this as the only game in town.
Here are some predictions on what’s in store for the coming year in legal tech:
- Distinctions in the market will become sharper. One of the defining features of the market in 2017 were the number of legal tech landscape charts in general circulation that made little sense when you considered what companies did, who they were grouped with and what the category labels were. Little wonder people get confused. What we have been looking at something akin to the stirrings of a primeval swamp with various early stage businesses attempting to harness raw technology capabilities into the sweet spot use case propositions that really deliver in the complex world of lawyering. In 2018, a combination of adoption acceleration and highly publicised success stories will heavily focus demand in key areas and thus drive clearer categorisation.
- New categories will emerge out of nowhere and mature fast. Some of the new categories of advanced legal technology are fast finding secure footholds. A great example is litigation outcome prediction which is finding very receptive markets in insurance and elsewhere – see here for an example.
- New types of technology-driven advisory work will start to appear. AI-driven clause search in M&A and lease review is now an established process for many law firms. It may soon become a de facto minimum professional service requirement to deploy AI in certain types of work. But in many cases this technology deployment is really just a way of lawyers producing the same thing for less. However, new technology also has the capability to help lawyers produce more insightful analysis of a type never before served up as advice in the legal industry. For example, sector-specific benchmarks of transaction quality, risk metrics on specific types of warranties, GDPR-compliant consent generation tools, automatic personal data categorisation/alerts. Whether the driver of innovation comes from law firms or outsiders remains to be seen. Our hope is that it is an inside job.
- For corporates, deployment of AI tools will become an essential compliance strategy in some regulatory areas. As things stand, there is no obligation for legal teams or business executives to employ AI to meet regulatory requirements on the horizon. The idea of AI becoming indispensable in meeting these regulations, especially from a legal perspective, may sound distant and inconceivable. However, this has increasingly already been the case in the industry facing the brunt of regulations in recent years: the finance industry. Financial institutions are no strangers to regtech (regulation technology), which are becoming indispensable to meet requirements of regulations such as MiFID II, where they are required to monitor and sift through voluminous amounts of trading data to identify malpractice. Firms are also collaborating with regulatory bodies such as the FCA to test the use of regtech products to meet regulatory requirements more efficiently. As AI becomes more powerful, these collaborations could lead to regulatory bodies being more willing to implement more stringent regulations. Although many regulatory challenges can still be met using traditional tools, firms might find it becoming less economically viable to do so if this trend persists.
- AI will emerge as a consideration for corporate governance. The pressure for businesses to apply AI tools to address their regulatory commitments does not only come from regulatory bodies. Business risks, first and foremost, impact shareholders. Business owners have fiduciary duty to disclose risky obligations in contracts and need to pre-empt those risks from crystallizing. Traditionally, the upper management relies on ‘chain-of-command’ reporting to gain visibility of commercial and operational data collected, much of the former being in the form of contracts. This is the same data and same data collection methodology used for meeting regulatory obligations. This method has become increasingly inadequate for this purpose and the upper management can be held accountable for business problems stemming from issues that are mispresented or omitted in these reports. The use of AI tools can provide much better visibility to flag up risks and anomalies that might potentially be missed, allowing CEOs to meet their governance obligations.
- It won’t all be about AI. Unsurprisingly in a new and exciting market in which feverish claims are often made, people have come to consider AI to be the panacea. Good data, creative legal problem-solving and new forms of collaboration will be just as important.
*This is a Sponsored Thought Leadership article for Artificial Lawyer by ThoughtRiver.