What is the role of the legal department within a company?
Over the last few years, the importance of legal services has grown significantly. The numbers alone are impressive: nearly three quarters of legal directors are now involved in their company’s executive committee, according to a survey of legal departments carried out by consultancy firm LEXqi Conseil. This marks an increase as compared with 2018.
With this in mind, it is fair to ask ourselves why the legal department is so important within companies. What are its functions and responsibilities? What is its strategic role?
What is a legal department? Definition
The legal department is the section of a company responsible for keeping that company’s operations compliant with all the relevant laws and regulations in force. It is staffed by lawyers and legal experts, who can be considered the company’s legal counsel.
Legal monitoring makes up the bulk of their day-to-day workload. Indeed, lawyers have to ensure that they remain up to date at all times on all the various standards and laws that affect the company’s business. This work requires a great deal of precision and rigor, as legal standards are constantly evolving, which can potentially impact on everything the company does.
At the same time, the legal department also plays the role of advising and fostering awareness: it must be in constant communication with all the other departments to ensure that the regulations are being properly applied, especially when there have been recent changes or developments. As such, the legal team’s expertise is called on for every project, in the context of contract negotiations and, of course, for decisions made by the executive committee.
As it is responsible for the compliance of the company’s business activities, the legal department also takes action in the event of internal and external conflicts, and, if necessary, in the management of legal proceedings.
Responsibilities and capabilities of the legal department
An identikit picture of a lawyer
A good lawyer should ideally embody all the following qualities and skills:
- a perfect command of business law
- extensive knowledge of the business sector that the company operates in
- unrivalled precision and meticulous attention to detail
- good interpersonal, communication and simple explanation skills
- an analytical mind, which is essential for guiding decision making
- skilled in both diplomacy and drafting, especially useful in disputes and contract drafting.
Risks managed by the legal department
The risks managed by the legal department can vary depending on which sector the company’s business falls into. Indeed, most of the regulations and disputes they deal with are industry-specific (banking, real estate, online services, food and drink, etc.).
That said, some risks are more general and remain the same even between sectors. They mostly tend to evolve in step with technological innovations and societal shifts.
According to a study by Cercle Montesquieu in 2021, the most common risks managed by legal departments are:
- data protection, which is an issue for 82% of legal departments;
- the combating of corruption and money laundering, tackled by 62%;
- corporate social responsibility (CSR), also a common challenge for 62%.
These are followed by human and social issues, such as respect for human rights and diversity. All of the above are generic, in that they apply to all business sectors; however, a company’s concerns can always shift and evolve over time.
For example, interest in data protection risks surged following the introduction of the GDPR (General Data Protection Regulation) in 2018.
All companies have various types of contracts to manage, both internal — the most common being employment contracts — and external, such as with suppliers and, of course, clients. These contracts are crucial documents, often processed in large volumes and handled by multiple parties and departments: purchasing, sales, human resources, finance, and, as one might expect, the legal department.
Be they contracts related to purchasing, business negotiations or even standard recruitment contracts, all of these documents must strictly comply with all the relevant standards. Why? Because even the slightest mistake can prove very costly indeed, both legally and financially speaking – not to mention the issue of the company’s reputation if the dispute becomes public. For all these reasons, the role of the legal department is paramount when it comes to contract management.
On a day-to-day basis, lawyers are responsible for ensuring that all contracts are compliant and that their performance is in line with all clauses. They also contribute to the process before the contracts are even signed, during the drafting and negotiation stages. This requires meticulous monitoring and regular discussions with the other departments in the company.
The DiliTrust solution, making light work for legal departments
DiliTrust’s Contracts module is a Contract Lifecycle Management solution. In other words, it is a tool that automates the management of contracts throughout their lifecycle. As the brainchild of former lawyers, this tool makes legal professionals’ daily workload a great deal lighter and simpler, freeing up their time (and mental space!) for high value-added tasks: providing legal opinions, giving advice, and making key decisions.
The Contracts module helps legal experts do away with all the time-consuming tasks involved in contracts: drafting (copying/pasting clauses), searching for information, carrying out all manner of checks, and so forth.
Thanks to algorithms which use artificial intelligence, contract management is not only easier than ever before, but also more secure, from drafting to signature, as well as the ongoing execution monitoring phase.
The result is improved control over contracts not just for lawyers, but for all employees involved: the risks of disputes, mistakes and financial losses fall dramatically, while the speed at which contracts can be processed is much faster, allowing the company to sign more than ever before.
Want to know more about our CLM solution? Contact us!