Category: Features

Reforming data privacy laws may not sound like a move destined to leave an enduring political legacy, but in policy-making circles the tropic casts a surprisingly long shadow.

‘One of the major hang ups of US leadership role has been the absence of a federal commercial privacy law in the country’, says Caitlin Fennessy, research director at the International Association of Privacy Professionals (IAPP).

For many, the most puzzling question of all is why there is still a debate about the issue. In a world where data, and the power to regulate its use, is becoming a central part of statecraft, the United States is conspicuous in lacking a national data privacy law.

A decade ago, when the Obama administration started discussions on strengthening privacy regulations in the US, the business community considered the initiative as an unwanted and unneeded interference. Since then, it has become clear that the alternative may be far less palatable.

‘We are pretty quickly going down the path toward fifty plus privacy laws, which is the same place we have found ourselves with data breach notification law’ says Liz Benegas, general counsel of enterprise management software provider Totango.

Bob Jett, head of global privacy and risk at Crawford & Company, says the case for a federal law has never been stronger. ‘As citizens and consumers, we are only going to increase the number of things we do online. We can also see that some of the largest tech companies are stepping up and saying they want to be accountable for what they are doing in terms of privacy. They have realised that if they don’t self-regulate, the government might come up with stricter regulations than anticipated.’

Public demand for new privacy laws has tended to be weaker in the US than other developed countries, though the disruptions of the last year and a half – pandemic-related issues like vaccine certificates, digital contact tracing and mobile health apps – have helped put privacy and data security at the forefront of public debate.

A recent poll by data intelligence organisation Morning Consult shows that 83% of voters wanted Congress to prioritise privacy legislation. Surprisingly, those who identified as Republicans were just as likely to hold this view as those who identified as Democrats.

For Cameron Kerry, a visiting fellow at the Center for Technology Innovation at the Brookings Institution, visiting scholar at the MIT Media Lab, and former general counsel of the US Department of Commerce, the significance of strong data privacy laws goes beyond the short-term benefits it would bring to consumers and businesses.   

‘In terms of the international picture, 2021 is a very important year for determining whether people can truly put their trust in American companies and technologies. Businesses want to see a consistent national standard rather than a variety of state standards that mean they have to re-engineer their systems each time they move to a new state.

‘American business has already had to adapt to GDPR, and many companies have internalised a lot of these practices and have acknowledged their advantages for themselves and their clients. There could not be much more fertile grounds for a federal law than we find today.’

Whether or not the US moves to pass a federal data privacy law, the number of states passing their own legislation has ramped up to the point that keeping track of developments can sometimes be a challenge even for the professionals. It also means that, whatever the next four years hold, the state of data privacy in the US is a question every GC will be following closely.

We spoke to those working at the sharp end of data privacy to find out what developments corporate counsel should be paying attention to.

A hill worth fighting for?

The drive to protect private citizens’ data in the US is arguably older than the country itself. Long before he worked to draft the Declaration of Independence and the US Constitution, Benjamin Franklin used his position as Postmaster General to ensure the privacy of communications sent by mail (to this day, the Fourth Amendment protects letters from search and seizure).

Subsequent lawmakers followed in this tradition, and in the last 50 years alone the US has introduced several notable pieces of privacy legislation, from the US Privacy Act 1974, which contained important rights and restrictions on data held by US government agencies, to the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which laid down data privacy, security and confidentiality rules for health insurers.

In short, the US has never been inattentive to the importance of privacy. But for GCs struggling to navigate the patchwork of laws across governing data privacy across the country, the big hope is that the Biden administration will finally push for a comprehensive nationwide legislation.

In the run up to the presidential elections in November 2020, privacy specialists were convinced that, whatever the outcome at the ballot, federal legislation would soon follow. Draft bills from both sides of the aisle were circulating in Congress, and when Senators Roger Wicker (a Republican) and Maria Cantwell (a Democrat) introduced the Consumer Online Privacy Rights Act (COPRA) and the United States Consumer Data Privacy Act (USCDPA) in November 2019, it seemed like an often-polarised political system had at last found common ground. That the election ultimately swung in Biden’s favour only served to reinforce this confidence.

‘Parts of the Trump administration had an interest in weighing in on privacy legislation and trying to help move that forward, but there wasn’t any high-level interest in this issue’, says Cameron Kerry. ‘However, Biden, and certainly some of the people around him, have said explicitly that the US should adopt privacy legislation.’

Since then, there have been further signs that data privacy may come into sharper focus. On 12 May 2021, President Biden issued the Executive Order on Improving the Nation’s Cybersecurity. While cybersecurity and data protection are not the same thing, there is a close relationship between the two on a legislative level.

As Liz Benegas, general counsel of enterprise management software provider Totango comments, ‘you can have security without privacy, but you cannot have privacy without security. We all know the emphasis the US put on national security recently. Developing comprehensive framework for each is difficult and takes time, but now that our systems have been hardened, privacy should be added to the legislation list as well.’

On that list there is already the Information Transparency and Personal Data Control Act, introduced in March 2021 by Representative Suzan DelBene. While the proposed Act is not as wide-ranging as the European Union’s General Data Protection Act (GDPR) or existing Acts applying in certain US states such as the California Privacy Rights Act (CPRA) and Virginia Consumer Data Privacy Act (VCDPA) in particular – it does not contain the right to access personal information or the right to collect or delete information held by a controller – it does include a pre-emption provision, meaning that, if adopted, it would supersede state laws relating to data privacy.

This, believes Cameron Kerry, points toward a credible impetus for legislative change. ‘There is still the opportunity, interest and conditions to get it done [in the US]. A lot of good work has been done by Capitol Hill in both Houses to understand the issues. Key Republican and Democratic bills in the Senate are pretty close on these issues. A few points still need to be resolved, particularly pre-emption and private right of action, but there are some potential paths ahead.’

Speaker of the House of Representatives Nancy Pelosi has already stated that the House would oppose any federal law that does not include the same level of protection as COPRA, and it is likely that the question of the pre-emption is going to be a huge stumbling block.

However, comments Julia Reinhardt, Mozilla fellow in residence, privacy consultant, and a former German diplomat specialising in EU privacy policy, ‘the Biden administration realises how important this is for industry, for people, for consumers and for international data transfers, so I really hope that it will find ways push this project ahead.’

‘Privacy is a big horizontal topic that regulators have been working on for decades. GDPR may have a few gaps, but it was a big step ahead to have one regulation for a large, contiguous market. The EU member states each had their own privacy laws before GDPR harmonised a general law for the 27 countries.’

Hurry up and wait

While there are of course certain differences of context between the US and EU, the European experience shows that none of the problems facing federal data privacy legislation are insurmountable. Except perhaps one.

Bob Jett, head of global privacy and risk at Crawford & Company, the world’s largest independent provider of claims management to the risk management and insurance industry, believes North America is sufficiently culturally distinct to make any parallels problematic.

‘The unique difference between data privacy in North America and in Europe is that Americans and Canadians, for the most part, do not consider their personal information to be a fundamental right. Most of us are willing to give up our rights to privacy for convenience or speed.’

‘In the US, we are much more worried about cybersecurity, because of the potential impact that has on our infrastructure, our ability to use our credit cards, or to get gasoline and to travel.’

A difference in European and American cultures of litigation could also become an issue. While Europe has yet to witness a wave of GDPR-specific class actions, the long-tail of these types of cases makes its difficult to know whether that is because they do not exist or because they are currently working their way through the system. If it turns out to be the latter, it could be a big warning sign for US businesses.

‘Regulations can become litigation tools’, adds Jett. ‘This is one of the things I have been tracking, because in the US, there is a fear for class action lawsuits around this. And such lawsuits have actually started to be filed in California.’

Even supporters of a federal data privacy law concede there is more groundwork to be completed, particularly around the issue of private rights. ‘The question around the rights for individuals to bring lawsuits for privacy violations coming from companies is crucial’, notes Reinhardt.

‘The volume of cases and magnitude of fines tend to be significantly higher in the US compared to Europe, so it may be necessary to include some provision that only allows attorneys general at the state level to sue.’

While these debates play out among lawmakers, GCs will have to go about complying with an increasingly complex patchwork of laws on a state-by-state level. But deliberation among lawmakers does not mean that legal teams can or should take a patient approach to managing privacy.

‘Data protection – both the privacy and security aspects of it – is quickly becoming a risk management function rather than a technological challenge’, says Benegas. ‘Gone are the days when only the chief technology officer needed to know or care about the issues. Nowadays, all levels and functions within a company need to know and be prepared.’

‘GCs and corporate counsel will play a pivotal role in helping shape the response to this challenge, not only because risk management is part of the job description but because of the broad view legal teams have into company operations, from human resources to vendor management to customer contracts.’

Ann Cavoukian, former Information and Privacy Commissioner for the Canadian province of Ontario and originator of the concept of privacy by design, which was subsequently incorporated in GDPR, also advocates a proactive stance when it comes to data privacy in the c-suite.

‘In these times of legal limbo, I always encourage companies to get a certification. First, it builds trust and business relationships, which has been lacking for a long time. Second, it increases the quality of the information they collect.’

‘There is no inherent tension between granting privacy and exploiting economic value when it comes to data. You can capitalise on data but strip it of all personal identifiers. One of the seven foundational principles I established with my privacy by design approach is to abandon the zero-sum models, where it is either-or or win-lose. There should not be a conflict between business interest and privacy. We should be aiming to satisfy both.’

Bob Jett, chief privacy officer at Crawford & Company notes ‘People used to joke that when a GC hears of a cyber attack or data breach they breathe a sigh of relief and say, “Thank God, that one falls to the IT team”. Today that joke wouldn’t make sense. No serious corporate legal professional thinks cyber and data risks are off their radar.’

Britton Guerrina, deputy global general counsel for technology and shared services with Deloitte Touche Tohmatsu Limited, echoes this view. ‘Cyber and data protection are increasingly important and should be top of mind for any legal team. The legal and regulatory risks in these areas have increased and continue to do so, with countries introducing increasing regulatory requirements, many of which are contradictory.’

Corporate counsel may be increasingly aware of the dangers posed to their organisations from cyber attacks, but the results to our survey of over 200 senior counsel across the US and Canada suggest their organisations take a very different view.

While 91% of legal teams were aware of their organisations’ cybersecurity efforts, only 18% said they were heavily involved in these efforts. In fact, an alarmingly high number of teams (39%) were not involved at all, while nearly two thirds (63%) were either not involved or only involved to a small extent.

Even legal teams that are involved in their organisations’ cybersecurity strategy are typically confined to a fairly narrow role. By far the most likely task falling to legal teams is ensuring the security of their own communications, data and files (84%) or providing strictly legal opinions on regulatory compliance (47%). Just under a fifth of teams (19%) reported being involved in their organisation’s wider cyber response planning, while only 7% were monitoring cyber threats across the organisation as a whole.

Businesses not involving legal teams in their cybersecurity efforts should take note: over half (53%) of the senior counsel surveyed rated their organisations’ cybersecurity defences as either poor or average. Just 13% said their organisations had excellent protection against cyber threats.

The limited involvement of legal teams when it comes to cyber security efforts is particularly puzzling given the obvious advantages lawyers would bring to the process. As Britton Guerrina notes:

‘Legal involvement is critical for various reasons, and lawyers are able to guide efforts in a wide range of areas, from helping to design the security programme to comply with privacy, employment and other local laws to advising the cybersecurity team on cyber regulatory requirements.

Legal teams can also assist with the roll out of security tools while addressing any legal impediments. They can advise which legal and regulatory requirements apply to a breach based on the facts and circumstances presented, determine whether breach notification requirements (regulatory or contractual) have been triggered, and craft notifications, interact with regulators, law enforcement, and so on. In my view, legal and cyber need to partner together, along with risk, in order to protect the organisation effectively.’

However, as Michael Shour, general counsel and secretary for Banyan Software, observes, this is likely to change as the regulatory and reputational stakes increase.

‘Legal is actually very well positioned to spearhead this area, but it is often not an area where management wants legal to focus, due to the limited resources. As class actions and cyber-related litigation increase over time, I suspect that this will continue to require an increasing amount of legal involvement.’

Plugging the leaks

Monitoring cyber risks may still be deemed a low priority for legal counsel, but the related issue of data privacy is fast becoming a key part of the legal team’s role. As one respondent, senior counsel for data and privacy at a global media and telecoms business, puts it:

‘Data protection is a growing issue, and not just because of the rise of serious and very damaging incidents which we all read about in the news. From a compliance perspective, it is the increase in country-wide and global regulations. Business has to operate as smoothly as possible, and it is our job as legal to help it do so within these regulatory boundaries.’

When asked to identify the most pressing cyber threats their organisations faced, nearly half (49%) of corporate counsel pointed to the risk of customer data being compromised. Theft of confidential business information was seen as the next most pressing risk, reported by 28% of those surveyed. As Naseem Bawa, general counsel for InteraXon, a leading maker of brainwave-controlled computing technology and applications, points out, in the digital economy data is a chief driver of value. ‘Data is part of a company’s IP and without stringent safeguards to protect and enhance its value you are leaving your doors unlocked.’

For comparison, just 2% said that direct monetary loss through theft was their organisation’s most pressing concern. While theft can be costly, it is often nowhere near as expensive as dealing with the regulators. For businesses that have yet to experience a significant data breach, comments one senior legal and compliance counsel at a large retailer, the uncertainty over consequences can be troubling.

‘The big unknown here is the way a regulators will respond. The marquee cases have been in the financial services industry, and there is some evidence that regulators will look at what a retailer is doing around data and compare it with the systems and controls that have been put in place by financial institutions. Obviously, these financial institutions have far more robust data-security arrangements in place, which is potentially something that could damage our position in any litigation.’

These risks are especially pressing, continues the respondent, in a world where customer interaction is increasingly digital.

‘Mobile payment apps and e-commerce are becoming the principal vector through which fraudsters are able to infiltrate business systems. It’s a data security issue but it’s also a cybersecurity issue that goes right to the heart of our business. That means the legal team needs to know how our IT systems work, with at least some degree of accuracy, and how those systems can sink us.’

For those unfortunate enough to suffer a breach affecting customer data, knowing how to respond is key. The advice from one general counsel at a large US medical insurer is to bare all. ‘If customer data has been compromised then you need to tell them, and you need to help them take whatever steps are needed to mitigate the risk they now face. In the first day or so after an incident everyone is scrambling around to collect as much information as possible before the company needs to report the incident, but often it will be too late for the customer if you wait a day. Bite the bullet and tell them what has taken place. And, of course, have a plan ready so you aren’t worrying about drafting the message during a firestorm. If you are facing a situation where you need to email potentially millions of customers, you will really be thankful that you planned ahead of time.’

This planning, many agreed, is among the most important steps that GCs can take. As Richard Brzakala, director of external legal services at Bank of Canada, comments, ‘The old maxim “Trust but verify” applies here. You may have best-in-class cybersecurity in place, but it needs to be tested continuously. It’s not a question of if things go wrong. They will go wrong. You will experience a cybersecurity incident or data breach eventually, so be prepared.’

On 7 May 2021, Colonial Pipeline, the largest petroleum pipeline in the US, was shut down following a cyber attack. It remained closed for five days, causing panic buying, fuel shortages and national security soul-searching. For cybersecurity experts, the most surprising element of this episode was that a key part of US infrastructure was not brought down by the actions of a hostile state (at least directly), but by a small group of cyber-criminals deploying a devastating form of online extortion software: ransomware.

After gaining access to a company or individual’s system, the attacker will make files inaccessible in some way. At the lower end of the scale, the malicious programme may simply lock the computer, an easily fixable situation for an IT professional and no great problem for a large company. But when deployed by more sophisticated attackers, the software will encrypt the victim’s files so effectively that recovering them without the decryption key is virtually impossible.

The Colonial Pipeline ransomware attack was just one of several high-profile events that have struck ostensibly secure organisations over recent months. May 2021 also saw a ransomware attack on meat processor JBS Foods, a $53bn company that is deemed vital to US food security. The attack, which led to closure of some of the company’s facilities, was reportedly ended after an $11m ransom was paid.

While the scale and severity of recent attacks has surprised many, the growing popularity of ransomware comes as no surprise to specialists in the field.

‘My first response to the upsurge in ransomware attacks lately was that we analysts have been warning about this for over a decade, and we all predicted this was going to happen’, says David Fidler, senior fellow for cybersecurity and global health at the Council on Foreign Relations.

‘Now it’s here we have another round of gnashing of teeth, but opportunities to mitigate the danger have been missed time and time again over the intervening years.’

Fortunately, even for those who may have missed the early warning signs, hope is not lost. GC speaks to some of the leading counsel and cyber experts to find out what the rise of ransomware means for business, and what lawyers can do to help prepare their defences.

The unlocked door

The rise in attacks affecting everything from water and energy utilities to fuel distribution systems is a sign of things to come. From a cybersecurity perspective, the truly frightening aspect of these attacks is that, once systems have been compromised, there is little IT professionals can do to regain control. Bhavani Thuraisingham, Founders Chair Professor of Computer Science and the Executive Director of the Cyber Security Institute at The University of Texas at Dallas, comments:

‘When the malware enters the system, it has access to almost everything, and in a ransomware attack [hackers] will encrypt everything and demand a payment in exchange for the key to unlock the files. As of today, AES 256 encryption cannot realistically be broken with modern computing methods. Unfortunately, this means that if the attack progresses to this stage, you have really no access to anything in the system unless you get the key to decrypt the data’.

Richard Forno, senior lecturer in the University of Maryland, Baltimore County Department of Computer Science and Electrical Engineering, puts it even more succinctly: ‘If you haven’t been conducting cybersecurity best practices and a sophisticated attack takes hold of your systems, you’re screwed’.

As a result, victims of high-profile ransomware attacks have been left with little option but to pay up. In the case of Colonial Pipeline, hackers demanded a ransom payment of $4.4m in the form of bitcoin, which they promptly received in exchange for codes to unlock the company’s systems.

More troublingly, the lines of attack hackers are exploiting are not easy to defend against. For example, phishing attacks in which members of staff are fooled into downloading malicious software by seemingly genuine emails are becoming increasingly effective. This, says Forno, is increasingly dangerous given the rise of social media as a means of validating an unknown person’s identity.

‘Using artificial intelligence and machine learning, you can identify, develop and even create fake personas that are very detailed. This can allow you to make a phishing email that is much more convincing to the target, particularly if
you’re targeting a particular individual, such as the CEO of a company.

What’s more, even those who follow every reasonable security protocol and measure can, unwittingly, become a victim of the more sophisticated hacks. Increasingly, [malicious] software is being downloaded through perfectly legitimate websites via ad networks. [If a hacker] is able to compromise a content or software distribution network, malware could be injected into this such that users of a legitimate website would then be downloading malware through the network.’

This type of attack, say the cybersecurity experts interviewed for this report, has already been detected on some of the world’s largest website, often with little or no awareness among their users.

Adds Thuraisingham: ‘Ransomware spares no one. It could attack an 80-year-old great grandmother, a major financial company or even critical infrastructure. With that said, the more pain the attacker causes, the more publicity they get and the more money they can extort; sectors that allow them to cause maximum damage may therefore be more vulnerable. These will include major hospitals, government organisations and, especially, financial companies.’

Of course, cyber experts are aware that ransomware attacks are now big news, and that reporting biases undoubtedly skew toward them. Even so, says David Fidler, senior fellow for cybersecurity and global health at the Council on Foreign Relations, the underlying reality is that such incidents are on the rise. In fact, says Fidler, the true extent of the problem has probably been under-reported.

‘There has been an increase in ransomware attacks, and that increase has been felt across the entire corporate sector in North America and beyond. Beyond this, there is a large number of institutions – typically hospitals or
other bodies that hold large volumes of data – that have been victims of ransomware attacks without the public or media ever becoming aware of it. So the problem is growing and the scale of the problem is perhaps larger than one would imagine.’

The GCs who came in from the cold

From the perspective of the US government, ransomware is a clear and present danger. The increase in the size, sophistication and public awareness of these attacks, as well as their ability to damage critical infrastructure, puts general counsel on the fault line of what, for some organisations, will be the most important challenge of the coming months.

‘The connection between criminal ransomware attacks and how the United States government perceives our adversaries as providing havens for cyber criminals is key’, says Fiddler.

The government has already accused Russia and China of tacitly allowing cyber criminals targeting US companies to operate free of constraints. We’re seeing movement toward more offensive actions on the part of the US government aimed at cyber-criminal organisations based in potentially hostile territories because, clearly, our defences are not effective in preventing these attacks.

If the government does move in that direction, that is a much more dangerous context for businesses to be in, because we do not know cyber-criminal groups are going to respond. They could become even more sophisticated and try to test how much further we’re willing to escalate’.

The thought that corporations might unwittingly get caught in this cat-and-mouse game of testing and defending critical infrastructure is no longer an abstract item on the risk agenda. Even smaller companies that are not deemed essential parts of the US economy now face the prospect of becoming collateral damage in the tit-for-tat exchanges brought on by the escalation of opportunities for cyber attacks and the escalation of deterrence by punishment.

‘For GCs, understanding the potential threat is key’, adds Fidler. ‘Understanding what the threats are from this potential escalation on the part of the government may help persuade the C-suite of the need to make more investments in their own cyber defence.’

Of course, only a minority of companies will fall victim to the most serious of incidents, but indirectly almost every single organisation will end up paying the price, whether through increased demands on security and compliance or changes to their relationships with customers and commercial partners.

Insurance has long been one of the major tools used by corporates to mitigate their exposure to cyber risk, but as the number of cyber-related insurance pay-outs topping seven figures grows, policies are being hastily rewritten.

‘[Last year] was an unprecedented year for ransomware attacks and the payment of related insurance claims’, notes Lavonne Hopkins, senior managing legal director for security, resilience and digital at Dell. ‘As a result, the cybersecurity insurance market is hardening as insurers revaluate how to keep their cyber insurance offers profitable.

I have observed that insurers are focusing more on evaluating organisational cybersecurity maturity and preparedness when making coverage decisions and determining premiums and deductibles. We can only expect this trend to increase. Organisations should start to prepare for a future that potentially excludes ransomware coverage from cyber liability policies and requires self-insurance models.’

A worrying thought. And even those who can find suitable policies should not be complacent against the threat, says Thuraisingham.

‘Certain insurers are now offering specific products that cover the threat of ransomware attacks but relying on this can be extremely risky. To activate the coverage a company must first lose its data in a ransomware attack; only then will the insurer release funds to pay the ransom.

This is obviously not ideal, as the protection offered does not typically compensate for the reputational damage or staff costs associated with the incident. I would advise taking all the preventive measures you can before relying on insurance.’

The price of this sort of ‘kidnap insurance’ coverage is also likely to increase markedly as insurers keep a watchful eye on cybersecurity developments. A report issued recently by Hiscox, an Anglo-Bermudan insurance provider that specialises in niche categories of risk, noted insurers faced a 50% year-on-year increase in pay-outs for cyber-related policies, with ransomware attacks accounting for the biggest contributor to this growth.

Outsmarting the hackers

Even the most generous insurance policy can only be triggered once a cyber attack has taken place, by which time financial compensation alone may not be enough to repair the damage. For general counsel, the only real way to defend against risk is to go on the attack.

David Mace Roberts, general counsel of transport information systems provider Electronic Transaction Consultants (ETC), has been working to keep one step ahead of cyber attackers for many years. For Roberts, the most notable feature of a good cyber risk plan is that it looks unlike anything else on the market.

‘A lot of companies will pull up a one-size-fits-all cyber response plan, but that’s really not good enough. A bespoke cyber response plan needs to be custom crafted for both you and your industry.

Thuraisingham echoes Roberts’ comments. ‘Just as with health concerns, the best method is prevention. Protect all your systems, data and processes so that the attackers cannot gain access in the first place. Perhaps most important, companies that do not mandate backups and do not have extremely stringent security policies are most in danger. Do continuous backups of data and processes. I cannot emphasise proper backup procedures enough’.

Indeed, as Richard Forno notes, none of these measures are difficult to implement, but business has tended to ignore expert advice for too long.

‘The problem I see is that a lot of companies and governments of all sizes fail to do basic cybersecurity best practices, things that we in the industry and academia have been urging people to do for 20, 30, 40 years. This can be things as simple as having a really strong password or using multiple forms of authentication for critical or sensitive systems’.

The most important aspect of effective defence against a ransomware attack, however, comes with employee training. Human error is overwhelmingly likely to be the biggest weakness in a cybersecurity defence package, as well as the first thing a criminal group will look to exploit. To guard against this, says Roberts, the only option is to train relentlessly, ‘If you only train once a year then training loses its impact and offers minimal protection.’

Lavonne Hopkins of Dell agrees. ‘Unfortunately, ransomware most frequently originates from human error, and over half of ransomware victims suffer repeat attacks. Training and education are critical to ensure a comprehensive cyber preparedness strategy and prevent these ransomware attacks. Organisations should mandate cybersecurity training, including phishing training, for all employees and contractor. Employees are the first line of defence and need to be equipped with the knowledge to help prevent an attack’.

Before any of the above can take place, senior management needs to take the risk to business from cyber attack seriously. As Thuraisingham notes, it is all too common to encounter business leaders who consider cyber strategy as a matter for IT professionals.

‘When you’ve hired the best risk analysts and cyber teams money can buy it is very easy to conclude that you’ve done everything you can. This is fundamentally wrong. Businesses will always be vulnerable to these attacks, so there needs to be a constant awareness of just how serious the consequences can be.’

Unfortunately, awareness of cyber risk as among the c-suite seems to remain limited. Our survey of over 200 general and corporate counsel in North America revealed that while legal teams felt there was a very high risk of cybersecurity breaches to their organisations, fewer than half were actively involved in shaping cybersecurity risk planning.

For many organisations, it may come back to haunt them. As Roberts concludes, ‘If you are a senior member of a public company, you’d do well to look at the SEC, the NYSE and NASDAQ who are all really pushing cybersecurity. Do you want this on the front page of the Wall Street Journal or the Washington Post? Do you want to have to answer to the boards, or to the securities regulators? If not, then taking the risk seriously now is the best defence.’

In 1954, The Westinghouse Electric Corporation unveiled the world’s first colour TV. With a price-tag of $1,295 – or nearly $20,000 in today’s money – the H840CK15 was the type of luxury purchase that stood as a solid signifier of economic success.

‘I grew up in a world where lawyers were among the few middle-class professionals who could afford the latest technology’, comments one senior lawyer at a large multinational bank.

‘Now, we are among the few middle-class professionals that ignore technology. It’s a strange thing that so many lawyers have chosen to overlook the transformative power tech has had on the world of work, and I am part of a growing number of in-house professionals that seeks to address the oversight.’

To rephrase the problem – well-known in economics – why does the cost of technology consistently fall relative to the rate of inflation while the cost of services, encompassing everything from healthcare to education continues to rise?

The answer, in short, is that machines cannot (yet) do what humans do. What machines can do, however, are the things humans do not want to do. From this perspective, technology is not a threat but an opportunity. It allows lawyers to move higher up the value chain. And, let’s be honest, no one wants to be stuck doing low-level work.

‘Lawyers are afraid of technology taking their jobs’, comments Lisa Marcuzzi, general counsel and country counsel for ArcelorMittal Dofasco in Canada. ‘But I don’t know of a single lawyer that feels unhappy that they will have to give up reviewing NDAs or sales agreements. As far as I can see, technology will free lawyers to do the jobs they trained for.’

The wider in-house legal community in the US and Canada clearly agrees. While 90% of respondents felt that technology had disrupted the legal profession over the last five years, and nearly all (97%) felt it would do so over the next five years, over three quarters (76%) said this disruption was a positive outcome for the legal profession.

Far from fearing tech, in-house lawyers are waking up to the freedom it can grant them – 87% of those we surveyed said their wider teams were receptive to the use of technology, while 78% said their businesses were supportive of finding new ways to work.

This widespread optimism, many respondents pointed out, was based on direct experience of available technologies. ‘I spent many years reviewing and negotiating documents that were up to 100 pages long’, commented one general counsel in the finance sector. ‘Typically, 90% of that document would either be boilerplate or unnecessary. If I add up the time I have spent reviewing superfluous material and account for cost then it comes to a shocking level of waste.’

In short, corporate counsel are looking forward to the freedom tech will grant them, and few fear their jobs are at risk. As one respondent commented, ‘The idea that lawyers will be replaced is just not realistic. Imagine a Fortune 500 company dismissing its legal team and saying, “we’ll just rely on technology to do all this stuff.” It won’t happen – it would be insane.’

What will happen is a continuation of the trends that have been in play for several years. The in-house legal team will move closer to the time-critical or economically important aspects of the business, law firms will be brought in to help with the types of matters where it just doesn’t make economic sense to employ a team of internal specialists, and technology will be used to remove a lot of the work that was never strictly legal work in the first place.

Eleanor Lacey, head of legal and general counsel for work management platform Asana, comments: ‘In the knowledge sector, tech never works by replacing people. It works by augmenting people and freeing them up to work on higher-value matters.’

‘There is a great sense of freedom now that we as corporate legal teams can really solve a lot of the problems we have seen time and again by introducing often inexpensive tech fixes. It’s a great time to be working in the legal industry. Anyone who says otherwise is just not seeing the big picture.’

Moving up the value curve

What are the grounds for this optimism?

Let’s take the single most important item an in-house lawyer deals with – the contract. Lawyers deal with contracts. Lots of contracts. So too do their employers. As Chris Young, general counsel for digital contracting platform Ironclad, puts it, ‘At a basic level, all lawyers are contracts lawyers and all the businesses they serve are contracts businesses. It’s the most fundamental unit that commerce is based on.’

In this contract-driven world, the central hub for contract review runs through the legal department. When a business grows, how does its legal department choose to scale? Does it add bodies, or does it use technology to scale up and meet demand?

For the last several decades, the answer to that question would have been the former. General counsel had one demand above all else: more staff. As our survey of legal teams in the US and Canada shows, attitudes are changing, and the answer is increasingly likely to be “new ways of working”.

Central to the evolving skillset of the in-house counsel is getting comfortable with communication. Those we surveyed were clear: documentation can be automated, and any lawyer who is essentially reading a document aloud can be replaced at will. But that, many feel, is a good thing. The rise of legal tech means the in-house team can finally sound like the rest of the company.

‘We don’t need to tell business, “The documents say this”’, comments one respondent, senior counsel at a large US medical services provider. ‘Any literate person can see what the documents say. We’re guardians of nothing but the obvious if we tell them what they can read for themselves.

‘That’s great – being freed from routine tasks is not a case of lawyers being replaced. It’s a case of lawyers being able to use their skills for the benefit of business. We should embrace it. Lawyers have been trained to do some very sophisticated work, but large parts of the contracting process are not that work. If we can relegate that to a system or use technology to complete it then we are going to have a lot more time to do the work that is expected of business leaders. The days of pushing paper around may finally be over.’

Chris Young, general counsel for digital contracting platform Ironclad notes that ‘In-house teams used to ask their law firms about technology. Now it’s the reverse. GCs are encouraging their firms to adopt technology, and firms are hearing about the most useful software and tools from their customers.’

For many firms, this will come as unpleasant news. But there is an upside. As Young points out, ‘In-house lawyers will always need law firms, and the industry won’t be transformed by one side alone. The more forward-thinking law firms should see this moment of change as an opportunity to gain a competitive advantage and become a true strategic partner to their clients.’

Judging by the results of our survey, it is an opportunity many have failed to grasp. Under half (45%) of the more than 200 senior counsel we polled for this report said their firms were using technology to deliver legal services and solutions, while a similar number (41%) were unsure how their external firms were resourcing matters.

As one respondent noted, ‘Knowing what goes on at a lot of firms is a game of Schrödinger’s Cat. They may be using some pretty sophisticated software to bulk process our matters, but they are unlikely to tell us about it unless we push them.’

This lack of transparency was widely cited as a source of frustration. Indeed, nearly three quarters (74%) of those we spoke to said they were not satisfied with their firms when it came to technology.

Law firms should take note: 88% of legal teams said it was important that their law firms kept up with developments in technology, with 32% saying it was crucial for them to do so.

We should not place the blame entirely on law firms here. In-house lawyers may complain that their firms behind the curve, but fewer than half (44%) are asking about their external advisers’ use of technology when undertaking
panel reviews.

With so many GCs either unsure of or dissatisfied with their firms’ use of technology, it is no surprise to see that few are looking to them as a source of inspiration. Just over a third of respondents (38%) said they now looked to their firms for guidance when it came to finding or implementing legal technologies, while under a quarter (23%) reported having been advised by their firms on the use of specialist legal technology. Only 21% of respondents said their firms had offered to share technology with them.

This, for some GCs, has been a dealbreaker. ‘One of the factors that motivated me to change firms was the lack of use of technology by my old external firm’, comments the general counsel of a large commodities business.

Of course, the technology used by law firms is often very different to the technology needed by corporate legal teams. Firms tend to operate in scales and volumes that are far beyond the requirements of their clients, making tech transfer a far from simple matter.

Even so, it may trouble those in private practice to know that legal teams are beginning to look for solutions elsewhere. Almost half (47%) of those surveyed said use of technology within the legal team had already impacted their relationships with external firms.

The good news? Law firms that take a proactive approach are winning clients. As Michael Shour, general counsel and secretary of Banyan Software, concludes:

‘If a firm is wise to the implementation of appropriate technology solutions, it can allow them to complete tasks more efficiently and cost-effectively. When I see a firm doing things like this, I can’t help but appreciate that they are driving efficiently for their clients and am impressed that they are on top of things – and that can only be a good thing for business.’