In-house legal teams have grown as a corporate mainstay, acting as internal, dedicated legal counsel that represent the business interests of a single corporate client. They have the opportunity to gain deep and specific industry experience, be intricately involved in business growth and development, and develop unique and valuable networks. 

Along with the unique opportunities these roles provide, several key challenges set in-house legal teams apart from those at firms. Corporate governance, risk management, and shifting regulatory environments have led to expanded responsibilities and in-house counsel positions. 

Understanding and navigating these challenges is critical to attaining efficiency and proactively preparing for success with in-house legal departments.

Managing Increased Regulatory Complexity

Regulatory frameworks remain on fast-shifting ground, particularly for industries and functions where emerging legal technology and environmental interests become involved. Compliance with regulations can range from marketing language to HR procedures. 

Examples of complex rules, standards, and guidelines that require careful implementation and review include: 

• New and proposed data privacy regulations at state and federal levels (e.g., GDPR, CCPA)
• ESG (environmental, social, and governance) mandates (e.g., from SEC and SASB).
• Trade regulations (e.g., tariffs, global market entry, product emissions requirements)
• Industry-specific regulations (e.g., HIPAA for healthcare records management)
• Cybersecurity and artificial intelligence (AI) (e.g., CMMC 2.0, intellectual property rights)

Staying on top of all these frameworks and requirements naturally demands in-house counsel to closely monitor any changes to them. By leveraging their legal network and industry news, internal legal staff can anticipate impacts—and begin any efforts to realign operations with compliance needs well before deadlines.

Beyond staying up to date on complex regulatory compliance obligations, strategies that help in-house counsel include: 

• Dating all internal regulatory documentation and guidance
• Routinely scheduling checks and updates on compliance-related procedures and files
• Leveraging legal tech implementations and automating time-consuming or rote tasks

Budget Constraints and Cost Efficiency

Cost management acts as a common stressor for in-house teams, where budgets may be squeezed in widespread reductions or adjustments that treat legal as simply another department. While KPIs remain the basis for most corporate performance analyses, in-house legal cannot rely on the overt connection between direct revenue and billable hours that firms do, which may make it harder to demonstrate their value.

Additionally, budgets and positions may be reduced when major projects are delayed, limited, or canceled in the current economic climate. In-house teams must adapt regardless, lacking a law firm’s ability to turn away clients or work based on staff bandwidth or other reasons.

Therefore, in-house legal teams should monitor their wins and contributions to more easily convey their impact—both regarding the team’s relationship to the organization and individual members’ relationship to the team. This includes collecting data that connects efforts to revenue generation, penalty reductions, and other outcomes that affect the whole organization’s bottom line.

If an in-house team wants to maximize the corporation's return on investment (ROI) in its staff, consider meeting more responsibilities on tighter budgets with legal tech that increases productivity and lightens support staff needs—or even outsourcing support and non-critical tasks when it’s cost-effective.

Legal Talent Retention and Development

While in-house legal work can offer significant salaries, benefits, and career development, there are limits to competing with firms for junior and senior legal talent. 

In-house teams may be constricted when it comes to growth opportunities—in the corporate world, lateral moves are often easier to land than waiting for a senior position to open up. There is no partner track or equity buy-in, which means that retaining lawyers at their peak can be difficult. 

This is particularly challenging for positions that require specialized legal expertise and experience and have a limited pool of candidates. Without a significant stake in the company employing them, mid-level and senior lawyers with valuable expertise may be best served by shopping for the best offer among your competitors. 

Addressing this challenge includes: 

• Offering top-notch professional development programs
• Incentivizing the ‘work-life balance’ advantages that in-house roles enjoy even further
• Providing creative ways to improve morale
• Proactive guidance and involvement in clear career-path planning
• Utilizing top legal recruitment partners
• Fostering a collaborative and supportive work environment
• Keeping an eye on market salaries, starting bonuses, and benefits

Legal Technology Adoption and Integration

Corporate departments observe junior positions with high turnover and senior positions with little turnover much more frequently than law firms. While these tendencies offer a blend of expertise and fresh ideas, they can also create an environment where new technology is explored less and rarely championed by those with the authority to adopt it. 

Tools that leverage machine learning (ML), generative AI, and big data analytics are largely designed to lift work that is repetitive, time-consuming, and prone to manual error from staff while also offering new and creative solutions. The outcomes include streamlined workflow and increased productivity, as well as meeting objectives related to cybersecurity and data privacy. Plus, once initial investment and adoption are complete, cost savings can be a significant benefit.

To get there, in-house legal teams need to overcome implementation and adoption barriers, which include: 

• The time and cost investment of change and onboarding new tools
• Resistance to change by department and C-level leadership
• Lack of tech proficiency or knowledge

However,  in-house teams can address these challenges and considerations through: 

• Promoting tech fluency within CLE paths or other staff education
• Requiring more tech experience or familiarity among applying candidates
• Investing time in identifying the right legal tech tools for your team
• Improving digital transformation efforts

Risk Management and Compliance Pressures

The core functions of in-house legal start with managing risk amidst multiplying sets of laws and regulations—with the expectation that the team can spot and mitigate each and every risk that crosses the corporation’s path. 

For any potential issues, in-house legal is expected to anticipate and mitigate: 

• Litigation risks
• Compliance issues and regulatory costs
• Corporate governance failures

Sterling Miller, a three-time General Counsel who spent almost 25 years in-house, offers this practical set of steps to risk management¹:

1. Know your company – Understand your company’s business goals and strategy, learn its degree of risk tolerance, and align yourself with or create a risk management leadership team.

2. Identify the risk – To identify and categorize risks, you need to determine what type of risk it is, the scenarios in which it would arise, its likelihood, whether third parties can pose it, and what type of harm can arise (e.g., monetary, operational, criminal). 

3. Extrapolate outcomes – Determine the company's best, worst, and most likely case regarding harm and whether benchmarks or standards exist to measure against it. 

4. Determine actions – Identify how best to monitor risks, what occurrences transition risks from potential to current, and what actions can minimize negative outcomes and maximize positive ones (e.g., policies and training, contractual terms, insurance, operational controls). 

5. Estimate cost – To calculate risk value, multiply the probability of an event by the cost or value of the event if it occurs. 

6. Report the risk – Through a formal risk assessment report or an ad hoc email, memo, or discussion, document your process through risk identification, likelihood score, potential outcomes, options to mitigate the risk, and your recommendation and rationale for it.

In addition to understanding the process of identifying, evaluating, and reporting risks, you can implement these strategies to improve your team’s risk management success: 

• Proactive risk management systems and notifications
• Training to ensure the legal team is consistent and current on risk handling
• Cross-functional and cross-departmental collaboration
• Enlisting and empowering each department to manage its areas of risk
• Developing clear compliance frameworks and tools

Balancing Business Needs with Legal Risks

While outside firms can advise clients and stop there, in-house legal teams remain intimately involved with business development and objectives. Achieving balance when business plans entail exposure to legal risks can be a difficult calculation, particularly as plans evolve and change in response to resource planning, market demand, and other factors. 

Aligning legal counsel with the company’s broader strategic goals can be pursued by¹:

• Understanding how to measure conflicting and overlapping legal and strategic risks
• Strengthening collaboration and communication between legal and other business units
• Creating scalable and effective risk assessment processes
• Reviewing engagements (positive and negative) to learn and improve

Meeting In-House Legal Challenges

In-house legal teams face significant challenges today, particularly from risk management at multiple levels, staying on top of regulatory compliance, budget constraints, technology resistance, and retaining talent. 

However, adopting the right strategies to improve workflows, champion the right tech, and hold on to skilled lawyers can help in-house teams overcome these challenges, boost their efficiency, and increase their value and profile within their organizations. 

When it comes to identifying, hiring, and retaining top legal talent, attain success by partnering with E.P. Dine, the preeminent legal recruitment provider since 1975. Amidst the constant shifts in the legal industry and corporate landscapes, our skilled experts leverage extensive networks and emerging technology alongside a recruitment plan tailored to your needs. This enables us to target the right in-house counsel fit for you. 

We fill legal positions at all seniority levels for corporations and firms nationwide. Visit E.P. Dine today to learn how we approach recruitment and deliver results.

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Sources: 

1. Thomson Reuters. The legal team and risk management: What you need to know. https://legal.thomsonreuters.com/en/insights/articles/legal-team-and-risk-management-what-you-need-to-know