Bloomberg Law
Aug. 12, 2016, 5:16 PM

GCs Add Compliance to Legal Department

Gabe Friedman

In the past year, Mitratech has made five acquisitions as it expands its suite of software products beyond those traditionally available to corporate legal departments, such as time keeping and matter management, and into the compliance and risk arena.

It ties into a trend of corporate legal departments taking on larger roles within their organizations, including increased responsibility for corporate compliance, according to Hugh Logue, a legal market analyst at Outsell.

As global regulations have become increasingly complex, and the cost for non-compliance more expensive and critical to the function of the corporation, the role of the legal department has been magnified, Logue said. In the U.S., financial regulations such as the Dodd-Frank Act are one example and the data protection rules in the European Union and elsewhere around the world are others.

“Ultimately a compliance issue will end up under the control of general counsel,” said Logue. “That’s why legal departments are getting ownership of all areas that could become part of legal risk.”

Technology companies such as Mitratech are targeting this growing market segment, he said, pointing out that Mitratech has snapped up two U.K. companies in the past two months, Hitec and CMO, which have increased its corporate customers from 20 to 305 in the European Union, Middle East and Asia-Pacific region.

He cites Mitratech’s own estimate, based on a survey, that 40 percent of corporate legal departments now have responsibility for the compliance departments in their organizations.

He defines the difference between legal and compliance, broadly speaking, as the difference between being reactive and proactive. Namely, compliance departments are supposed to be taking steps to actively manage and mitigate risks, whereas legal may take a more reactive approach, and deal with problems as they arise.

Other examples of technology companies moving into the compliance space, include reorganization last year at Wolters Kluwers, which combined its Corporate Legal Services unit with its Financial & Compliance Services division to create a new division called Governance, Risk & Compliance.

As for general counsels, Logue said many are resisting the growing responsibility.

“They’re not enthusiastic about the prospect of increased workloads was the general feeling I got to speaking to many general counsels,” he said. “Many of them would like the compliance function to remain the responsibility of compliance professionals.”

Overall, he said one consequence is that corporate legal department spending on technology is up across the board.

“This increased complex regulatory environment really is pushing the general counsel into a much more strategic position, closer to the CEO and executive levels than ever before,” said Logue.

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