Legal Process Outsourcing (LPO) is a widely accepted practice that offers strategic, operational and financial benefits. However, changes in the LPO industry have made regulatory risk management more important than ever for those corporations or law firms considering outsourcing. LPO clients should weigh both the benefits and risks of outsourcing in the context of the legal industry’s regulatory framework.
When a corporate law department or law firm outsources to an LPO provider, they are giving control to that LPO and relying on new systems and processes – which come with their own set of risks. Add to that the fact that corporate law departments are demanding value-added services and are outsourcing increasingly complex functions, and the risk level increases. Meanwhile, LPOs continue to evolve as vital participants in legal service delivery. As new competitors arise and clients trend toward multiple providers and shorter contracts, LPOs are streamlining their processes and costs to remain viable. This new LPO landscape can prompt new legal rules and requirements, often in foreign jurisdictions.
In this changing marketplace, the outsourcing legal processes such as document review or contracts management does not change a client’s regulated status or regulatory responsibilities. In fact, outsourcing complicates legal compliance, and clients should not assume their LPO providers will adequately manage regulatory risks associated with the services. Ultimately, it is the outsourcer that suffers the consequences when a legal violation occurs. Legal breaches can disrupt operations, delay services, and deprive clients of important rights and benefits. And if there is a formal government action, the penalties could be punitive. But even that does not compare to the long-term damage to the client’s business and reputation when a high-profile regulatory violation occurs.
Information and prevention are key to success. It is important that corporations and law firms outsourcing legal services are aware of the ethics opinions addressing Legal Process Outsourcing from the American Bar Association and various state bars. They should understand their obligations related to confidentiality, conflicts, disclosure to clients, billing practices and unauthorized practice of law.
Overall, outsourcing clients need to engage in regulatory risk management early. Legal risk management standards should be defined by the client early on in RFPs and service level agreements, and put into practice through careful accounting of the engagement’s circumstances and needs. It may be best to in-source certain types of legal work rather than risk legal violations. While high-risk, proprietary work may be best tackled directly by internal legal staff, recurring and commodity-type services such as corporate forms or high-volume services such as litigation document review may be considered for outsourcing to a lower-cost LPO provider. Whenever outsourcing, clients should be willing to commit adequate resources to monitor the LPO throughout the life of the project and evaluate the continuing effectiveness of policies and practices.
In the end, the reward of an appropriate and successfully implemented LPO strategy can be substantial, but you must plan carefully and conduct your due diligence.
Check more info about: Global Outsourcing Association of Lawyers Twitter and Intellectual Property Conference San Francisco
When a corporate law department or law firm outsources to an LPO provider, they are giving control to that LPO and relying on new systems and processes – which come with their own set of risks. Add to that the fact that corporate law departments are demanding value-added services and are outsourcing increasingly complex functions, and the risk level increases. Meanwhile, LPOs continue to evolve as vital participants in legal service delivery. As new competitors arise and clients trend toward multiple providers and shorter contracts, LPOs are streamlining their processes and costs to remain viable. This new LPO landscape can prompt new legal rules and requirements, often in foreign jurisdictions.
In this changing marketplace, the outsourcing legal processes such as document review or contracts management does not change a client’s regulated status or regulatory responsibilities. In fact, outsourcing complicates legal compliance, and clients should not assume their LPO providers will adequately manage regulatory risks associated with the services. Ultimately, it is the outsourcer that suffers the consequences when a legal violation occurs. Legal breaches can disrupt operations, delay services, and deprive clients of important rights and benefits. And if there is a formal government action, the penalties could be punitive. But even that does not compare to the long-term damage to the client’s business and reputation when a high-profile regulatory violation occurs.
Information and prevention are key to success. It is important that corporations and law firms outsourcing legal services are aware of the ethics opinions addressing Legal Process Outsourcing from the American Bar Association and various state bars. They should understand their obligations related to confidentiality, conflicts, disclosure to clients, billing practices and unauthorized practice of law.
Overall, outsourcing clients need to engage in regulatory risk management early. Legal risk management standards should be defined by the client early on in RFPs and service level agreements, and put into practice through careful accounting of the engagement’s circumstances and needs. It may be best to in-source certain types of legal work rather than risk legal violations. While high-risk, proprietary work may be best tackled directly by internal legal staff, recurring and commodity-type services such as corporate forms or high-volume services such as litigation document review may be considered for outsourcing to a lower-cost LPO provider. Whenever outsourcing, clients should be willing to commit adequate resources to monitor the LPO throughout the life of the project and evaluate the continuing effectiveness of policies and practices.
In the end, the reward of an appropriate and successfully implemented LPO strategy can be substantial, but you must plan carefully and conduct your due diligence.
Check more info about: Global Outsourcing Association of Lawyers Twitter and Intellectual Property Conference San Francisco