How Technology helps Legal Departments in Financial Services Manage Their Unique Challenges

Legal Operations teams are generally tasked with the design, planning and implementation of their legal team’s strategic initiatives to support the business. They must be able to balance managing risk and regulatory changes with operational efficiencies whilst keeping costs in check. Access to data in a structured form allows the team to provide valuable and powerful advice, guidance and support to their legal function. Given the unique position of an in-house legal function, they often hold a wide range of information about the business they support, which gives them an unparalleled view of their organisation. Whilst most in-house legal teams will broadly use the data for similar reasons, the rise in legal and regulatory changes impacting financial institutions has increased their demand for meaningful data. Some of the main legal and regulatory changes include the Senior Manager and Certification Regime (SMCR), “ring-fencing”, Dodd Frank, European Markets Infrastructure Regulation (EMIR) and General Data Protection Regulation (GDPR), to name but a few.


The introduction in 2018 of the Senior Manager and Certification Regime (SMCR) by the Financial Conduct Authority has put additional onus on certain key individuals and material risk takers within UK financial institutions to evidence their decisions. Maintaining structured data in a form that can be analysed and measured will help provide evidence for some of the key decisions being taken. These decisions might include law firm panel appointments, outsourcing / insourcing business activities and management of legal risks.


Those Financial institutions with clear visibility of the derivatives and related instruments they have entered into will have benefited in understanding any re-papering needed for “ring-fencing”. The data may also enable them to ensure they meet the new collateral obligations under EMIR. Understanding the legal spend to support these legal and regulatory changes will allow the in-house function to better prepare and budget for future changes.


Under recent Banking reforms, financial institutions are required to maintain “living wills” to try and ensure they fail safely. As part of this activity key contracts / documentation is required to be maintained in a central location. As many of these will have passed through the legal function at some stage, a well-structured database with key details of the contracts will help ensure obsolete documents are removed and new documents are added.


With the increases in cyber security, the legal function will, over time, be able to better identify which external law firms have handled data for the organisation and ensure that robust measures to safe guard that data are being applied by the law firms.

The data can support trend analysis which will help the legal function understand and be better positioned to support major changes in demands for products and services and any resultant risks. A significant change in demand may be seasonal (such as end of a tax year or when certain subsidies are paid), market or social media driven (such as mis-selling issues) or economic/geopolitical (such as changes in interest rates, exchange rates, commodity prices as well political uncertainty). Any of these can alter the legal risk profile of the business and change demand for legal resources. Being aware of pressure points will help the legal function adapt.


Legal departments in financial services face a number of unique regulatory challenges. Technology provides a central source of truth to manage these requirements. The resulting data output ensures legal operations can support the legal function quickly and accurately while predicting risk and change.


– 20th February 2019, Iain MacDonald, formerly Legal Operations at Lloyds Banking Group