Security concerns and economic pressures have eliminated the competition for talent as a major threat to the profitability of law firms, according to 2022 Report of the Central Bank’s Business Leaders from Thomson Reuters and the Georgetown Law Center for Ethics and Legal Practice, and the Center for True Value Partnerships. The report examined the main risks to law firm profitability and how firm leaders are addressing them.
Legal Current has key issues from the report, which surveyed business leaders at US law firms, including chief operating officers, chief financial officers, managing partners, and other executives.
- Safety concerns are top of mind. Security breaches, data loss, hacking, and ransomware were rated as top risks by 42% of law firm business leaders. General economic pressures were cited by 32%, tied for the second highest risks with partner costs. Last year, by comparison, general economic pressures tied for ninth among risks, accounting for only 16%. The top three risks last year were attorney recruitment and retention, competitor acquisitions, and partner fees.
- Growth is expected for the coming year and the next three years. Most law firm business leaders expect growth over the next 12 months in terms of demand for legal services and revenue-per-lawyer. Less than most law firm business leaders expect revenue-per-partner and revenue-per-lawyer to grow. Expectations for growth are expected to increase over the next three years, with a whopping 84% expecting an increase in revenue-per-lawyer. However, more than two-thirds of law firm business leaders expect higher direct and indirect costs over the same period.
- There are different predictions for training areas. Among the business areas, most law firm business leaders expect health care, bankruptcy, and intellectual property to see the highest growth. Mergers and acquisitions, real estate, and personal injury are viewed as the most likely to see a reduction.
- Rising credit and transaction rates are key to growth. These are the two most common ways law firm business leaders plan to improve corporate performance, and more than 90% of firms plan to do so. Also, remote work is said by most companies to improve performance, with 88% of companies saying they support it. That’s a big jump from 62% last year.
- Businesses will continue to capitalize on technology. More than three-quarters of law firm business leaders say they are likely to strongly consider using other technologies to reduce costs and for purposes other than cost cutting. The primary technologies that firms plan to purchase that are not currently in use are AI-powered legal research, contract management, and AI-powered litigation tools.
For more strategies law firm business leaders are using to drive law firm profitability, download the full report.