General Counsel Survey 2020

Study on How Indian Legal Departments are reacting to the impact of COVID-19

The outbreak and spread of the coronavirus (COVID-19) have been a disruptor to personal and professional lives across the globe. The pandemic has forced organisations to confront a host of hard questions about how they can and should conduct business in the wake of such a global health crisis. Vahura conducted a detailed study through an online survey on how Indian Legal Departments are reacting to the impact of the COVID-19.  We received over 90 responses from General Counsels ("GCs") across sectors in India who shared what they are doing for their businesses during these unprecedented times. We would like to thank each of the GCs who took the time to share their experience and knowledge with the wider legal community.

 

This report draws insights on how Indian Legal Departments within Corporates are preparing to tackle the impact of this pandemic outbreak and what the future may look like. 
 

Profile of the Respondents

Vahura surveyed over 90 India based GCs between April 21- April 27, 2020. The respondents were from private sector companies within four main industries: IT/ITES (19%), FMCG & Consumer Goods (11%), Power & Energy (10%), and Internet: e-commerce, Fintech (10%).

51% of the GCs were from large organisations, i.e. organisations with annual revenue in excess of INR 1000 crores or USD 130 Million. 
 

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A. Business as Usual

Majority of the GCs expect that it will take their companies more than three months to recover; of which 33% say it will take 3-6 months, 23% say it will take 6 months to 1 year and 11% say it will take more than a year to bounce back.

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B. Impact on the Business

The COVID-19 outbreak appears to have a mixed impact on businesses, with 56.67% of the respondents stating that their company is seeing a significant recoverable impact.

Majority of GCs from IT (64%), Power & Energy (50%), Real Estate (80%) and Banking (100%) sectors, have said that their business is impacted but can be resolved through proper strategy and planning. 


Close to one-third of the GCs from Power & Energy (25%), Pharma (33%) and Telecom (33%) sectors have said that they are facing limited impact. 


Interestingly, a substantial number of GCs from the IT (29%), Pharma (33%), Financial services (60%), Power & Energy (25%) and Telecom (33%) sectors are also saying that they are seeing growth opportunities in the current situation. 


However, responses from the Hospitality & Tourism, and Internet (E-Commerce, Fintech) sectors stand out in particular. 50% of the GCs from Hospitality & Tourism, and 44% of GCs from the Internet (E-commerce, FinTech, etc.) see an existential threat to their business.
 

Key Takeaway

According to our analysis, consumer-focussed 'non-essential' sectors have been most adversely impacted due to the COVID-19 pandemic. These findings also highlight the fundamental strengths of some of the sectors such as IT/ITES, Financial Services and Pharmaceuticals & Health Care, which constitute  20% of the respondents who suggest they see growth potential even in the current situation. 
 

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C. Complexity of a Novel Nature 

COVID-19 has put GCs under an enormous strain with an absolute shift in their areas of focus.


About 90% of GCs in the Essential Goods and Services category and 81% in the Non-Essential Goods and Services category report offering legal advice on “unprecedented issues” as the legal team's most critical focus area since the outbreak.

Key Takeaway

 

GCs record an increase in the novel (pardon the pun) issues coming up as an immediate consequence of the COVID-19 outbreak. This increase is attributed to the shift in priorities of the Legal Department to address unprecedented critical issues. Additionally, as governments and authorities race to push through new regulations each day, the legal team is expected to monitor such notifications and directives issued in response to the crisis.

The GCs also acknowledge that some non-traditional areas have risen on their priority lists, such as:

  • Preparing and implementing the Business Continuity Plan

  • Crisis communication

  • HR/ Employee Issues

  • Contract re-negotiation

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D. How helpful have advisors and service providers been?

With an increase in the workload, GCs have reported an increase in dependency on external platforms and service providers. More than 90% of the GCs considered law firms to be the most popular and valuable option in combating the effect of the pandemic on businesses.
 
Findings also show that most GCs regard Consulting Firms and Alternative Service Providers the relatively least helpful option during these times.

Key Takeaway

 

Regardless of the type of sector or the size of the law department, GCs are constantly finding ways to address the increasing internal demand for legal advice, to increase the quality of legal services, and find cost-effective ways to deliver the same. With such shift in priorities, it is a good time for legal service providers and legal tech companies to analyze their role and the benefits they intend to provide to their clients.

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E. Priorities for the upcoming year

The pandemic's unprecedented impact means that GCs require, now more than ever, to support their respective businesses with quick and easy-to-navigate resolutions that are relevant to their market reality. More than 85% of GCs have rated advising senior management on significant legal issues and implications of the COVID-19 outbreak as the most critical priority in the upcoming months.

 

Key Takeaway

 

As reality sets in and businesses are now able to identify the actual impact on their operations, GCs are in the process of listing down their top priorities for the rest of the year. GCs understand that legal teams would be required to support all the business functions, including sales, supply chain, and human resources. Many GCs are also prioritizing the increase in internal efficiency and capacity building. Prominent approaches include reducing the external legal spend, implementing legal tech solutions and introducing alternative resourcing options such as secondments, contract lawyers and LPOs.

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GCs are considering additional ways to improve the efficiency and effectiveness of their respective legal teams. More than 2/3rd of the GCs (about 67%) expect a more significant role and use of legal technology over the next year. As the demand for legal advice on unprecedented issues is currently increasing, several GCs are also planning to invest in developing their existing legal resources as subject matter experts on various legal issues that the business is facing.
 

Key Takeaway

 

Findings confirm the need for GCs to look for the right strategy and structure to help extract maximum value from the internal legal team and external partners. GCs are looking to improve their operations with a flat or declining budget through digitisation, right-sourcing, upskilling and talent management that integrates new sets of skills. GCs recognize that now is the time for them to reimagine the internal client experience and achieve it efficiently, cost-effectively and consistently. 
 

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F. Legal tech and building internal capability

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When asked which of the dispute-related areas of practice will see a change in demand in the coming months, GCs from the Essential and Non-Essential categories anticipated an increase in demand in Corporate Commercial (e.g., contract disputes) and Employment. In addition, 88% of the GCs from the Essential category also see an increase in demand for Insolvency and Bankruptcy related disputes in the upcoming months. However, with the moratorium in place, this might not be a priority to India Inc. 

IP, Tax, Competition & Antitrust, Fraud and White Collar Crimes are some of the practice areas that GCs are predicting a fall in demand. We have also noticed that an increase in demand for Fraud & White Collar activities is opted by GCs from the Pharma, FMCG, Banking, Hospitality sector primarily. 
 

Key Takeaway

 

According to the respondents, 50% or more of the total GCs foresee an increase in 6 out of the 10 Disputes related practice areas. Additionally, over the next 1 year, GCs predict an increase in Negotiations (84%) and Court Based Litigation (77%) as a method to resolve disputes. Other methods of resolving disputes such as ODR, Arbitration and Meditation were opted by more than 50% of the GCs. 

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G. Demand for Legal Services (Contentious)

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H. Demand for Legal Services (Non-Contentious)

With regard to non-contentious related activities, Corporate Advisory, Banking & Finance and Employment are the three practice areas that GCs are foreseeing an increase in demand in the year ahead. Approx 25% of the GCs from the same group also see a decrease in M&A, and Real Estate based activities in the year ahead.

 

Key Takeaway

 

According to the respondents, 50% or more GCs foresee an increase in 7 out of 10 non-contentious related practice areas. Corporate Governance, Tax and Capital Markets are some of the practice areas where GCs anticipate the demand to remain the same in the coming months. 
 

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I. Legal Budget Component:

60% of the GCs foresee an increase in the Legal Technology component of the legal budget. Only 22% of the GCs have opted for an increase in the law firm fees component. 

Key Takeaway

 

More than 1/3rd of GCs from the Internet, Power, Banking, Real Estate and Telecom sectors, have said they are going to see an increase in law firm fees as part of their overall budget. 

FMCG, Pharma, Financial Services, Hospitality are some of the sectors, where the GCs have said that the fees component is going to decrease.
 

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If you have any questions in relation to this study, please write to consulting@vahura.com

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