The legal service industry has experienced exponential growth over the past years. Many entrepreneurs have joined the industry due to its high returns on investments and profitability globally. However, the sector has begun experiencing market disruptions both internally and from consumers setting new challenges that firms must handle to grow. Below are the top five challenges that have dominated the industry, especially since the beginning of 2021.
Like in any other sector of the economy, the Corona disaster has had damaging effects on the legal industry globally. Law firms across the world are struggling to continue serving their clients while at the same time maintaining their relevance. To maintain continuity and vitality in the markets, most legal entities have adopted strict policies like reducing their staff to cut costs, negatively affecting their operations.
Lawyers most affected by the disaster are litigators and those that deal with contingency cases. This is because courts and other administrative offices are still closed, meaning that all proceedings that occur in them, including hearings and depositions, cannot occur. To add to the dilemma, the pandemic shows no signs of ending soon; hence, many complaints no longer have the pressure to settle their cases. Contingency lawyers who only get their revenues when resolved are at a risky financial position the longer the pandemic prevails.
Other law firms that have greatly suffered from the pandemic are those specializing in business mergers and acquisitions. Many of their customers are waiting for the pandemic to end before making any significant business decisions.
Cybersecurity continues to be a significant challenge in the law industry in 2021. While many of these threats can be prevented by using network security software and internal safe practice systems, many law firms still have outdated cybersecurity systems making them highly susceptible to cyber threats.
One of the most common cybersecurity experienced law firms include phishing scams. It continues to be a threat to the legal industry due to the large amount of sensitive data passed through digital sources. For example, a scammer can use any manipulative move to gain sensitive information from a client.
Another cybersecurity practice that affects law firms is a data breach. The practice is becoming prevalent in the legal sector, where many clients have fallen victims. Preventing data leaks takes a combination of user security policies and tools between law firms and clients.
3. Clients expecting more services at a lower rate
There are many reasons why this challenge is rising in 2021. One of the most significant reasons behind this is the introduction of doing it yourself (DIY) legal services, which are cheap; hence clients expect legal entities to charge them low prices. Besides, legal entities are presenting transparent online pricing models, making them lower prices to remain competitive. This has a detrimental effect on the firms’ profitability, making it hard for them to survive.
4. A large number of technological solutions to choose from
For decades, the legal sector remained undisrupted by technological changes. However, this is no longer the case. Digital transformation has resulted in new processes and workflows which have entirely revolutionized the legal sector. Many new legal, technological solutions are being introduced daily, making it difficult for a law firm to choose which technology best fits them.
With the recent technological changes on the market, consumer behavior is subject to change with clients’ expectations rising day by day. This forces legal representatives to adopt strict policies that enable them to remain relevant and competitive in the industry.
5. Increased competition
Due to increased competition, law firms are finding it hard to acquire new clients and at the same time maintain their current customers. More law firms are being set up day by day, creating a pool from where clients can choose. To remain relevant, law firms have to lower their prices to attract more clients, affecting their profitability and revenues.
Law firms should adopt policies that support innovativeness and creative thinking to remain relevant in the competitive sector. The policies should always be customer-focused while at the same time maintaining the primary goals of the organization. They should also use the latest technology features to help legal representatives stay on top and meet deadlines, store and locate documents more efficiently, and streamline legal processes in general efficiently.