Legal Research

"Spend Wisely"

Posted by Jordan Furlong: "One of the reasons -- maybe the main reason -- why lawyers are so risk-averse is that averting risk is kind of the whole point of having lawyers. People hire us for two reasons: (a) to fix a problem that's already occurred, or (b) to arrange things so as to minimize or eliminate the risk that problems will occur. In Susskindian terms, these are the ambulance at the bottom of the cliff and the fence at the top, respectively.

The idea that we'd be better off with fewer ambulances and more fences is starting to catch on within the profession. But there's an important question in there: how many fences do you really need? Is it possible you're installing more fences than can be justified by the reduced risk of accidents? And as sellers of both fences and ambulances, are lawyers sufficiently objective to be the ones making that call?

Ron Friedmann got me thinking about all this with two insightful and provocative posts about reducing corporate legal spend. He argues that institutional clients "need to do a better job assessing risk and deciding what warrants legal attention," and draws an analogy to the US health care system which, by many accounts, costs so much in part because of rampant unnecessary treatment. If clients took the time to review all their legal spending and figure out what percentage could be eliminated with an acceptably small increase in risk, they could lower their legal spend without dramatically increasing the company's exposure.

The idea that companies are over-protecting themselves against risk and therefore overspending on lawyers is compelling. Obviously, there are legal costs that can't be eliminated -- if the government tells you to comply with a given regulation or face prosecution, you're going to comply. But if you separated corporate legal spend into two piles -- one for "we need to do this or we'll go out of business" and "we'd better do this to make sure we've covered all our bases" -- you might find the second pile a lot higher than you expected. And if you weighed the savings of not covering a given base against its reasonably foreseeable consequences -- not the possibility, but the probability of trouble -- you might decide you're buying too much legal risk aversion..."

Full text and active links are available at the source site listed below.

Source: Law21, 22 July 2009

Full post as published by Stark County Law Library Blawg on July 23, 2009 (boomark / email).