Companies are growing their legal teams, but that doesn't spell doom for outside counsel. Here's why law firms will still win work this year.

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A third of internal legal departments say they’re staffing up in preparation for a busy 2021. But that doesn’t mean opportunities for large law firms to win work will go away.

Corporate legal teams expect to be busier with transactional, compliance, and regulatory work this year, in addition to changing workplace safety regulations due to the pandemic as well as industry-specific changes in regulation, according to a new report last month from the Association of Corporate Counsel. 

Of the nearly 1,000 survey respondents, who are chief legal officers and generals counsel, 32% said they expect to hire more this year — but half of those growing teams say they still plan to outsource more work than ever to external law firms to keep up with an influx of work.

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Companies used to outsource most of their legal work to law firms, whose professionals generate steep legal fees and have a steeper learning curve to the ins and outs of the company they’re working with. As internal legal departments take on larger roles within their companies, they can manage more of the legal process in-house.

While this reduces the risks to companies of sending work and crucial data outside the company and improves security, the ACC report said, it can also threaten the stream of everyday work going to law firms — but luckily, the report found, there’s enough work to go around that even departments that are staffing up will need the help of outside law firms to manage an increased volume of work.

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Because legal departments are growing in their scope in addition to their size, hiring “does not necessarily imply reducing the amount of work that is sent to law firms,” the study said. 

ACC survey respondents said they think they’ll need additional resources to tackle significant transactions, like M&As and spin-offs; compliance issues; regulatory issues; data privacy and protection; litigation and e-discovery matters; and more in the coming year.

Heading into 2021, 61% of chief legal officers said they expect industry-specific regulation to be their biggest challenge this year, followed by data protection privacy rules (54%), political changes (38%), mergers and acquisitions (32%), and taxation (22.5%).

Chief legal officers also said that they’ve also been busy shoring up travel and health policies due to the coronavirus pandemic: 95% said they’ve changed their employee safety policy, and 94% changed their travel policy last year.

Legal departments are also increasingly being called on to handle a broader range of business functions: 74% manage compliance; 46% manage privacy; 43% manage ethics; 40% manage risk; 26% manage government affairs; 20% manage human resources; and 18% manage administration.

Compared to four years ago, legal teams are also working more directly with companies’ core leadership teams: 78% of chief legal officers now regularly attend board meetings, according to the ACC report.

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