The chaos that COVID-19 has wreaked on the world is not limited to one country or one company. Entire industries have been turned on their heads, and the legal sector is not exempted from the harsh impacts. It has never been more critical, both for the economy and the legal system, to prepare for the aftermath of the crisis.
While the COVID-19 pandemic is unparalleled, the world has seen downturns in the past that have overturned the legal industry. A study of the previous crisis and its implications could yield some useful information on what to expect and, more importantly, how to equip for the future.
- Law Firms Tend to Weather the Storm Better
The law industry is often spared from the economic downturns and recessions. A large part of the disruptions in the legal proceedings are short term, be it in court systems or legal practices.
In the wake of the 2008 recession, top California law schools and other prominent legal establishments were quick to pick up, as opportunities rose from emerging new businesses and revamping financial markets. Nevertheless, the current descent may turn out to be unprecedented, and hence law firms also have to consider all potential scenarios.
- Demands might Differ across legal Sectors
Though experts are predicting a surge in demand for legal services, how well it fares would depend on the practice area. Naturally, restructuring and litigation sectors could do well, whereas transactional practices are prone to decline. The choice of automation might transform the legal sector, and replace many tasks performed by lawyers with new positions requiring different skills and agility.
- Geography is a Significant Factor
Though the current downturn is global, how it affects your firm would depend on how connected you are in the global legal and financial markets.
In 2008-09, market weaknesses were strongly felt in international law firms, primarily in New York. On the other hand, Texas and Washington firms gained both in revenue and profit. The Covid-19 might hit the U.S. cities differently. If your business is less exposed to cross-border activity, you might find the operations relatively less affected.
- Downturns Streamline Long-term Secular
Law firms must mitigate the pressure to shift to alternate delivery, and pricing models post the crisis. While the standard rates might tend to rise, it also leads to a lapse in collections. This would eventually result in flat net prices due to an increase in discounts, write-ons, and write-offs.
Law businesses should also be prepared to face increased competition from alternative legal service providers. This would drive high running costs, and require more focus on commercial arrangements.
- Prioritize Clients
Like in any other predicament, some law firms will handle the downturn better than others. The reasons for their sustenance and growth owes to several factors. For one, it is not uncommon for firms to focus on their short term challenges rather than the clients. Prioritizing the customers, keeping them updated, and maintaining discipline could help you navigate the pandemic better.
The key is to keep an eye on the long term issues while tackling the immediate need for survival. Firms who keep their head above the crisis in the past not only identified and implemented best practices, they also took initiatives to build resilience.