You can download TRRI’s 7^th report on Fintech, RegTech, and the role of compliance in 2023 here

On the other hand, there are signs of a slowdown in the growth of the fintech sector. In the first half of 2022, for example, the total capital invested in fintech worldwide reached $59 billion, which was flat year-over-year, according to Innovate/Finance’s 2022 Summer Investment Report. What’s more, there were 3,045 deals completed in the fintech sector, fewer than the 3,401 deals in the first half of 2021.

The slowdown is echoed in the findings from this year’s TRRI survey. There was a fall in the number people feeling extremely positive about fintech and regtech. For fintech overall, this year’s survey reported that 15% of respondents were extremely positive compared with 31% last year. For regtech, 15% of respondents felt extremely positive compared with 26% in 2021. What’s more, less than one-in-ten (8%) of respondents from G-SIBs felt extremely positive about fintech.

It may be unsurprising that respondents felt less positive about innovation and digital disruption given the challenges that firms must address across the board. This year, respondents said that the availability of skills (20% fintech, 16% regtech) and regulatory approach (14% fintech, 18% regtech) were the most significant challenges anticipated in the next 12 months. For G-SIBs, concentration risk and third-party providers ranked highest among challenges for fintech (15%), whereas cultural approach (15%) was the biggest challenge facing G-SIB regtech users. Data governance and cyber resilience also feature highly in the list, with other areas including financial crime and operational resilience also prominent.

Regulators are also adopting technological solutions to help with their supervisory roles and the management of large volumes of data. That means, firms need more interaction with regulators on fintech and regtech. More than two-fifths (43%) of G-SIBs reported having spoken to their regulator about fintech and regtech. This contrasts with responses from other financial services firms, nearly 60% of which reported that their regulator had not spoken to them about the use of technological solutions.

Despite this current slowdown and waning of enthusiasm, the future of the fintech market remains optimistic, the report observes, recommending that financial services firms should continue to invest in technology, IT infrastructure, and associated skillsets. To maximize the potential of technological innovation, firms must continually reassess their technological needs and then invest in solutions tailored to the activities of their business.

The Fintech, Regtech, and the role of compliance survey has, in its lifetime, attracted more than 3,000 respondents. Participants from all sectors of financial services — from globally significant banks to technology start-ups — took part in this seventh survey. The survey results are intended to help financial services firms with planning, resourcing, and direction, allowing them to benchmark whether their approach, skills, strategy, and expectations are in line with those of the wider industry. The report specifically focuses on areas that directly affect the compliance function.

The report also assesses the extent to which firms are turning the technological challenges they are now facing into opportunities, embracing new ways of working and navigating the evolving regulatory approach.

We spoke to Marsha Huber, Director of Research at the Institute of Management Accountants (IMA), and a pioneer in this emerging area of study since 2014, about the key findings from her neuroaccounting research.

Understanding the brain & how accounting expertise is developed

In the beginning, a novice learner, such as an accounting student, has a lot of technical knowledge and neurons in the brain that contain bits of knowledge. However, these neurons have not yet developed into neural networks that enable learners to connect the dots and weave concepts together. “A novice auditor can follow checklists, but it takes a few years for the neurons in the brain to form networks to fully grasp the knowledge to the point where they can tie concepts together that they could not have done as a novice,” says Huber.

As accountants build their expertise after 10 years in the profession, the neural pathways expand and grow together. This is why an audit partner has the ability to forecast potential problems and determine mitigating plans and actions before they occur.

Huber’s electroencephalogram (EEG) studies of the brain with accounting students and their ability to identify relevant and irrelevant financial accounting terms provides proof. The novices’ brains did not recognize accounting terms that did not fit within a particular financial accounting schema. The more experienced students’ brains, however, did identify the irrelevant terms despite not being asked to do so.

Key takeaways for team managers & accounting employers

By using the insights from neuroaccounting, accounting team managers and accounting industry employers could maximize team performance and engagement among their professional workers. Some of these key concepts include:

Understand learning is nonlinear and grows in spurts — The basics of learning are irregular and vary among learners. Indeed, it takes time to learn, and the brain also learns in context. A novice may not be able to apply learning to different contexts, whereas an expert can. In addition, a learner’s knowledge grows in spurts. Learners often forget what they initially learned, but as time goes by and the brain makes better sense of things, the learner will level up.

Learning can occur during a class for one person, when working in a group for another, and still, working independently for someone else, according to Huber. As knowledge develops in learners, accountants can experience mini a-ha moments when new knowledge breaks through to the conscious mind from the subconscious mind. Insights tend to come when not actively working on the problem.

Increase the creation of “flow” time — Huber recommends that accounting employers create opportunities for employees to experience flow. “Because of neuroscience, we understand that being ‘in the zone’ or ‘flow’ can produce exceptional output,” Huber explains, adding that this practice and bring amazing feelings of energy and focus to work.

Activities that enable flow are having no-meeting days and taking breaks, such as siestas, in the afternoon. Employers should allow employees to block off uninterrupted time to create time for flow.

Investing in time for rest allows for incubation, where neurons can figure out better solutions and develop the neural networks of expertise. In a study that Huber conducted, she found that accounting students napped more than professionals (and other students), hypothesizing that they needed to replenish the energy they expended while learning complex content.

Learning on the job is a recipe for success for accounting professionals, of course, yet it also makes sense to remove the stigma of napping and allow for incubation and the neural networks in the brain to build expertise from the learned experiences during the day.

Understand the brain science of manipulation on accountants’ ethics and decision-making — Finally, understanding the implications of neuroscience indicates that some accountants are more prone to being manipulated than others. “Mirror neurons” in the brain unconsciously will cause some to mirror or imitate the actions of others.

This has implications for the accounting profession. Researchers studied this phenomenon in controllers. In essence, because of the way the brain thinks and functions, friendlier controllers could be manipulated more easily than unfriendly controllers. Controllers that mirrored other people were more likely to make questionable ethical decisions when pressured by others.

Managers of accountants also benefit from neuroaccounting in team assignments — Huber highlights the key takeaway of her work: That managers need to understand better how their teams are wired and play to each team member’s strengths and preferences through four profiles, which are:

1. 1. 1. Clarifiers ask a lot of good questions to get the group moving in the right direction from the start;
      2. Ideators like to brainstorm and explore new ideas;
      3. Developers identify pros and cons and enjoy developing mitigation plans; and
      4. Implementers prefer to focus on execution.

To put this into practice, managers could give new problems to clarifiers to clarify challenges, then, hand the challenge to ideators to brainstorm solutions, who send potential solutions to developers to analyze pros and cons and recommend a way forward to address the problem, and finally, hand it off to the implementers to execute the plan.

As an advocate and researcher in neuroaccounting, Huber says she hopes that an increased understanding of how the brain learns will enable more efficient training practices and help to close the talent gap in finding employees for current entry-level roles in the tax & accounting profession.

“We aren’t using neuroscience to train our people at all,” Huber says. “And if we used neuroscience and understood it, people would learn better, and we would teach better.”

In a May decision from the US District Court for the Southern District of New York, Upsolve, Inc. et al v. James, Upsolve, a nonprofit that helps individuals file for bankruptcy for free, challenged the state’s application of the unauthorized practice of law to other trained professionals. To help low-income individuals facing debt collection navigate and respond to their suits more readily, Upsolve launched the American Justice Movement program in January, which trains professionals to offer complimentary legal advice about whether and how to respond to debt collection lawsuits. Specifically, the volunteers sought to help New Yorkers fill out checkboxes on a one-page answer form provided by the State of New York to avoid automatic default.

In the Upsolve case, the New York Attorney General argued that such guidance was the unauthorized practice of law, but ultimately, the judge ruled that those rules did not apply to the program because the legal advice was protected as speech under the First Amendment. The court also stated that the advice mitigated the risk of harm to the consumer while addressing a significant legal problem area, further in favor of the decision.

In our new column, NextGen Justice Tech, by Kristen Sonday, we will take a look at the people, trends, and technology shaping the future of access to justice.

The ruling is monumental because it allows legal professionals to provide guidance on completing legal forms that might be applied to other areas of law, including through online tools that can reach exponentially more individuals.

“By ruling in favor of Upsolve, the Southern District of New York… established a new First Amendment right in America: the right for low-income families to receive free, vetted, and accountable legal advice from professionals who aren’t lawyers,” said Rohan Pavuluri, Upsolve’s Co-Founder and CEO.

If further applied to online forms and filing apps, then tech companies, court employees, and other volunteers would be able to assist people with basic questions about whether and how to respond to government requests, vastly expanding the number of people who can help. For individuals who are too afraid or uncertain of navigating such services on their own, this support would provide peace of mind and tangible next steps to assist significantly more low-income folks in managing the legal process.

The “sandbox” model

The implementation of state-run legal tech sandboxes is another opportunity to spur justice-related innovation. Utah was the first state to launch such a sandbox in August 2020, in which lawyers and legal professionals can develop and promote new legal solutions under the supervision of the state’s Supreme Court. One year in, the Utah Supreme Court had approved 30 companies, including those that created initiatives to provide individuals help completing court forms and receiving legal advice via chatbot.

The sandbox concept helps mitigate risk for justice tech founders since they’re building and testing ideas alongside a legal authority. In addition, through this model, “justice technology companies can partner with authorized legal services providers to offer consumers actual legal advice. Attorneys are the most obvious partners, but authorized document preparers, among others, are an often-overlooked partner,” says Natalie Knowlton, Founder of Access to Justice Ventures.

Finally, the Association of Professional Responsibility Lawyers (APRL) has made a powerful recommendation to update the American Bar Association’s (ABA’s) Ethics Rule 5.5 and permit lawyers who are admitted in any jurisdiction to be able to practice across others. “Our proposal advocates that a lawyer admitted in any United States jurisdiction should be able to practice law and represent willing clients without regard to the geographic location of the lawyer or the client, without regard to the forum where the services are to be provided, and without regard to which jurisdiction’s rules apply at a given moment in time,” the APRL wrote in its letter to the ABA president.

This change would be significant for justice technology companies and non-profits in that their lawyers would be able to serve individuals across jurisdictions, regardless of lawyer or client location. Justice tech companies would save time and money by being able to serve more individuals virtually, and with a leaner staff, could free up capital for other initiatives. For tech companies that currently have to hire staff who are licensed in each state in which they want to provide lower cost legal services, this reform would be game-changing.

“As a startup, an update to Rule 5.5 would allow us to move much faster in expanding our services to those in need,” says Erin Levine, the Founder and CEO of HelloDivorce. “We would be able to hire and train fewer, high-quality lawyers that provide consistency in our services across jurisdictions, as well as quickly build out subject matter expertise that can increase the number of clients served.”

Further, under this scenario, legal services organizations would be able to refer pro bono clients to attorneys across the country, making those referrals more efficient and potentially better aligned. The rule also would greatly enhance access for folks in rural areas, as they often are limited to those lawyers in nearby metro areas who might work on their matters.

By being able to access legal assistance from anywhere in the United States — via in person or online, through lawyers or other approved professionals — the magnitude by which the legal profession could greatly help those in need through better legal reforms is significant for the justice tech community and underserved citizens across the country.

At times, however, this blind focus on achieving that singular objective could actually lead to a mismanaged AI process that doesn’t take potential biases into account, researchers say, adding that these biases could have been baked in the AI all the way back at the data collection stage. As a result, the idea of instituting fairness metrics into AI development is starting to gain popularity in the tech community — not only for ethical and social reasons, but to ensure a more complete end product emerges from the AI processes.

The idea of fairness within AI comes from the idea that not all data is created equal, whether it’s measuring human populations or words in a legal document. If an AI algorithm is measuring the potential risk within a procurement contract, for example, the context matters, whether that contract is procuring coffee mugs or nuclear material. If it’s measuring whether a public economic policy is being applied equally across different races, it matters whether the population data is New York City or the rural Midwest. Fairness in AI means planning for these differences in data to make the end result representative of the goal that developers are actually trying to have the AI process tackle.

Sometimes, however, modern cost and time considerations can get in the way of fairness, says Cao (Danica) Xiao, vice president of machine learning and Natural language processing (NLP) at software company Relativity. Xiao came into the legal industry recently, but she previously spent time as an AI research leader in the healthcare and technology fields. When discussing what fairness means when it comes to legal AI development, Xiao draws a parallel to a healthcare development with which many are now familiar: the COVID-19 vaccine.

A December 2020 study from MIT revealed that despite the COVID-19 vaccine efficacy figures touted by providers Pfizer and Moderna, the true efficacy of the vaccines varied highly by race. The study measured the number of people whose cellular immune system was not predicted to robustly respond to the vaccine; and those figures varied wildly by race, from less than 0.5% of white clinical trial participants without a robust response up to nearly 10% of Asian participants.

The issue, Xiao says, is one of initial sampling. White populations tend to be overrepresented in vaccine and drug clinical trials due to a number of factors, including education and income level, proximity to news promoting the availability of trials, and sheer population size in the US. But many clinical trials, particularly for a vaccine as time-sensitive as COVID-19, tend to have one constraint that rules over all: the time it takes to recruit trial participants.

“So if we only want to minimize time, then the majority of cases, the majority of patients and people we recruit to the trial, they represent the majority group of the population,” Xiao explains. “That’s a fact that we cannot avoid.” As a result, the trial’s results will be skewed towards that overrepresented group.

Awareness of those differences can go a long way, however, whether in developing healthcare trials or creating representative data samples to run against an AI algorithm. That’s why, while Xiao concedes that she’s heard the legal industry is largely behind the healthcare industry in its adoption of AI technologies, she’s more interested in changing how legal organizations approach artificial intelligence before ever running a single algorithm.

Tools to lessen AI bias

Drawing from AI development in other industries, there are a number of fairness metrics that those data scientists exploring legal AI can take into account up front. A simple one is identifying subgroups early on to make sure there are representative populations of each type, be it demographic-centric subgroups such as race or gender, or contextual subgroups such as various types of matters across a firm.

A slightly more complex metric that Xiao points to is known as privacy-preserving federated learning — the idea that researchers should consider data sets from multiple locations, lessening the bias that occurs in each individual data set by combining them in a federated manner. “We train a local model from each location, but we don’t use the local model to represent the total behavior,” Xiao says. “We train a global model on top of the local model, and we will adjust the parameter of the model to make sure the final global model will consider each different heterogeneous pattern, and the web will be equally good for different populations.”

Fairness in AI means planning for differences in data to make the end result representative of the goal that developers are actually trying to have the AI process tackle. Sometime, however, modern cost and time considerations can get in the way of fairness.

Using data science techniques, there are also ways to amplify rare outcomes, which are crucial to find in healthcare and law alike. Or put a different way, if the purpose of a particular AI algorithm is to find a needle in a haystack, it’s important for the needle to stick out rather than be dismissed as noise. These rarities can also identify anomalies that are important to investigate further. The goal of rarities detection is “to amplify the pattern in those rare samples to amplify their voice, to boost their patterns, to make sure our final model will be able to capture those patterns and will learn the patterns in those data,” Xiao notes.

For legal organizations dipping their toes into AI for the first time, perhaps the most straightforward way to lessen bias in AI models is to make sure data sets are up to date. For example, if you are looking at a natural language processing test that links women to their profession and the training data comes from 20 or 30 years ago, professional titles for women may look a lot more different than they do today.

This is not only a question of fairness, Xiao says, but one of correct outputs. “If we only test the model against the old data, we might see lower accuracy,” she adds. “We need to consider those new trends and consider those new advancements and all those inclusion metrics in the model, and the model will be more and more accurate moving forward on the future data.”

As AI models become relied upon for more and more legal and professional work, particularly as technology’s capabilities for analyzing data and making predictions continue to grow, it’s crucial for the legal industry to adopt fairness methodology now and develop fairness metrics into AI development early.

“When we make a prediction, we need to consider this advanced context information to make sure the prediction is more accurate, but it will be a long process,” Xiao says. “We need to continue improving the solution.”

At its core, cryptocurrencies are square pegs being forced into the existing round holes of traditional finance and accounting. With IRS Notice 2014-21 guiding crypto tax standards thus far and with the Financial Accounting Standards Board and other organizations helping guide crypto accounting, the conversation around crypto thus far has centered around treating it like other traditional assets under standard accounting protocols. While this may work for a new kind of traditional asset, cryptocurrencies are inherently a new asset class with different operational structures.

The potential challenges arising are obvious. How do you fit an entirely novel asset class into tax & accounting rules built for traditional assets? Well, this necessitates some way to translate cryptocurrencies into traditional formats — to fit the square peg of crypto into the round holes that make up modern traditional finance. In other words, financial tools are needed to bridge the gap between crypto and traditional finance.

New tools needed

While there are already such software tools emerging that could greatly aid in the translation of digital assets into more traditional financial accounting frameworks, there are certain components that are critical for this to happen successfully. A few key ways this needs to be accomplished include:

Aggregation — First, the data needs to be gathered and collected. Cryptocurrencies present an immense amount of data, most of it unstandardized and unclassified. In order to even begin working on making everything fit together nicely, we need to mold it into a form we can use in the first place, even if that ends up being a square peg.

Aggregating data, and finding a software provider to do so, is a significant hurdle that many financial institutions and tax & accounting firms need to overcome in order to package crypto up into a nice little square box.

For more on the status of crypto regulation worldwide, check out the full digital version of the Cryptos on the Rise 2022 report from Thomson Reuters Institute and Thomson Reuters Regulatory Intelligence

Normalization —Unstandardized, unclassified, abnormal — these words could describe my sleep patterns around the tax deadline — but they also accurately describe much of the overall trove of crypto data. Normalizing crypto data means standardizing the naming conventions, properly categorizing transactions, as well as establishing standards around tax issues such as a cost-basis, fair value, and more.

There is a plethora of companies that jumped through numerous logistical and categorical hoops simply to help standardize small bits of cryptocurrency. And while this clearly demonstrates that this is a big challenge, both in the size of data and in the size of  transactions, it also shows the great need for robust standardization of cryptocurrency data.

Legibility — Finally, the last step in the process is legibility, or, making crypto data understandable and readable to general ledger tax & accounting systems. This means building the final bit of the bridge, allowing crypto data to flow from buy-side to sell-side to better enable the closing of books with ease.

Everything we’ve just discussed at a birds’ eye view encompasses billions to trillions of dollars of business investment to solve these challenges. The private sector is racing to create solutions for tax & accounting professionals to allow crypto, at the end of the day, to be handled like any other asset.

For crypto natives, this is great news. While many in the crypto sphere want to subvert traditional finance, it’s a lofty goal that likely will only occur through traditional pathways. Ensuring cryptos inevitable adoption means allowing tax professionals and accountants to be able to handle it just like they would other securities and assets, such as bonds and stocks.

So, all it takes to fit the square peg of crypto into the round hole of traditional finance is a little pushing, shoving, shaping, and molding with the aid of software solutions, and like magic crypto tax & accounting could become as easy as ever.

You can learn more about tax solutions surrounding cryptocurrencies here

The COVID-19 pandemic and resulting lockdowns and government closures changed the way we were allowed to communicate, limiting personal contact and requiring the use of all alternative means. Ultimately, this advanced our overall ability to communicate and interact remotely. More than 30 states suspended in-person court proceedings for weeks or months after the pandemic hit in March 2020. New Jersey, Connecticut, Delaware, New Mexico, and Alaska mandated their use; and states including New York, California, and Texas urged use of virtual proceedings while suspending conflicting court rules. The pandemic may have forced government’s hand, but many courts and related agencies rose to the challenge in understanding new ways to use technology to ensure that people’s rights were preserved and protected.

A failure to provide adequate protection of citizens’ rights leads to more than a clogged court. There are civil implications, such as allegations of civil rights violations and expensive court cases. For example, a lawsuit, brought by San Francisco’s public defender against the San Francisco Superior Court on behalf of nearly 400 remanded prisoners goes into details about how defendants’ constitutional rights to a speedy trial could be being violated by delays and backlogs due to an overburdened and technically-stagnant court system.

As pandemic restrictions are lifted, courts must balance the benefits of traditional means of adjudication against valuable opportunities to use more advanced means. Governments must evaluate the merits and protection of rights afforded in both the use of traditional communication and virtual appearances. The goal of the court is to preserve rights, and it has become obvious that a hybrid model (using virtual and in-person options) is the best way to make sure individuals have the most opportunities and options to exercise their rights.

Participation & access are key

One of the major hurdles to access to justice, of course, is participation in the process, which can include transportation issues, childcare, time off of work, and many other issues that some people can afford to take for granted. The use of the courts’ time to issue bench warrants, dismiss for want of prosecution, and entering default judgements only to have to appeal and re-address the same issues, is an inefficient use of the limited funds allocated to the judicial system. Texas Chief Justice Nathan L. Hecht clearly explained this as the “new normal”, saying: “We really are determined to take what we learned in the pandemic and build on it.”

In Arizona, judges and other state court officials reported increases in case participation rates in 2020, which they attributed to the move toward remote proceedings. For example, there was an 8% drop year-over-year in June 2020 in the rate of default, or automatic judgments indicating an increase in participation. In Arizona’s largest county, Maricopa, the failure-to-appear rate for eviction cases decreased from nearly 40% in 2019 to approximately 13% in February 2021.

It is a critical net step for the courts and access-to-justice advocates to evaluate each change that was made in an effort to get through the period of crisis and determine which changes are critical to maintaining a properly functioning court system. While this answer will inevitable be complex, it will ultimately make the justice system better and save time and money. In many states this process has already begun.

In June 2020, the state of New York created the Commission to Reimagine the Future of New York’s Courts, a group of judges, lawyers, academics, and technology experts that is studying how courts operated during the pandemic. In April 2021, the group issued technology recommendations to “improve the efficiency and quality of justice services during the ongoing health crisis and beyond.”

As the nation enters a period of post-pandemic recovery, all government agencies have an obligation to grab hold of the lessons and technological advancements that were brought on by the pandemic and subsequent crisis. Using these lessons to create a more just court system is one way to not waste that crisis and struggle it caused.

Indeed, the two events in which I participated each offered a key, primary themes — deep security educational content offered to those in the legal technology realm for LegalSEC; and product awareness for current and prospective iManage customers at ConnectLive — as well as the usual parties and ubiquitous panels for all attendees.

However, over and above the expected content, these events featured a unique set of activities designed to motivate professionals to get out of their basements and living rooms and back in an environment that can better foster collaborative learning and skills expansion, such as workshops, focus groups, TED talks, networking sessions, and more. In short, it seem, at least to the organizers and many attendees, that it was time to get back to serious work.

Here are some highlights of some of the innovative tactics used to enhance the learning experience and engagement level at each conference.

LegalSEC Summit

SAN ANTONIO — Workshops were a key element of the LegalSEC Summit, with one full day of the conference dedicated almost solely to workshop content.

For example, one morning session, Using Your Work Behavior DISC profile to be More Influential and a Better Team Member asked participants to complete a behavioral self-assessment tool prior to the conference, with discussion of the results occurring at the workshop. The goal was to establish a performance development framework to help attendees understand their leadership styles and improve their workplace teamwork.

To summarize briefly, the DISC process was as follows: Prior to the conference, attendees self-identified, via the response to scores of questions, a ranking score in four areas: Dominance, Influence, Steadiness, and Compliance. This helped participants understand their “work styles” via comparisons like these below:

• • • Assertive vs. Reflective
    • Optimistic vs. Realistic
    • Predictable vs. Driving
    • Complaint vs. Pioneering

During the workshop, discussions and exercises provided guidance to help participants understand both their greatest strengths and developmental opportunities — crucial topics that are unfortunately rarely addressed in the day-to-day work lives of deep technical professionals.

In the afternoon, focus shifted back to core security content through a group play of Backdoors & Breaches, an incident response card game, from Black Hills Information Security and Active Countermeasures. The main goal of the game is to help security professionals conduct incident response tabletop exercises and learn attack tactics, tools, and methods in an interactive manner. Essentially, attacks within the game are triggered by an Incident Master, a combination of dice rolls and procedure cards occur, and there is an ability to use what are called Inject cards to add chaos into the game and facilitate further conversation. Ultimately, there are determinations made about actions taken by a Defender. Throughout the process, the game serves as a teaching tool about the different tactics and defensive actions one takes within the cybersecurity function.

The event’s keynote speaker, Kenya Parrish-Dixon, the General Counsel and the Chief Operating Officer for Empire Technologies Risk Management Group and an expert in information governance, cybersecurity, and e-Discovery addressed stepping into a leadership position when an organization is in chaos. In her speech, From Chaos, Opportunity, Parrish-Dixon reminded attendees about the value of continuous learning and how a combination of divergent assessments can help identify issues and reduce chaos. “The opportunities that presented themselves to me often came when organizations didn’t have the internal expertise to resolve problems,” she said. “Stepping into that chaos has led me to greater heights in my career and will lead you to better opportunities as well.  Don’t shy away from problems — be the leader that the moment needs.”

All in all, the LegalSEC Summit’s focus on soft skill development and security issues in a game theory approach within the context of multilateral workshops gave the event a unique flavor, and I believe enriched the overall experience for attendees.

ConnectLive

CHICAGO — ConnectLive 2022 is iManage’s networking and information update event for its customers, partners, product experts, and users. As such, it exists most as an opportunity to convey the product roadmap, hold discussions on company strategy, and, importantly, facilitate the collection of feedback from clients on product issues or requests.

Yet, it was within the realm of client feedback that ConnectLive used many tactics to solicit information in new ways that proved most interesting and offered useful strategy suggestions to attendees. Focus groups and opportunities to pose questions to panelists in small groups or one-on-one formats were used with the idea that by creating a variety of input types, the quality of the feedback received would be enhanced.

Sharing data with participants was also done in different ways. In addition to the traditional panels and roundtables, other formats such as TED-style talks were leveraged to pass knowledge along in formats more consistent with how we all receive information today, specifically in shorter bursts of concise, denser messages.

On a personal level, I enjoyed the sessions outlining the iManage development roadmap, and was able to participate as a panelist speaking to building a business case for moving to the cloud. Some of the compelling reasons for such migrations include a desire to outsource certain elements of technical support to experts, improved security, and move to a fixed monthly expense.

Summing up

It was illuminating to see how both ILTA and iManage executed their vision of delivering content, albeit in different ways, to enhance the conference experience and make the most of the less frequent face-to-face time many legal professionals have together. Organizers went to great lengths to expand the manner in which conference participants received content and interacted with the various presenters, making each event a more interactive and useful session than the more traditional conference experience.

It would be heartening to see this model followed going forward as more in-person events make their way back to the forefront.

In a session titled, Approaching the Verge: Opportunity and Reward in Web 3.0 Technologies, panelist Amy ter Haar, legal counsel at Global University System and board member of Ocean Falls Blockchain Group, began by exploring the positives of the metaverse, noting that the metaverse is not just one technology, but rather “the ability to interface with technology in a whole new way.”

In a typical transaction, for example, there is one party (often an intermediary, such as a bank) in charge of recordkeeping and information. But when parties in the metaverse enter into a transaction using the blockchain, both parties can access and change information as needed, with a secure record of those changes verified by all parties. In that way, ter Haar said, the metaverse is “disempowering intermediaries and gatekeepers and empowering people.”

Still, the metaverse can be tough to define for those not engaged in the space, she added. “If you engage in the exercise of replacing the word metaverse in a sentence with the word cyberspace, you’ll find that 90% of the time the meaning doesn’t change.”

To better envision how the metaverse paradigm can change interactions, panelist Matthew Rappard, chief technology officer at security company Vaultie, said to think of how most people interact with the internet on a daily basis. Generally, he said, “there is this loss of the concept of privacy.” Every person has equipment to record video, apps that track location, easier access to secure information like bank accounts, and more. On the other end, the metaverse can provide users with another path via the ability to present as a different self. Video content creators called Vtubers present as online avatars that are wholly disassociated, where viewers never see their actual identities.

“You’re ending with this kind of switchover where in the public world you’re seeing less privacy, but in the digital world you’re seeing something different,” Rappard explained, adding that the switch comes with a virtual world that provides more control. “When we’re talking about the metaverse, it’s the ability to control your identity and how that identity interacts with smart contracts.”

Where the Metaverse and law intersect

When legal disputes arise, however, the metaverse’s nascent nature and increased focus on privacy can be a hindrance as much as a boon. While panelist Yinka Oyelowo, principal lawyer at Toronto-based Yinka Law, believes that the metaverse and associated blockchain technology “simplifies a lot of the processes that we see in real estate,” for instance, she acknowledged that resolving metaverse-related disputes remains “very hypothetical.”

Consider the case of trust and estate issues: Who would take ownership of a piece of metaverse property if the original owner passes away? While smart contracts encoded within the blockchain are very good at executing the specific terms of a contract, they may also need to take into account how a transfer of property would be executed and the rules in any jurisdiction that may apply.

“It’s quite complex, because the jurisdictional requirements for British Columbia are going to be completely different from the requirements in New Hampshire in the US,” Oyelowo noted. Law firms helping with this type of dispute would need lawyers that not only vet jurisdictional issues, but also understand the technology and are versed in the laws around trusts and estates.

Further, a regular issue when it comes to physical real estate is airspace: Who owns the three-dimensional area above or below a piece of property? However, real estate in the metaverse does not function in the same way, and determining airspace rights becomes difficult. Assumptions about the physical world “aren’t easily transferred over to the metaverse. It takes quite some time to understand the issues,” Oyelowo said, adding, however, that also means opportunity. “There’s a lot of fertile legal ground for those involved in trusts and estates, for commercial real estate.”

Indeed, all panelists pointed to the opportunity for legal professionals to provide clarity to emerging metaverse risks. The Digital ID & Authentication Council of Canada (DIACC) has been investigating ways to authenticate online identities while still maintaining confidentiality and privacy, Rappard noted. Oyelowo also pointed to startups that have been linking face IDs with cryptocurrency wallets, where a wallet holding crypto funds is opened through dual-factor authentication that includes both the facial scan and a unique code.

But even as these opportunities emerge, those in the legal world still need to look out for risks — and make sure they abide by ethical guidelines. Even those Vtubers who don’t show their offline identity present a legal and ethical challenge, Oyelowo said. “While most potential clients will be forthcoming with their identity while engaging in the metaverse setting, some clients… may prefer anonymity.” But in a province such as Ontario, this can be a problem: Before giving advice, attorneys are ethically bound to verify the client’s identity. And especially if the two parties are only conversing in a virtual world, clients may physically be in a jurisdiction with different or less stringent ethical boundaries.

That means that although the virtual world is emerging, physical considerations are still necessary. Therefore, attorneys should take care to “obtain identity documents that you are satisfied are valid” from the person behind the avatar, not just the metaverse avatar itself, Oyelowo explained.

Ultimately, the experts agreed that the metaverse will continue to evolve, with new opportunities and potential pitfalls both emerging in the coming weeks and months. Regardless of how it develops, what remains certain is that the metaverse will be an engaging space to watch going forward.

In fact, the majority (51%) of surveyed corporate law department leaders say expertise is a primary driver for viewing a particular ALSP brand favorably, according to recent Thomson Reuters research. Broken down even further, 20% of those surveyed point specifically to the quality of advice and to specialist knowledge that an ALSP imparts, while more than 5% reference the breadth of an ALSP’s service and the strength of specific individuals on its team.

The portion of law departments pointing to expertise may be slightly lower for ALSPs than it is for law firms, with around three-quarters of respondents saying expertise is a primary driver of law firm branding strength. For ALSPs, expertise still far outweighs other brand favorability factors, including technology (viewed by just 11% as a primary favorability driver) and value or pricing (9%).

The majority of surveyed corporate law department leaders say expertise is a primary driver for viewing a particular ALSP brand favorably

The data, coming from Thomson Reuters Market Insights, was collected from 1,378 interviews with corporate legal leaders, conducted between July 2021 and June 2022. The answers given in some of those interviews provide insight into why expertise remains paramount. For example, one General Counsel of a financial services company explained why they viewed a Big 4 firm favorably: “The main reason being that some years ago we engaged one of their partners as an expert in a litigation claim, and it seemed to me — and obviously they’re a ‘big-hitter’ in the accounting world — that they have a very good grasp of the legal side as well. So, if I needed that I would probably go with them, and they’re our auditors so we know them well.”

Interviewees also expressed similar sentiments for smaller ALSPs. An assistant GC for a healthcare company discussed their use of an ALSP that specialized in staffing issues, saying: “I like the skill set, the consistency of project managers that they provide, the attention to recruiting standards, and the effort to promote diverse candidates when they are involved in recruiting projects. I like their technical competence and their culture.”

And an in-house counsel at a technology company noted of a different ALSP: “I think that, particularly for an in-house function, they can provide flexible resourcing. Obviously, with internal budgets always smaller than you want, they can help you cover a project and offer quality services.”

Going with the experts

Expertise as a deciding decision-making factor rings true to Gabriel Buigas, a former technology industry deputy GC and now head of the Contracts, Compliance & Commercial Services business unit at ALSP Integreon. While Buigas jokes that “anybody who says that pricing doesn’t matter is maybe a Big 4 and hopeful that that’s the case,” he also explains that providing lower costs can only enhance an ALSP’s pitch rather than make it fully. “Just because you’re the low-cost provider, if you have no referenceable clients and no proven delivery capabilities, you’re not going to win,” Buigas adds.

The focus by law departments on expertise is not a recent phenomenon, however, corporate clients are becoming increasingly sophisticated in understanding the ALSP market, resulting in shifting priorities, he explains. “I remember doing pitches where what everybody thought was, you had to have the person that dressed well, spoke well, and had beautiful slides,” Buigas says. “More and more, clients don’t want to see you. They want to see who’s going to do my delivery: ‘I want to talk to that person and I want you to include that person on the pitch.’”

All of this is a welcome development, Buigas says, adding that he expects it to only continue to increase in importance as the ALSP market grows. He points to more mature areas of the ALSP market such as discovery as an example of the wider industry’s future, where a number of providers offer ever-increasing scale and lower costs. Expertise, then, becomes the ALSP’s primary differentiator by necessity.

“The difference starts to be: ‘I’m really good at this,’ Buigas explains. When clients have the kind of case in which they need foreign language capability, or particular expertise in a particular jurisdiction or on a certain type of matter, they can go to particular ALSPs because that’s their specialization, he notes.

“So it does help in terms of how you distinguish yourself in crowded markets, particularly for areas that have become increasingly more commoditized.”

You can learn more about how to create the kind of partnerships that will drive the strategic, financial, and operational priorities of your corporate law department here.

In fact, there are already a few forces in place that are working to drive efficiencies into the legal function.

One landmark improvement is the increasing impact of system integrations — often fueled by application programming interfaces (APIs) — in our profession. The more systems exchange data between systems — or present data within the framework of another application (viewing an iManage document via Teams or Sharepoint, for example) — the less time one spends reentering data or switching back and forth between applications.

Another catalyst is workflow technology. Long present in the technology and service fields, these are now increasingly present in legal with many such third-party platforms offering this service, and many no- or low-code providers offering law firms the option of constructing their own workflows. A few key uses of this technology include the legal intake process, moving matters through the litigation process, generating client reports, or the automation of the client electronic billing process.

Let’s take a closer look at three key law firm functions which are strong candidates for automation and process improvement.

1. Automating the processing of court filings

Streamlining the processing of an email Notice of Electronic Filing (known as an NEF or ECF) is a great example of using technology to wrap a process flow around a specific and measurable set of manual or mundane tasks. Accessing and downloading the filed documents, storing them in a document management system, and distributing copies of the notice to the case team and docketing centers, are all opportunities for automation.

Data shows that this work takes 8 to 20 minutes per email notice — the real time is often more because of interruptions. Intelligent automation can deliver scores of hours back to law firms, while processing state and federal court notices and getting the filed documents into attorneys’ hands in a timely manner.

There are already services in this space that offer court notice process automation to get filings from court-to-pleadings index, and from court-to-case teams, often in less than a minute. These APIs and process automation workflows, when applied to manual mundane tasks can help improve staff efficiency, eliminate errors while saving documents, reduce risk associated with delays, and provide visibility into a process that is difficult to manage manually. One law firm recently processed their 100,000th court notice and calculated that the firm saved 13,500 staff hours by automating the process.

2. Improving document generation & data collection

The legal industry has enjoyed the benefits of collaborative systems for many years, as well as no- or low-code approaches to constructing new systems and tools to empower document preparation. The amalgamation of all three of these capabilities in a unique manner is now further accelerating work in this area, allowing end-users to build systems, without programmers, that can collect necessary data and compile it in a manner which will automatically generate the required legal product — a customized, final document.

Imagine the number of times a law firm works with clients to collect information and prepare documents. Common legal documents, such as wills and non-disclosure agreements, are artifacts with which most lawyers are familiar and can conceptualize the benefits. Other types of documents — like deposition summaries, site inspection reports, local counsel matter updates, and many others — can also benefit from automation.

“A meet users where they are mantra helps accelerate the speed with which existing or new documents can be automated, as well is offer real-time tracking and ease of sending reminders regarding these process flows,” says Karl Chapman, CEO of Kim Technologies, one of the companies driving innovation in this space.

That, in essence, does a great job summarizing the value of this class of system — one which supports the conversion of legal documents to web-based forms which, once completed by business partners, then automatically generate the final work product for an attorney. In addition, this process can provide full data analysis through enterprise search, bulk download, or API integration while eradicating large volumes of administrative time typically dedicated to supporting such processes.

3. Enhancing time entry & financial analytical functions

Time entry is one of the oldest administrative tasks in the legal industry. It’s a critical element to the success or failure of the law firm, as every one-tenth of an hour not captured is 10% not billed. Since most lawyers are loathe to perform administrative tasks, however, it’s no wonder that some wait until the last minute to capture their weekly time. Unfortunately, waiting until the end of the week or month guarantees that they will forget some billable activities.

Accordingly, this makes time entry automation an alluring enhancement. By leveraging automated time entry to capture all the work being done by their lawyers, a firm can ensure that all time is captured. Modern time capture solutions seamlessly connect to the corpus of tools routinely used by the lawyer, including emails, phone calls, documents, web research, and more. Indeed, there are two very clear benefits of automated time capture: i) all time is captured automatically; and ii) workers need only complete and save the entry.

“When one digs deep into the math, the business case is ever more compelling,” says Rod Wittenberg, Vice President of Financial Productivity Software at BigHand. “Consider a set of assumptions where the average task is 30 minutes, and each lawyer is expected to bill seven hours per day. The result of that, obviously, is that there are 14 tasks to be entered each day. Then, assume it takes one minute to exit your task and complete the time entry before moving onto your next task. If we round it up to 15 minutes for ease, then you are talking about 3,600 minutes per year of administrative effort to get time into the system. If a system can capture that time automatically, this significantly reduces the administrative burden for all timekeepers.”

Overall, organizations need to understand the massive implications of lost time and the value of automating certain processes like court filings, document generation, and time entry. Law firm leaders want to improve their lawyers’ efficiency and effectiveness at work and in life — to improve the quality of life and offer better financial management within law firms, automating certain manual rote processes can deliver great value.