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Navigating the AI landscape: insights for law firms
John Kunzler, Managing Director, Risk and Error Management, Marsh UK
Victoria Prescott, Senior Vice President, Risk and Error Management, Marsh UK
As we navigate deeper into the digital age, the legal sector is experiencing a monumental transformation with the integration of artificial intelligence (AI) and generative AI technologies. These advances promise to enhance efficiency, streamline operations, and improve client service. However, with great power comes great responsibility, and law firms must navigate the associated risks with care. In this article, we explore the findings from our recent Law Firm Risk: Global Survey Report and discuss the implications of AI and generative AI for risk management in law firms.
The rise of generative AI in law firms
The adoption of generative AI technologies is on the rise, with a significant 67% of law firms indicating they are currently utilising these tools in their operations, according to our report. This statistic is a testament to the growing recognition of AI's potential to transform legal practices. From document automation to legal research, generative AI can enhance productivity and reduce the time spent on mundane tasks. However, as firms embrace these technologies, they must also be vigilant about the risks they introduce.
Top uses of generative AI
When we look at the specific applications of generative AI, the landscape reveals some interesting trends. In the UK, the top uses include business development, document review, and document automation. These applications highlight a focus on improving operational efficiency and client engagement. However, in the EMEA region, we see a different emphasis, with legal research, contract drafting, and document review being the key drivers for increasing efficiency and productivity. This divergence suggests that firms in EMEA are leveraging AI to tackle more substantive client work, potentially reflecting varying client needs and market dynamics.
A distinction between open-source and sandboxed generative AI
As firms explore the capabilities of generative AI, a critical distinction arises between open-source generative AI and sandboxed generative AI. Despite the highly publicised use of ChatGPT at one city firm recently, many firms in the UK are taking a conservative approach. In fact, 45% of law firms have indicated a prohibition on the use of open-source generative AI within their operations. When it comes to ChatGPT specifically, only 14% of firms in the UK allow its use, compared to a more liberal 32% in EMEA.
Interestingly, while not strictly a generative AI tool, we found that 30% of firms are utilising Google Translate. This raises significant concerns regarding accuracy and confidentiality, as relying on such tools can lead to misinterpretations and breaches of client trust. Firms need to weigh the benefits of these technologies against the potential risks they pose.
The importance of policies and guidelines
Given the complexities and risks associated with AI, the need for comprehensive policies and guidelines becomes increasingly critical. We consider firms with "tight" control — those that have implemented six or more generative AI policies — to be better positioned to manage risks effectively. These policies typically include internal guidelines for responsible AI use, prohibitions on public open-source AI, training and education initiatives, and regular risk assessments.
However, it’s concerning to note that in our survey only 18% of firms reported having such stringent policies in place. This suggests that many firms are still in the early stages of developing their AI governance frameworks. As the use of generative AI becomes more prevalent, it is essential for law firms to establish clear guidelines that outline acceptable practices and ensure compliance with legal and ethical standards. Other sectors have noted that governance is being outstripped by developments in AI.
Transitioning from policy development to implementation, training, and education on the risks and ethical considerations of generative AI are vital for all employees. The report reveals that only 52% of firms provide such training, which may well be a missed opportunity for many. As AI systems become more integrated into daily operations, firms should foster a culture of continuous learning. This could involve regular workshops, seminars, and updates on emerging AI technologies and their implications for the legal sector. By investing in employee education and other measures, firms can empower their teams to leverage AI effectively while minimising risks.
The future of AI in law firms
Looking ahead, the integration of AI and generative AI in law firms is likely to continue growing. As firms seek to enhance their competitive edge, the ability to harness AI effectively will be a key differentiator. We are already starting to see firms requiring new AI skills from recruits, with 7% of UK firms specifying such skills on their resumes, compared to a striking 19% of firms in EMEA. This trend underscores the importance of adapting to the evolving landscape and ensuring that legal professionals are equipped with the necessary skills to thrive in an AI-driven environment.
Conclusion
As we continue to explore the potential of AI in the legal sector, it is crucial for firms to prioritise risk management and ethical considerations. Understanding the hazard presented, trigger events and threats that need to be countered will vary depending how the technology is applied. Designing, implementing, and monitoring suitable barriers and controls is also a challenge. Overall, the quality of how this is addressed is a good litmus test of the firm’s risk governance processes. By completing these steps consistently, firms can harness the power of AI while safeguarding their clients' interests and maintaining the integrity of the legal profession. The future of law is undoubtedly intertwined with AI, and those who approach it thoughtfully will be best positioned to thrive in this new era.
In summary, the journey into the AI landscape is not just about adopting new technologies; it’s about understanding the implications of those technologies and preparing for the future. By fostering a culture of learning, establishing robust policies, and remaining vigilant about the risks, law firms can navigate this exciting yet challenging terrain with confidence.
