Law firm executives see external economic concerns, as well as cost and talent pressures, a new report shows

In a newly released report, we examine the mindset of US law firm executives and what they perceive to be the top threats to their firm’s continued profitability

Given the past few years of the legal industry posting strong results despite the global pandemic, it would be easy to feel complacent that the worst of times are over. But as the legal industry shifted in the middle of this year, cracks in that friendly facade began to appear.

Not insignificantly, many law firms found themselves locked in ongoing competition for the best legal talent, increasing their overall costs; At the same time, many also began to see early indications that legal demand was slowing in some areas of the law.

An inventory of all this, the newly released Report of Business Leaders of Law Firms seeks to gauge the mindset of US law firm executives—managing partners and associated professionals responsible for running their firm’s operations who may be the proverbial canaries in the coal mine in relation to future challenges to the firm’s bottom line. This annual report is published by the Thomson Reuters Institute in association with the Center on Ethics and the Legal Profession at Georgetown University Law Center and the True Value Partnering Institute.

The report reveals that law firm executives view broader economic concerns — inflation, a possible recession, ongoing wars, supply line disruptions and a tight political environment — as major threats to their firms’ continued profitability.

Concerns about broader economic pressures were cited as a high risk to law firm profitability by almost a third of respondents, twice as many as in last year’s report

In fact, concerns about overall economic pressures were cited as a high risk to their law firm’s profitability by nearly a third of respondents, twice as many as in last year’s report. In fact, those worries have shifted to 2nd place in the list of top risk concerns in the survey, up from 9th place last year.

It seems like corporate leaders have shifted their focus away from law firms to the uncertain world outside the office. Underscoring this, law firm executives identified fear of external cyberattacks by illegal actors as their top threat, with 42% of respondents citing this as a high risk to the firm’s profitability. These fears about security breaches, hacks, ransomware requirements, and data loss were the first time they emerged as a poll choice in this year’s survey.

Of course, the report only reflects gloomy thinking. On the positive side, most business leaders surveyed said they expect at least moderate levels of growth in many of their company’s areas of activity, and even high levels of growth in areas of activity such as intellectual property and mergers and acquisitions. And more than half (52%) said they expect a key financial metric, earnings per attorney, to grow moderately over the next three years.

Yet even as corporate law firm leaders begin to map out their business strategy for the next few years by taking steps to improve their firms’ financial performance — raising fees, improving technology, supporting more remote work, and increasing cross- Selling Across the Firm – Many are keeping at least a wary eye out, on the horizon, wondering if those darker clouds portend a more worrisome future.

You can download a copy of the Thomson Reuters Institute’s Law Firm Business Leaders Report by completing the form below:


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