Corporate legal departments (CLDs) at energy companies are no strangers to due diligence. Day in and day out, they handle complex matters involving everything from local to international compliance. This requires reading the fine print and identifying subtleties the average person might miss. As the energy sector continues to evolve, it’s imperative for CLDs to approach business processes, particularly those designed to manage and control legal spend, with a comparable level of rigor.
Across the board, energy companies have a growing need for legal services, thanks to a long list of factors, ranging from the looming threat of climate change to greater demands for data privacy and security. According to the International Energy Agency (IEA), achieving net-zero emissions by 2050 will require energy companies to invest $4 trillion in clean energy each year. At the same time, new energy projects focused on renewable fuel sources have thinner margins, tighter budgets, and face greater regulatory scrutiny. The sector is also facing tremendous uncertainty, including threats like climate change and eco-terrorism.
Add it up and now, more than ever, every penny counts—and must be accounted for. That includes legal spend.
Ensuring visibility into spend
Given the current landscape, CLDs at energy firms need to find a way to stay on top of a wide range of highly complex legal matters. At the same time, they must ensure they are choosing the right firm and getting the most value possible out of outside counsel, while also maintaining strong relationships with them.
Energy matters can be highly complex, requiring even greater due diligence during firm selection. Solutions that provide support for competitive bidding and alternative fee arrangements can help organizations select the right firms, for the right matters, at the right price.
Once those firms are selected, nurturing the relationship becomes a top priority. That starts at the beginning, by setting expectations not just about spend but also anticipated timelines, goals, and so forth. Essentially, organizations need to work with their firms to help them understand and work within the companies’ guidelines—and keep tabs to ensure they remain there.
Approaching this task manually is a fool’s errand, though. Take bill review, for example. Reviewing law firm invoices by hand is a time-consuming, mistake-ridden approach.
The good news is that technology is also changing rapidly, and artificial intelligence (AI) can be used to digest large stacks of invoices in a fraction of the time. AI-assisted bill review makes the process more efficient and accurate, which ensures CLDs can successfully predict costs and drive greater value from their firms. By scanning invoices for irregularities and billing violations, the AI can recognize patterns that may indicate budget overruns, lost revenue, and other issues.
Complete control of legal spend
AI-assisted bill review represents just one component of Wolters Kluwer’s total spend management approach, a form of holistic spend management. Holistic spend management requires a unique combination of solutions and data clarity to enable transparency into outside counsel spend and actionable data to maintain strong law firm relationships and value.
Total spend management combines various technologies, including e-billing, AI, and machine learning (ML). With the combined power of these tools, companies can more accurately track and manage spend compared to budget, automatically enforce billing guidelines, and more.
The approach allows CLDs to have full trust in the law firms they work with and to make sure that the right people are spending the right amount of time on the right tasks. With this information, companies can have honest and data-backed conversations with their legal partners about areas that can be improved to drive even further efficiency—which can help the relationship and legal outcomes long-term.
A is for augmented
While AI plays a critical role in spend management, human touchpoints should remain. It can be helpful to think of the “A” in AI as “augmented” instead of “artificial.” Much like machines take X-rays that doctors interpret, AI-assisted bill review systems flag parts of invoices that need to be reviewed by an actual person. AI and ML solutions can quickly gather and analyze historical data, including overlaying it on current matters, but a human with legal expertise still needs to review it.
The ability to gather and analyze historical data is especially important in the energy industry, where many CLDs rely on disparate reporting systems spread across numerous jurisdictions. One Fortune 500 energy company, for instance, spent 80 hours each quarter gathering information about matters and budgets and compiling it into reports. AI can be a tremendous time-saver in this regard, integrating data into digestible dashboards that display spend analysis, timekeeper hours and rates, budget forecasts, and other key metrics.
AI handles the time-consuming legwork of compiling and organizing data and displays that information in a graph or chart that an expert can easily digest and apply. At a glance, legal operations professionals can understand where their spend is going and make more data-driven decisions, such as between settling a case or letting it go to court.
Control what can be controlled
The bottom line is that the energy industry is facing a lot of upheaval: the threat of climate change, the rise of eco-terrorism, a focus on green initiatives, changes in demand, new laws, mergers, acquisitions, and more. There’s no way to control everything, so energy firms—and CLDs especially—must control what they can. Old-school manual processes simply don’t cut it in this regard. But AI can streamline workflows, prevent spend leakage, and enable better decision-making, all of which can help energy companies weather this time of change.