What worries law firm CEOs the most? Cyberattacks, economics and associate compensation, according to a new report
The possibility of cyberattacks is most often cited as a top concern for law firm business leaders, followed by risks caused by high partner salaries and general economic pressures, according to a report released Thursday.
These concerns replaced competition for talent as the most cited high risk to profitability this year, according to the 2022 Law Firm CEO Report from Thomson Reuters, the Center on Ethics and the Legal Profession at Georgetown University Law Center and the True Value Partnering Institute.
The report is available here.
The report is based on a survey conducted in October of managing partners, chief operating officers, chief financial officers and other business leaders at law firms. The survey collected 50 responses.
The report notes that 2021 was “another banner year” for law firms, based on numerous performance metrics, but in 2022 “cracks began to show in this generally positive facade.”
Law firms are competing for talent, facing higher expenses and seeing slowing demand in some practice areas, according to the report.
Forty-two percent of law firm business leaders rated security breaches, data loss, hacking, and ransomware as a high risk to business profitability. This is followed by general economic pressures and associate salaries, each cited by 32% of respondents.
The study follows two other reports on law firm finances released this week.
A survey of more than 120 major law firms by Wells Fargo’s Legal Specialty Group found that law firm revenues grew 4.6% overall in the first nine months of 2022 , compared to 14.4% in the same period last year. Expenses increased by 12.8%, resulting in a 7.3% decline in net income.
The number of lawyers increased by 4.8%, while productivity decreased by 5.3%.
“Firms are hesitant to fire newly hired lawyers, but reliance on natural attrition and reassignment of partners has not yielded satisfactory results,” Wells Fargo’s Legal Specialty Group said in a summary of the findings of his investigation. “So we started hearing about more demanding benchmarks to manage usage. Formal dismissals do not yet seem to be a pervasive consideration.
Law.com had a blanket.
Another survey of 195 leading U.S. and international law firms by Citi Global Wealth at Work’s Law Firm Group found revenue grew 4.1% in the first nine months of the year, a summary shows. . published by Law.com.
The “moderation in revenue growth” was largely due to a 1.2% decline in demand, according to the executive summary from Citi Global Wealth at Work’s law firm group.
“We continued to see a notable decline in M&A and capital markets activity in this volatile market, in contrast to the extraordinary performance of these practices in 2021,” the summary reads. “We have also heard mixed views on litigation, and although companies have told us that they expect bankruptcy and financial restructuring work to resume in the second half of this year, we have not no significant recovery yet at this stage.
“On the other hand, private equity and investment management practices have been busy and we hear that activity levels in regulatory and intellectual property are strong.”