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Shoosmiths litigation team recently hosted a roundtable discussion with senior inhouse lawyers with clients in financial services, technology and the automotive sectors. In this discussion, each participant discussed their key takeaways from our recent Litigation risk 2024 report, their biggest concerns for the year ahead and identified some areas that need further exploration in 2025 and beyond.

AI continues to create uncertainty making it a key litigation risk.  

In our Litigation risk 2024 report we identified that companies are more confident in their ability to respond to disputes than they are in their ability to identify emerging areas of risk. Half are not horizon-scanning and 64% do not undertake trend analysis on their sector. The rapid emergence of generative AI is a great example of why its so important to assess what’s coming over the horizon. Generative AI is not only opening up new possibilities for efficiencies in legal operations, it is creating uncertainties and new areas of litigation risk in the way that it is being used by businesses. In our roundtable, participants agreed that AI is now a primary concern, particularly at this stage in its development where controls and guardrails are still being established for use of applications such as Chat GPT, Bing Chat Enterprise and Microsoft Copilot. Without effective controls in place the risks around misuse of sensitive data and IP are high.     
 
Sam Henegan, Senior Legal Counsel, Motorway Online Ltd: “Our business is really ramping up on the use of AI and we have had to catch up on putting guidelines in place. Ownership of the IP and what you put into AI apps is a very grey area and this is where we are thinking about potential litigation in the future.” 
 
What’s driving misalignment on risk mitigation between legal teams and their boards?
While there is a degree of alignment between boards and legal teams on the key areas of litigation risk in our report, there is room for improvement in all but 13% of the respondents’ businesses. Two in five (38%) respondents say data breach follow-on litigation is one of their board’s top concerns, but GCs and legal teams see it as less of a worry. Our roundtable participants believed that this misalignment may be in part because of the differing priorities of the board and the depth of their knowledge. One participant’s board are VC investors that invest in a wide range of sectors and therefore have less specialist sector knowledge of their business. Participants also agreed that the reason for boards having a greater concern about data breach than GCs, is likely to be that they are more focussed on security concerns and reputation, particularly in light of recent high-profile cases.
 
Lawrence Furlong, General Counsel, Onecom Group Ltd, stated: “Most Boards have a diverse set of complex challenges and risk mitigation will not always be top of that list. It’s not always easy to obtain budget to mitigate something that might never happen.”

Employment litigation has become ever-present in the in-tray for many inhouse teams.

55% of survey respondents in our report stated that they thought employment litigation risks would increase over the next 3 years. In our roundtable discussion, participants agreed that employment was now a significant part of their workload, driven mainly by a post-covid rise and changes relating to rights on working from home, grievances and disciplinary issues. Participants also talked about the fact there is no cost to making an employment claim, which inevitably means that more claims can be made without risk. In many cases businesses will not want to settle because they need to set an example and deter further claims. Equally, although many of these claims are low value, reputational risk can be a big factor.  
 

Does risk mitigation need to be re-evaluated in this era where reputations are so at risk? 

Fewer than half of respondents in our report provide internal training on specific litigation risks, only 46% conduct litigation preparedness reviews and only 36% carry out contract audits. Many of our roundtable participants, particularly those who deal with consumers, are increasingly having to balance litigation costs with reputational risk. One participant stated that a financial act of goodwill can sometimes be better than the reputational damage of potential bad PR. However, others stated that this can be unsustainable.
 
Legal Counsel roundtable participant said “You can put a confidentiality agreement or a settlement agreement in place but the issue can still end up on a social media forum. Its not commercially possible to settle everything but there is a PR risk.” 
 
We are really grateful to all of our roundtable participants who gave up their time to provide some fantastic insight and great ideas for questions to include in our 2025 report. In our next report we will be exploring more on AI, the role of the inhouse lawyer and their relationship with the board and, the growing issue of reputation risk.

 

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