One thing I noticed while practicing law: we tend to focus on reports, data, surveys, and even conferences that are directed solely at legal.
Yet there is a world of valuable information about those we serve: our clients. Indeed, one thing you hear over and over from in-house counsel and business people is that their lawyers don’t understand their business. One way to do that is to get out of the box and listen to what they are saying.
That’s why the annual Risk Barometer Report of the global insurance carrier, Allianz, about what keeps business people up at night is so important. And what keeps them up? According to the Survey, they believe the top risks to their business are cyber incidents (42%) followed by AI (32%). Both ranked in the top five in every region and across every sector.
For US businesses, cyber is also number one, followed by business interruption and, not surprisingly, legislative change. AI risks were fourth.
The Survey
While I can’t vouch for everything in the Survey, to say it’s pretty comprehensive would be an understatement. Allianz talked to some 3,338 customers, risk consultants, underwriters, senior managers, claims experts, and other risk professionals. It included representatives from 23 industry sectors. And the nature of it lends credibility: the information is just as valuable to Allianz as it is to its insureds, so it better be unbiased.
So???
So why is knowing about business risks important to lawyers? Law firms are businesses that face the same risks as every other business. It’s thus a good idea to know what the world of business considers the significant risks to them and their revenue. It helps to prepare and be proactive.
Secondly, for those lawyers who represent businesses, the best way to get a better understanding of a client’s business is to know what they think endangers their livelihood. It helps us guide and advise them. And, in the process, become more valuable.
The top two risks — cyber and AI — are particularly important both for law firms and for lawyers advising and representing clients.
The Cyber Threat
This is the fifth year in a row that cyber risks have topped the list. And the margin is higher than ever before. It’s the top risk identified by businesses in almost every country and across businesses of all sizes. The particular cyber risks cited included cybercrime, IT network and service disruptions, malware/ransomware, data breaches, fines, and penalties.
Reflecting the growing concern with cyber, a decade ago it was eighth. Indeed, according to the Report, the growth is reflective of the deepening reliance on digital technology while the bad guys continuously evolve their attack mechanisms.
The Report also notes that “AI is supercharging threats, increasing the attack surface and adding to existing vulnerabilities”:
At the same time, attackers are also increasingly using AI to automate attack processes, which enables them to carry out more attacks, faster and more efficiently. AI is also lowering the bar for threat actors, making it easier for criminals who lack technical skills and ransomware expertise to execute attacks.
Companies are also seeing tightening regulations globally particularly with respect to privacy and cyber security which also increases risk.
Cyber and Legal
I have recently written about the threat of cyber to law firms and the legal community. It’s a threat that is often not taken as seriously as it should.
But the Allianz Report underscores the danger and risks to every business, including law firms. Like most other businesses, law firms increasingly rely on the digital world, magnifying the risks. And like all businesses, law firms need to recognize the impact of AI on cyber threats. It’s not time to get complacent.
Think about this: your law firm is hit with a cyber attack and your timekeeping and billing systems are frozen. Your attorneys can’t do work and bill time. Consider the business interruption cost. If that doesn’t keep you up at night, I don’t know what will.
Law firms have sensitive valuable client communications and information in their digital vaults. That makes that information valuable both to the law firm and to the bad guys.
Moreover, arming ourselves with knowledge of the cyber risks and client concerns makes us valuable. We need to be able to convince our clients we are serious about cybersecurity and that we are protecting the information entrusted to us. We need to be able to advise clients about the threats, warning them of things like creating digital discovery trails and the AI threats.
Moreover, those lawyers with expertise in cybersecurity and handling cyber incidents will be in demand. So, there are lots of opportunities for lawyers to take advantage of their clients’ legitimate cyber worries.
And all of this is compounded by the second big risk: that posed by AI.
AI Risks
Clearly AI exponentially increases the cyber threat. But the respondents also identified risks posed by AI implementation, liability exposure, and misinformation/disinformation as concerns.
Indeed, AI risk climbed from number 10 last year to number two this year. It was one of the top five concerns in every industry sector; most believe the risk will continue to intensify. The rapid spread of generative and agentic AI systems, paired with their growing real-world use, has also raised awareness of just how exposed organizations have become.
Interestingly, about half of the respondents think the benefits of AI outweigh the risks. About 20% say just the opposite; the rest aren’t quite sure yet. Businesses are concerned about things like education, retraining, and upskilling their workforces and are taking actions in these areas.
And despite all the hype, according to the Report, most organizations remain in pilot mode with only a few scaling AI across their enterprise. This means investments and expectations are rising but ROI may not be obvious. This can lead to false conclusions about AI impact which in turn increases risk.
Importantly: “new liability exposures are emerging around automated decision-making, biased or discriminatory models, intellectual property misuse and uncertainty over who is responsible when AI generated outputs cause harm.”
The Report also mentions the threats of deepfakes and automated persuasion to brand integrity and political stability.
AI and Legal
Just as with the cyber threats, lawyers, legal professionals, and law firms would be well advised to recognize the AI risks to themselves and to their clients. AI not only increases cyber risks to law firms, but it also poses the same education, retraining, and upskilling challenges identified by the Survey respondents.
An even bigger challenge is that posed to law firms and their business models, as I, along with countless others have discussed over and over. Not recognizing these challenges is folly.
As Michael Bruch, Global Head of Risk Consulting Advisory Services of Allianz Commercial, is quoted in the Report:
AI’s transformative potential means it cannot be underestimated…Those businesses that can develop risk management strategy and resilience strategies—that are forward looking, strategic and functional, and agile enoughto adopt to rapid change—will be best placed to capture opportunities presented by transformative technologies…
Keeping abreast of developments, reading industry reports like that of Allianz, and becoming skilled in the risks and benefits of AI are all ways to meet the challenges. Bottom line: take AI seriously. For better or worse it threatens to change the profession. Knowing that is critical.
And when AI is the number two concern of our clients, we better know as much as they do about it. We need to lead our clients, not wait for them to tell us what to do and mandate AI use. Want to be valuable to your clients: help them understand the risks and benefits of AI. Help them implement (or decide not to implement) AI tools.
To do that, you have to know as much about AI as your clients, if not more.
Getting Outside the Box
As I said at the outset, finding out what’s important to our clients (remember them, those you serve?) means getting outside the legal box. Do that by reading what they read and going where they go.
I remember the first time I attended the annual CLOC conference and being amazed at how few actual practicing lawyers were there. Yet it was an ideal way to learn about what businesses were doing and how they saw the legal ecosystem. About skating to where the puck is going not where it’s been, to use a well-worn sporting cliche.
The same thing applies to reports like that of Allianz. Reading it forces you to get outside the legal ecosystem and look at business concerns. Want to be valued by your client? Learn and understand those concerns. Help them sleep better at night.
You can’t do that by reading legal reports and going to conventions with rooms full of lawyers just like you.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
The post Want To Know What Keeps Your Clients Up At Night? Spoiler Alert: It’s Cybersecurity And AI appeared first on Above the Law.