A new technology that has already disrupted other regulated industries, most notably finance, is now impacting the legal industry, too. Between blockchain and cryptocurrencies, Jan Hoffmeister, Co-Founder and Chairman of Drooms, believes industry tech disruption is what’s behind the developing status quo in the legal sector.
The technology is blockchain, which has particularly powerful implications for lawyers’ due diligence processes. I have already witnessed first-hand the benefits that blockchain offers law firms compared with standard practices, but it is still far from being widely used.
The legal sector is often slower to embrace new technology. Quite rightly, it is considered and deliberate, favouring often slower, controlled actions. According to a Thomson Reuters report entitled Ready or Not: Artificial Intelligence and Corporate Legal Departments, corporate counsel believe they are tech-savvy but acknowledge that their comfort levels and confidence with technology have limitations.[1]
As technologists it is just as important for us to understand the reasons for law firms to be resistant to change, and it is our job to help inform the decision to change, not just advocating the benefits but also the robustness of technologies available.
What is encouraging is that most of those lawyers to whom I speak do recognise the efficiencies and security benefits provided by technology such as virtual data rooms (VDRs), and especially blockchain-enabled VDRs. Importantly, the majority now recognise that failure to adopt new technologies will leave them at a competitive disadvantage.
The key issue is speed: technology disruption is happening far quicker than most lawyers realise and they need to accelerate their adoption of new technologies or risk being left behind.
The key issue is speed: technology disruption is happening far quicker than most lawyers realise and they need to accelerate their adoption of new technologies or risk being left behind.
Change is not just inevitable though, it is desirable. Traditional due diligence methods and processes such as document gathering and review, completion processes and logistics will always be required and in business deal making such as that required for M&A, there is no room for error. But manual processes are laborious and take up a lot of time which, in the legal sector, is literally money. This has led to a desire from all parties for smooth and increasingly fast due diligence processes that are sufficiently agile to take advantage of deals quickly as opportunities arise.
By using the right VDR provider, law firms can be assured that their entire due diligence processes are efficient and secure. Although most VDR providers can manage and protect confidential documents and data, not many in the market can harness the power of blockchain technology, or at least not just yet.
I am proud to say that Drooms was the first[2] to incorporate blockchain technology into its VDR products but we will not be the only ones to do so for long. I predict it will be best practice within five years.
Until now, all data has been stored on physical data carriers following completion of transactions. But now it can be archived on Drooms servers and accessed using blockchain. As a result, secured data cannot be lost; is almost non-manipulable; and is accessible to all authorised parties involved in a transaction at any time. Any warranty issues or necessary contract checks can be carried out quickly and problem-free via the data room after a transaction has been completed.
As a result, secured data cannot be lost; is almost non-manipulable; and is accessible to all authorised parties involved in a transaction at any time.
Using blockchain technology together with artificial intelligence and the various other features of a VDR allows for safer sharing of sensitive data and confidential information. The addition of blockchain provides a level of robustness that is beyond other technologies. It holds the answer to overcoming the fears of security and questions of effectiveness surrounding the adoption of VDR technologies as well as providing a significant competitive advantage for law firms. It is a win-win situation.
[1] Thomson Reuters report, Ready or Not: Artificial Intelligence and Corporate Legal Departments https://legal.thomsonreuters.com/en/insights/articles/artificial-intelligence-ai-report [2] Drooms - The first data room with blockchain technology https://drooms.com/en/pressrelease/drooms-the-first-data-room-with-blockchain-technology
