In the latest Thomson Reuters Institute Insights podcast, our team of strategists reveal what they’re hearing about industry priorities entering 2023, and how the economy may cause those priorities to shift
For professional services firms, 2022 represented the beginning of a return to normal. As many offices settled into a new hybrid working norm, legal and tax & accounting firms reached seemed to be gearing up to speed, while new initiatives in areas such as environmental, social & governance (ESG) and compliance innovation started to take shape. There was hope for large-scale industry growth — but that hope may end up being tempered.
As we enter 2023, the specter of a potential recession looms over all budgetary and strategic decisions. Professionals in corporate law and tax departments are already anticipating having to do more with less, which will likely impact how they work with their outside partners over the next 12 months. Add into this a mixture of new governmental regulations, and these next 12 months could start to look less optimistic and more of a trial to overcome.
In the most recent Thomson Reuters Institute Insights podcast, available on the Thomson Reuters Institute Insights podcast channel, our team of strategists reveal the trends they’re watching as we enter 2023, and how changes in the overall economy may affect this coming year’s strategic priorities.
Rabihah Butler, Head of Compliance & Government Insights, says that compliance is the name of the game in the risk and fraud space, with the Beneficial Ownership Act, the Enablers Act, crypto-regulation, and ESG compliance all playing their part to make the coming regulatory year a complicated one. And in the event of an economic downturn, there may be questions surrounding who bears the burden of that compliance risk, as well as how government entities and court systems will be able to continue key system reforms that they began during the pandemic.
Natalie Runyon, Head of ESG Insights & an Advisory Services Consultant, believes 2023 may be “a painful year because of multifaceted operational challenges and other headwinds” facing those responsible for ESG within organizations. The Securities and Exchange Commission’s rules on greenhouse gas emissions and the European Union’s new corporate sustainability reporting requirements both will increase work for lawyers and accountants, while certain social aspects of ESG — most significantly, the increased focus on employee well-being as a key performance indicator of organizational well-being — will remain a key priority for boards, especially in a tighter labor market.
Zach Warren, Head of Technology and Innovation Insights, views the tech and innovation landscape as one where next-generation technologies such as artificial intelligence, blockchain, and even ChatGPT may be taking a back seat to tried-and-true standards like business development and security and data protection. Thomson Reuters research has shown that while technology investment has continued thus far in the legal and tax industries alike, a recession may mean scaling back some research and development initiatives.
Bill Josten, Head of Legal Marketplace Innovation Insights, notes that what is top of mind for corporate law department leaders and law firms alike isn’t changing: the volume of matters they’re seeing is increasing. However, flat budgets and a potential down economy may have changed the calculus of how those matters will be tackled. Tighter budgets are forcing corporate law departments to tier their outside work, which could mean a potential rise in utilization of alternative legal services providers. Law firms, meanwhile, also are eyeing what inflation might mean for their realization rates and how to hold onto demand in the face of those tightening corporate purse strings.
Finally, Nadya Britton, Head of Tax and Accounting Insights, explains that small and midsize tax & accounting firms are looking to continue their advisory services expansion, particularly with continued industry automation and a de-emphasis on simple compliance work, while large tax firms are focusing on specialization in specific industry areas. Corporate tax departments, meanwhile, are “all about data, data, data,” Britton says, particularly with trying to better integrate the tax function into their organizations’ wider business initiatives. Even though any economic downtown may not impact tax as strongly as other industries, there are still implications around the industry’s growth plans to be considered.
As our team of strategists describe it in the podcast, 2023 is set to be a complicated year, but research has shown that there can be reason for optimism among all areas of professional services. Even with economic uncertainty looming on the horizon, the next year can prove fruitful with a little strategic planning and care.