Legal Department Budgets: Finally Trending Up!
During a year of inflationary pains, global crises, and economic pressures, 73% of Hong Kong GCs suffered budget slashes in 2023, by an average of 9%. But the latest findings show hope: legal departments are now reporting a moderate, yet positive, shift in 2024, as more than a third of GCs reported a budget increase this year, albeit only by 6%. Even better, only 4% saw a decrease, while the majority (60%) saw no change at all.
Most legal leaders (99%) reported that they’ll need to update their current budgeting buckets for legal resources and expertise to account for AI or other emerging risks. This could account for why, in addition to technology (60%) and in-house staff (54%), they plan on increasing their investments in legal operations (34%) and flexible legal talent providers (34%). Fortunately, the majority (86%) also anticipate another increase in legal department budgets for 2025.
Hong Kong GCs Anticipate Meaningful ROI from Legal AI and Tech Investments in 2025
Once considered leaders of the department least likely to embrace change, legal leaders now indicate a growing emphasis on technology within legal departments. In 2024, 52% of GCs prioritised technology in their budget allocations.
This trend is expected to continue into 2025, with 99% of GCs acknowledging the need to update their budgeting buckets to address AI and other emerging risks. Technology investments, particularly in AI-powered tools like virtual legal assistants, predictive analytics, and contract review, are anticipated to drive meaningful returns on investment (ROI) in the coming year.
Most GCs Plan to Shift from Current Budgeting Model in 2025
While the majority of legal leaders in Hong Kong reported they currently use the precedent-based budgeting model (PBB) for their legal department, most GCs said they’re considering or actively planning to shift their budgeting model in 2025, if they haven't already. The top reasons for the shift are to become more agile and responsive, to meet regulatory or compliance requirements, and a desire for greater transparency and accountability.
Even though the PBB model took precedence in 2024, most of the GCs who implemented it are planning to, or have already, shifted their model to become more agile. GCs who had already adopted an agile, rolling/continuous legal budgeting strategy saw larger budget increases in 2024 and largely avoided cuts altogether.
As 2025 approaches, legal departments are gearing up for significant shifts in their financial strategies, driven by emerging challenges and opportunities in technology and compliance.
The traditional precedent-based budgeting (PBB) model, long a staple of legal departments, is being reconsidered by most GCs. The unpredictability of recent years, marked by economic fluctuations, political instability, and rapid technological advancements, has exposed the limitations of rigid budgeting frameworks.
Consequently, 72% of Hong Kong GCs are either planning to shift or have already shifted to more dynamic models, such as the rolling/continuous budgeting model, which allows legal leaders to continually evaluate and adjust the legal team’s budget throughout the year based on the present performance and economic environment. This shift is motivated by a need for greater emphasis on agility and responsiveness.
At last, it appears legal budgets are growing. Looking ahead, 86% of GCs expect further budget increases in 2025. The primary areas of investment will be in technology, in-house staff salaries, and flexible legal talent providers, with a particular focus on AI-driven tools that can enhance efficiency and mitigate risks.
This is where modern, tech-savvy partners like Axiom step in. Axiom can ensure a level of collaboration, knowledge, and in-house experience equivalent to that of an actual member of the in-house team; and can support your organisation’s transition to trustworthy, AI-enabled workflows to drive legal team innovation, efficiency, and job satisfaction.
Axiom gives small, mid-market, and enterprise clients a single trusted provider who can deliver a full spectrum of legal solutions and services across more than a dozen practice areas and all major industries. Axiom’s global bench of AI legal talent is helping in-house teams design and implement AI data governance, privacy, and compliance programs; conduct AI regulatory assessments and AI bias reviews; evaluate AI’s impact on IP protection; and drive AI technology selection, implementation, and usage.
The traditional precedent-based budgeting (PBB) model, long a staple of legal departments, is being reconsidered by most GCs. The unpredictability of recent years, marked by economic fluctuations, political instability, and rapid technological advancements, has exposed the limitations of rigid budgeting frameworks.
Consequently, 72% of Hong Kong GCs are either planning to shift or have already shifted to more dynamic models, such as the rolling/continuous budgeting model, which allows legal leaders to continually evaluate and adjust the legal team’s budget throughout the year based on the present performance and economic environment. This shift is motivated by a need for greater emphasis on agility and responsiveness.
At last, it appears legal budgets are growing. Looking ahead, 86% of GCs expect further budget increases in 2025. The primary areas of investment will be in technology, in-house staff salaries, and flexible legal talent providers, with a particular focus on AI-driven tools that can enhance efficiency and mitigate risks.
Previous studies have shown legal teams have been under-resourced and overwhelmed with legal work on top of daily administrative burdens, and many legal leaders are hopeful technology tools and services will optimise their teams’ efficiency in the new year. This might be why in 2025, 34% of legal department leaders plan to boost their spending on flexible legal talent providers.This is where modern, tech-savvy partners like Axiom step in. Axiom can ensure a level of collaboration, knowledge, and in-house experience equivalent to that of an actual member of the in-house team; and can support your organisation’s transition to trustworthy, AI-enabled workflows to drive legal team innovation, efficiency, and job satisfaction.
Axiom gives small, mid-market, and enterprise clients a single trusted provider who can deliver a full spectrum of legal solutions and services across more than a dozen practice areas and all major industries. Axiom’s global bench of AI legal talent is helping in-house teams design and implement AI data governance, privacy, and compliance programs; conduct AI regulatory assessments and AI bias reviews; evaluate AI’s impact on IP protection; and drive AI technology selection, implementation, and usage.