No one would ever mistake the corporate tax or in-house legal departments for profit centers. But, while these functions may exist to prevent companies from losing money unnecessarily – and they are indeed incentivized to find efficiencies along the way – they do not drive income in the traditional sense.
However, as large corporations have doubled down on their data and analytics strategies over the last several years, many are finding new ways to find profit in parts of their businesses once relegated to overhead. The key to making that happen is marrying deep domain expertise with robust data that puts the right people in the driver’s seat on big-picture strategy.
Predictive Tax Modeling
Take the corporate tax department. A decade ago, the primary function of a multinational tax department was compliance. Stay on top of the federal, international, and local tax requirements in each jurisdiction in which the company operates, make certain the company meets filing requirements, look for opportunities to maximize deductions and credits along the way, and you’re doing a solid job.
Today, however, that’s not even half the job of a corporate tax pro. Operating in an environment of volatile economic and regulatory change in which the G-7 has agreed to support new rules for a global minimum tax rate on company profits and all manner of new digital taxes are being introduced in jurisdictions worldwide, corporate tax departments have had to evolve into business strategists.
These teams play an increasingly critical role in real-time modeling and business structuring, called upon to comply with today’s tax code and to stress-test multiple different scenarios to come up with contingencies and strategic workarounds for tax changes that have yet to happen.
Reimagining Corporate Counsel
The same can be said for in-house legal counsel. Once colloquially referred to as the department of ‘no,’ the corporate legal department does a lot more than edit contracts and manage legal disputes. According to a recent survey of more than 300 in-house corporate attorneys conducted by AlixPartners, corporate litigation spiked over the past year as a perfect storm of data privacy, corruption, bribery, and COVID-19-related issues put large corporations legal departments on high alert.
In fact, according to our 2021 Report on the State of the Legal Market, many legal departments have seen their roles expand significantly since 2020, with 79% of legal departments reporting an increase in workload due to the pandemic. And 43% noted a change in the typical mix of legal matter types handled by their departments because of COVID-19.
Here again, simple risk mitigation and defensive posturing in a manner consistent with a traditional cost center will no longer cut it when the demands of the job require the ability to project, anticipate, and switch strategies on a dime.
Big Data and AI
Thankfully, increases in complexity and risk have coincided with an equally powerful revolution in data and analytics. Corporate tax and legal departments no longer operate in the dark regarding forecasting and impairment, scenario planning, and crisis management. Instead, they have deep databases of information on global exposures, the ability to model multiple different outcomes using AI-enabled software, and access to company-wide information on everything from real-time transaction volumes to hyper-local compliance and reporting requirements.
By arming themselves with robust data and analytics, the most advanced in-house accounting and legal teams have transformed their roles from reactive to proactive. They’re using a combination of deep domain knowledge with factual data to inform business strategy on everything from market expansion to acquisition targeting and the timing of expenditures.
Five years ago, I wrote that the revolution in artificial intelligence, big data, and analytics would allow professionals to spend less time combing through spreadsheets and more time cultivating the kinds of valuable insights that will help anticipate hurdles and alter course before those hurdles become real problems. I was right about the potential but could never have anticipated the urgency with which it came together.
Brian Peccarelli is co-chief operating officer of Thomson Reuters.