3 September 2019
Tell us about your entrepreneurial journey and why D2 Legal Technology started?
The journey really started on the trading floor of the investment bank UBS. It was quite an exhilarating environment – dynamism – with the buzz of the transactions being conducted with the quantitative finance through mathematics and computer science that supported it.
A technologist by background, after graduating from Cambridge University in Computer Science, I worked as part of the front office IT team within fixed income derivatives. Here I designed and developed trading systems, as well as leading the FpML industry initiative internally within the firm.
A large part of my role was to allow the firm to price exotic derivatives, balancing optimisation of capital, liquidity, collateral with risk. These financial instruments are simply a series of (complex!) contractual obligations, detailing the various cashflows and event-driven rights between the parties. I was amazed by how poorly these obligations were tracked through systems and data, despite the huge volume of them. A large part of the issue in my view was a very technology-averse legal function, who were unable to appreciate and engage in the increasingly digital agenda and the business opportunities this would allow.
I woke up one morning, convinced that with some legal training I could address this gap. As a result, I went back to law school, requalified as a lawyer, working for almost five years at magic circle law firm, Allen & Overy LLP as a derivatives and structured finance lawyer. With this newly acquired legal skillset and experience, I started D2LT in October 2011, determined to solve the problem of deriving business intelligence from large capital markets legal agreement portfolios.
This concept of unlocking business value through legal change, primarily through the appreciation and use of legal data has resonated, especially post Financial Crisis. D2LT has grown to a firm of some hundred consultants across Europe, America and Asia, advising at the intersection of FinTech and LegalTech to achieve business optimisation, regulatory compliance and operational efficiencies.
What do you aim to achieve with D2 Legal Technology?
We have established ourselves as a leader in legal innovation in the capital markets area, however, the real opportunities – through areas such as artificial intelligence, blockchain and smart contracts – are only just beginning to become a reality. We have the opportunity to lay the groundwork, through some of the legal data standards work we are doing, that has the opportunity to truly transform the legal profession. The future is certainly very bright!
In particular, we are increasing our work in the asset management and insurance industries where the same opportunities to unlock business value through optimisation of legal processes and technology enablers exist.
I would very much like in-house legal functions to see their positive role in being part of the business, rather than simply a cost and back-office support function – and help them in their journey in this regard.
What makes you stand out from your competitors?
Our unique blend of practitioner industry knowledge, legal, technology and transformational skills. D2LT originates, designs and manages the delivery of legal change solutions for its clients by proactively taking the time to understand their businesses, the regulatory needs and their existing operating environments. Our multi-disciplinary experience, across capital, risk, liquidity, collateral and other business areas allows us to quickly assess and identify optimisation opportunities and operational risks and to propose and deliver an appropriate solution to address them. A lot of firms rush to solve legal problems, forgetting that we are there to solve business problems – which might just happen to contain a legal component.
This unique proposition has been recognised, for example by being awarded 1st, 2nd and 3rd place, across different categories in the prestigious FT Innovative Lawyers awards in 2017, and in the FT Business Intelligence Awards 2018 for our work on legal data.
What are some of the most exciting innovations you have come across in this space?
After the crisis of 2008, the OTC derivatives industry was buffeted by a plethora of financial regulation, that has massively increased the cost of trading derivatives for market participants. This has ranged from regulatory capital and liquidity requirements, a paradigm shift in the collateral requirements, the need to create living wills and part of the recovery and resolution regulations and a focus on the treatment of client assets and client money. In addition to this, market events such as Brexit and the upcoming retirement of IBORs has created an environment where we have to innovate to do things better as an industry.
This has led to the use of document generation tools for repapering exercises, legacy document digitisation, AI and Machine Learning tools to extract key terms and derive business intelligence from the contracts – as well as netting engines. These have all been very compelling, however, their success and ultimate business impact limited through the lack of industry legal data standards.
D2LT was appointed by ISDA, the derivatives trade association, in 2018 to create such an industry standard for the ISDA Master Agreement. This is foundational and transformative in impact, allowing an ecosystem of market utilities to flourish and serve the industry – and therefore the most exciting development in the industry. The work will be completed later this year in 2019.
What are some of the biggest lessons you have learned which have impacted the way you work?
Don’t be afraid of failures – use it to iterate to success, evolving your approach and methodology. We need to study our initial attempts – innovation relies on learning, agile working and constant improvement.
D2LT learnt from its early attempts to digitise legal agreements into consumable data, including an early project where it was described that a proverbial Ferrari had been built, but in a garage with no door. We quickly learnt to make that opening to drive the car out – linking the legal data with client, market and transaction data – turning the project into a phenomenal success, but only after adapting the approach.
What was the most challenging part about setting up your company?
Financial firms are currently in a very cost-constrained market, where the business is struggling to cope with the plethora of regulation post financial crisis. There is therefore a temptation for them to apply tactical and short-term fixes, without realising the impact. Repapering exercises for regulations such as “Margin Reform for Uncleared Derivatives” is a good example of this, where many have failed to address the underlying client and legal agreement data issues. This can be quite frustrating, seeing the missed opportunities.
We have worked with our clients to understand the value in taking a longer-term approach and build business cases for them to help support a more sustainable transformational approach to legal data. In some cases though, it has taken the stick of a regulator, including significant fines (with one example that was particularly pronounced, in respect of close-out netting and the legal opinion management process for regulatory capital purposes), for this brave step to be taken.
The challenge is often to help clients deal with short term tactical needs, whilst ensuring these fit into a broader strategic direction.
What would you say are the biggest misconceptions people have about working in a startup and how do they differ from reality?
People assume startups are all about creating a product or solution and developing code, forgetting the client business problem and the business process that needs to be addressed to be successful. A huge part of the work is having that real interest in the client business and challenges in order to be able to address this. In many cases, it is about persuading a client that they do not just need a shiny new tool – rather implement changes to how they work (which may then be assisted by a technology enabler).
If you had one piece of advice to someone just starting out, what would it be?
Challenge the status quo. Successful innovation requires an innate curiosity – asking questions, challenging assumptions and exploring new ways of thinking. One must refuse to accept the premise that, “This is right because that is the way it has always been done.”