Economic recession/Credit: alphaspirit/Shutterstock.com

Most legal executives think a recession could be on the horizon yet few have prepared themselves and their departments for a possible crash, according to a report released Friday.

In a survey of 72 legal executives based in North America at Fortune 500 companies, leadership advisory and search firm Russell Reynolds Associates found just 3% of the company's top lawyers view a recession as “highly unlikely in the next 18 months.”

Despite most general counsel's bet on a coming recession, only 14% of respondents said they are “well prepared” to manage an economic downturn. Only 1% of GCs said they were personally “unprepared,” with 24% slightly prepared and 61% somewhat prepared.

Cynthia Dow, the head of Russell Reynolds Associates' legal, regulatory and compliance officers practice, said in an interview that GCs may be unprepared because of the length of the U.S.'s current economic expansion, with leaders hesitant to refuse further growth plans despite potential market warning signs.

General counsel respondents were still more likely to feel prepared than chief human resources officers and chief financial officers, who also took the survey for a total of 263 senior executives.

Legal execs were also the most likely to say their teams as a whole are prepared for a recession, with 7% responding “well prepared” and 63% “somewhat prepared.” More than 85% of general counsel are at least “somewhat certain” their current team is the “right team” to “successfully navigate through an economic downturn.”

That could be why 32% of GCs ranked loss of talent, layoff and increased workloads as their greatest fear for managing in a recession, compared to lack of agility at 6%, impact on morale at 6% and budget constraints at 4%.

In a survey interview with Russell Reynolds, The Hershey Co. senior vice president, general counsel and secretary Damien Atkins said legal departments must “find opportunities to show more value, bring cash into the company and protect themselves from cuts in the long term.”

Nearly one-third of GCs reported their team's agility, ability to tackle new legal issues and an increased work volume in various areas as their greatest strength in a recession, followed by skill and experience. But 25% of GCs said lack of agility is their team's greatest weakness, second to lack of preparedness.

“If agility is a gap you need to close, you are in a lot of trouble in a downturn, especially with a management team that has not seen a downturn,” Marc Alpert, the general counsel of Loews Corp., said in a survey interview with Russell Reynolds.

Dow said a prepared legal team should be agile, deeply connected to the business and offer cross-training to lawyers, so they can “handle a full range of … issues that come up and when the demands change on the legal department.”

More than a quarter of general counsel reported that in a recession the most critical legal function will likely be business and commercial advisory, followed by outside counsel and budget management, and litigation and risk management. Regulatory and compliance came in last at 10%.