Australian organizations are rapidly embracing digital transformation and artificial intelligence, but their legal and governance frameworks are failing to keep pace with technological advancement, according to a comprehensive new survey by law firm Maddocks.

The Digital Transformation 2025 Legal Trends Benchmarking Survey, which surveyed a broad cross-section of the firm’s business and government clients, found that while organizations rated their average technology maturity at 6.3 out of 10, more than half (54%) admitted they were not prepared for recent reforms to the Privacy Act. Respondents primarily came from legal and risk departments (49%), IT (18%), and operations (11%).

The findings reveal a concerning disconnect between technology adoption and legal preparedness, with 41% of respondents lacking proper controls for artificial intelligence systems despite 69% having implemented AI policies.

Cyber security emerged as the top technology priority for 2025, with 36% of organizations ranking it highest and 57% expressing serious concern about cyber threats to their operations. The heightened focus comes as data security was identified as the greatest technology-related challenge facing organizations.

"Cyber security spend has become a top priority for both technology and legal teams as the increased risk of threats and recent legislative changes make it apparent that privacy and cyber security is no longer just a problem for IT departments," said Brendan Tomlinson, Partner and Technology Sector Lead at Maddocks.

Despite this concern, the survey revealed significant gaps in cyber preparedness. While 91% of respondents have cyber incident response plans, only 65% regularly update key stakeholders on these plans, and 38% do not conduct practice exercises or role-playing scenarios.

AI Adoption Outpaces Governance

The survey found widespread AI adoption across Australian organizations, with IT departments leading implementation (60% adoption rate), followed by sales and marketing teams and administrative functions. However, this rapid uptake has created new challenges around data privacy, security, and regulatory compliance.

Leading concerns about AI use included data privacy and security issues, with 72% of respondents worried about ethical considerations and 66% concerned about regulatory compliance.

Organizations are struggling with increasingly complex technology contracts, with 71% identifying tracking performance and compliance as their most significant challenge. Risk allocation emerged as a key concern, with 54% of respondents wanting to see more favorable allocation of risk and liability in their technology agreements.

Nearly 70% of organizations expressed concern about becoming involved in technology-related disputes, with almost 22% having experienced reputational damage due to technology platforms in the past year.

Despite the governance challenges, technology investment remains strong. The survey found that 56% of organizations are planning major technology procurement or projects this year, while 51% expect to spend more on technology than in the previous financial year.

The research, which included responses from across industries including government (48% of respondents), healthcare, finance, and manufacturing, highlights the urgent need for organizations to strengthen their legal and governance frameworks to match their technological ambitions.

"Organizations are increasingly understanding that implementing an agile and skilled workforce is vital to adapt swiftly to evolving digital shifts and opportunities," Tomlinson noted, emphasizing that organization-wide education and training on technology legal issues is becoming critical.

View the full Survey Results here.