The world in which general counsel operates is changing at a rapid pace as regulatory issues continue to mount, placing businesses at an even greater risk for legal and compliance issues.
Defining Legal and Compliance Risk
When it comes to defining legal and compliance risk, a broad spectrum of definitions exist. There is often little consensus between companies regarding how they view legal and compliance risk. For instance, some firms may define legal risk as financial loss while other firms draw much more extensive definitions. In other instances, legal and compliance risk may be defined as who takes ownership for that particular level of risk. In an ideal world, compliance and legal risk managers would work together in order to approach risk management in a more concentrated effort.
New Frontiers — A Changing Risk Environment
According to a recent study completed by KPMG, 59 percent of survey respondents felt that the increased regulatory environment in which they must operate is riskier today than it was just five years ago. General Counsel participating in the survey reported a number of specific areas they felt were riskier than just a few years ago, including organizational and brand reputation management. Other GCs reported that working in multiple jurisdictions, often a result of high growth markets, can prove to be particularly challenging because each culture is inherently different. When working in a global environment, GCs must continually be cognizant of varying cultural and legal issues, some of which are easier to accommodate than others are.
Meeting the Regulatory Challenge
As regulatory challenges continue to increase, GCs find they must take a number of steps in order to respond to regulatory risks. Training on new legislation as well as imposing compliance processes are now at the forefront of the process undertaken by most GCs to meet new regulatory challenges. Researching the differences that exist in regulations between various markets is yet another way that many general counsel are working to mitigate risk. At the same time, GCs are recognizing the importance of working closely with other departments within their organizations as an effective method for managing risks and ensuring regulatory compliance.
The Emerging Global Value Chain
In light of a rapidly evolving global market, more and more general counsel are also now coming to recognize the value associated with multi-sourcing. As a result, a global value chain is emerging in which GCs are leveraging an expanding portfolio of potential sourcing options. Such options may include offshoring to an in-house legal department or could involve sourcing from contract attorneys on an as-needed per-project basis. In some instances, GCs are also now going directly to legal services providers who are able to provide the benefit of a global presence.
The Future Role of General Counsel
To be certain, the role of general counsel is changing quickly. Today, GCs often find they must maintain a balancing act between serving as attorneys and business executives. In the last few years, the power base of in-house legal counsel has expanded, largely due to organizational trends combined with the lingering effects of the financial crisis. Among the most significant changes that are occurring in the realm of general counsel in the last few years is the increasing importance placed on the role of general counsel as a joint risk manager by senior corporate executives. More and more, the intimate knowledge of an organization or business developed by general counsel is viewed as being indispensable to the overall operability of the business. At the same time, general counsel are increasingly viewed as the protectors of their legal process structures within their respective organizations. Rather than handling the day-to-day legal work, general counsel are now focusing more on strategic enhancements to the legal departments within their organizations, making multi-sourcing of legal sources more vital than ever.