2020 State of Corporate Law Departments report insights: Safeguarding the company
In the recent 2020 State of Corporate Law Departments report from Thomson Reuters, Acritas, and the Legal Executive Institute, law department professionals cited several key priorities for their units, including (not surprisingly) increased efficiency and effectiveness.
However, it was the role as guardian of the company that struck closest to the core mission of what corporate law departments strive to be; in fact, managing the company’s risk on a number of fronts is often seen as the primary—if not sole—role of law departments.
More importantly, as many new risks and challenges continue to burst forth from the ongoing pandemic crisis—including very real threats to employee health, market viability, and even company sustainability—the role of safeguarding the company is even more important now, according to the corporate law department officials surveyed.
The law department as guardian
As the report clearly spells out, risk comes at corporations from all directions. Financial and market risk have always been a part of corporate life, of course, but companies are increasingly contending with deeper threats in the form of operational risk, reputational risk, and geo-political risk. Now, there are even newer risks to deal with: cybersecurity and man-made climate change, for example.
Survey respondents saw their role as risk mitigators split into two separate, yet vitally important, parts:
- Proactively managing and mitigating risk to the company
- Complying with an expanding list of regulatory requirements
Taking the reins of risk management
The survey also showed that corporate law departments and their leaders are taking an increasingly proactive role in risk management—seizing the reins of ownership, so to speak. In fact, this level of safeguarding requires departments to push the boundaries of their own reach within the company.
But what does that expanded reach include? According to the survey, it includes more collaboration with other business units, broadening their oversight of a wider range of risk management activities, and investing in a diversified skill set among their team.
One salient example of the expanded purview of corporate law departments is the issue of man-made climate change and the slew of new regulations, potential liabilities, and related threats to sustainability the issue encompasses.
The legal and market threats surrounding man-made climate change can leave in-house lawyers with a hard choice: either wait until asked to advise on compliance with man-made climate change regulations, or take the lead and help create a sustainable culture that considers man-made climate change conditions and safeguards the long-term future of the company.
In a special section of the report, founder of sustainability strategy firm Andrew Magowan writes, “And the answer always came down to riffs on the same theme: lawyers are there to ensure our business’ success was robust and sustainable in the long-term.
“This level of long-term risk management is the definition of lawyering in the world that we now live in. It is what the purpose of our function demands that we do.”
Corporate law department leaders are well aware of their dilemma to mitigate a company’s risk while supporting its growth, and they are very conscious of how this conflict can damage the department’s reputation for effectiveness.
The leaders surveyed cite 3 main approaches to this dynamic that may help law departments change how they are perceived within the company, allowing departments and their lawyers to move away from being seen as a blockage and toward being welcomed as a collaborative partner that helps get things done.
1. Understand the company’s risk tolerance
First, corporate law departments must establish a clear understanding of their company’s attitude toward risk and how that fits into the company’s growth strategy. All risk management analysis should be undertaken with the acknowledgement of the level of risk the company finds
2. Communicate this understanding to others
After the law department has a deep understanding of the company’s risk tolerance, it’s crucial the department fully communicates with business units as to what is an acceptable risk and which activities or strategies will raise red flags. Make sure other units know these hard lines were established based on what the corporation sees as acceptable risk.
3. Explore solutions
Corporate law departments will go a long way toward burnishing their images within the company if team members are more willing to explore solutions rather than simply hindering or delaying activity or saying no to others’ ideas with little explanation.
This is not an easy balancing act to maintain, as many law department leaders acknowledged in the survey, but balance they must.
One solution: Investing in law teams
Legal technology is not the only investment that improves efficiency and effectiveness of the law department—investments in people do, too.
Department leaders surveyed in the report explained that talent is vital to the job they need to do for the company, and any investment in talent pays strong dividends, including achieving company goals, lowering overall costs, and, perhaps most importantly, mitigating risk to a manageable level.
Investments to upgrade talent or bring in a mix of new skills doesn’t have to be complex, and can include:
- Training current employees to better hone their skills
- Hiring more professionals (both legal and non-legal) to increase the department’s capacity
- Choosing professionals with different legal skills to introduce a variety of skillsets and change the way the department operates
Legal departments have always been in the business of identifying and managing risk, and that role is only expanding. Every year brings new crises for businesses, and some of those crises will be threats to the existence of the business as a whole. Successful law departments will need to be even more active to continue to function as the guardians of their businesses.
By increasing the efficiency and the effectiveness of your law department with Thomson Reuters Legal Tracker, you can have more time to devote to higher value work, like risk mitigation. Learn more.