Think ahead: How in-house counsel can plan forward for unlikely scenarios

Every new year inevitably begins with many of us making New Year’s resolutions. Whether exercising more, losing weight, getting organized, or learning something new, almost everyone picks something they want to improve for the year. It’s no different for in-house legal departments: the beginning of the year is the perfect time to get organized, set goals, and — most importantly — strategically plan for the unexpected, such as organizational risk factors.

Planning ahead is an opportunity for legal departments to show their value to the company. Simply put, they should use the beginning of the year to look ahead, peer around corners, try to spot issues that might arise during the year, and engage in scenario planning for how they should act if those problems arise. It sounds difficult, but it is something that in-house lawyers can do if they have a structure in place designed to spot issues, rank them, and plan accordingly. This article discusses how to create just such a structure.

Gather information

Your ability to strategically plan for the unexpected starts with your ability — or willingness — to do the work to gather the necessary information. Given the speed and volume of information available, this may seem hopeless. The key is to focus on sources of information that are most likely to give you germane details, such as data about your company, the marketplace, and the actors who can influence the company’s business, be it customers, regulators, competitors, or environmental factors. Here are some suggestions for the best way to get the information you need:

  • Start early. Don’t wait until a problem arises to begin the process. It should be a year-round process where you or members of the legal team are constantly digesting information and deciding whether it should go on the list of “things to watch.” Assigning roles can be part of everyone’s development process.
  • Talk to the business. Your best source of information for potential issues is the business leaders you serve. Talk to them! Make appointments to spend 30 to 60 minutes to discuss what they see as potential issues over the next 12 months or so and — equally important — what sources of information they follow to stay informed about developments that might affect their part of the business.
  • Read — a lot. Get your hands on company strategy documents and public filings, read major newspapers, and subscribe to market publications focusing on your company’s lines of business. Lastly, find legal-specific sources of information that track important developments or highlight new and important issues.

Ultimately, devise a “storage” system for the information so that next January, you can go back and wade through what you have accumulated. The storage can be an email folder; note-taking software like OneNote, Evernote, or Google Keep; or a simple spreadsheet — whatever works best for you.

Have a framework to analyze the information

Once you have gathered information about developments, issues, problems, etc., that might affect your company, you need a framework to sort through it all to decide which are worth the time to think more deeply about. Basically, we are talking about risk analysis and some type of game theory or critical-thinking analysis of what you have gathered to determine which issues are worth spending more time on.

To be blunt, you cannot put everything on your list because that is generally too much for any legal department to deal with. You have to decide which issues would be the most impactful, good or bad, if they arise, along with the likelihood of the problem materializing in the next 12 months. This analysis lends itself to a two-by-two matrix (also known as the Eisenhower matrix), where the horizontal axis (x) is the likelihood of happening and the vertical access (y) is the impact on the company. You can simply plot your issues in the different boxes, focusing on the issues placed in the upper-right quadrant — the most impactful and most likely to happen.

While simple, an Eisenhower matrix is incredibly effective for identifying where to focus your energy. Could you be wrong regarding what you placed in the matrix and where you placed it? Of course, no one can predict the future with 100% accuracy, but at least you have a systematic way of looking at and focusing on problems that might arise. When it comes to the questions to ask, there is a lot of information online with questions about critical thinking. Still, I like to reduce it to the most basic question: would this increase company value or hasten value destruction? If the answer is neither, it doesn’t make the list. If it triggers one or the other, it simply becomes “by how much?” The bigger the impact, good or bad, the more likely it makes the list.

Remember, this does not have to be a solo endeavor. You can run the matrix past others in the department, and the business leaders you spoke with, to get their input and see if they agree or how they might otherwise add to or subtract from your matrix. Use their input to refine your thinking.

Make a plan

Finally, once you have gathered and sorted through your information, asked the right questions, and plotted issues on your matrix, you need to develop your scenario planning for what the legal department will do if any of these issues come to pass. As noted, you should focus on the issues in the upper-right quadrant, but if time and resources permit, you can give some attention to the other quadrants. While some like to make scenario planning complicated, I prefer to keep it simple. My approach is generally, “who, what, why, where, and when?” In other words:

  • Who do I need to loop in?
  • What do we need to do?
  • Why do we need to do it?
  • Where will we need to act?
  • When do we need to act?

If I can answer these basic questions, I will be ahead of the curve if something happens. Preparing for contingencies like these can all be part of developing your legal department’s business action plan.

In-house lawyers have a lot on their plate; it’s not easy to carve out time to think about scenarios that “might” happen. But, doing so is the difference between a reactive and proactive legal team and a vital part of making the legal department future ready. While a reactive team can usually get by, the proactive one is an incredibly valuable asset to the business. A proactive team engages in the same type of planning the business undertakes, loops in key stakeholders, gets different opinions and viewpoints, and takes steps to be ready if the unlikely becomes a reality.

Use the process to plan ahead and show the business the value the legal department brings to the table. Fortunately, for those with access to Practice Law, you have a wealth of resources to help you spot and track critical developments that could affect your company.

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