Legal risk in an organisation
7 ways the in-house lawyer can be effective in managing legal risk within their organisation.
There are really two aspects to this.
The first is the way in which Legal manages the risks arising from those areas for which it is primarily accountable. This would include the operational risks of the Legal department and those areas of its work that it is responsible for – litigation and the use of external lawyers, for example.
Second, there are those legal risks that result from the organisation’s business together with risks that are common to organisations generally. Examples might include supply chain risks, competition, regulatory compliance, operational business risks, and meeting environmental and taxation requirements. Legal may well have a secondary role here in helping to identify, assess, control and manage these risks but without being primarily accountable for the relevant activity.
Organisations typically have detailed frameworks and strategies to manage their risks, including legal risk, with Legal playing an important role in its management. At the same time, individual lawyers, whatever their role, can play an important part in the way they go about their business and their interactions with their business colleagues. This is less to do with strategies and systems than with personal effectiveness. We will look separately at the role of in-house in relation to legal risk generally in an organisation but here we consider 7 personal strategies that in-house lawyers can use to help manage legal risk at the front line.
1. Get out and talk
It sounds obvious but it’s very easy to become tied to the desk, which we only leave for meetings or breaks. A lot happens in organisations on an informal level, and the more we are able to interact with colleagues the more we’re likely to learn about what’s really going on. This can be a really useful way to learn about the problems and challenges that colleagues are dealing with and understand things from their perspective. It also allows you to explain things from your legal viewpoint. This helps to build rapport and trust and help to make working relationships more collaborative. Of course, we need to be wary of the coffee machine conversation being taken as legal advice or policy on an issue (when it isn’t) but some useful knowledge can be gained via this type of informal conversation – although it’s usually sensible to follow up a conversation with a short email to confirm what was (and perhaps was not) said and any agreed next steps.
2. Don’t be overly critical
Lawyers are expected to have an opinion but colleagues will be loathe to consult us if they think we’ll immediately judge them harshly. It helps to cultivate a listening, non-judgemental persona. As lawyers, we are used to being sought out when something has gone wrong or when there’s a threat pending. But we also know how valuable it is to be involved early in plans so that we have the chance to consider the legal risks and our advice, in a wider context. Being seen as someone who listens well, is not overly critical and does not rush to judgement is likely to make colleagues more willing to seek our counsel and advice. And the way we advise is important also. Generally, our role requires that we work collaboratively and constructively with colleagues to find a workable solution, even if it’s not the one first envisaged. The more the lawyer is seen as a business partner the more we’re likely to be involved. This is not to say that lawyers should not push back strongly on bad or highly risky ideas. But colleagues are generally looking for workable solutions.
3. Get in the loop early
This is not always easy as there may be established processes that either exclude lawyers altogether (when they should not) or involve them too late for their advice to be constructive. There may also be a culture of limiting lawyers’ involvement in certain business processes or meetings, including for fear that they will stop or side-track the business initiative. These may well be issues that need addressing by the General Counsel and senior members of the legal team. But every in-house lawyer is likely to come across situations where they are seeing repeat business either because anything that “looks legal” is sent to Legal or because legal advice has not been taken earlier and the problem has escalated. These are the situations where lawyers need to be persuasive and influential. It’s important to be able to demonstrate to colleagues how involving us in similar matters early will help to nip problems in the bud, saving colleagues (and us) valuable time. And if there’s too much repeat business, there may well be a case for helping colleagues with self-help options so that only novel or complex matters are escalated to Legal.
4. Get colleagues used to thinking about legal risk
When asking your advice, colleagues are likely to have different levels of understanding about what the legal risks are in any proposed course of action or in relation to a particular threat. They may have a sophisticated level of knowledge and will be consulting us over a novel development. Or they may be unsure about what the legal risks are, let alone how to manage them.
In-house lawyers can help their clients in two ways here. First, by being clear about their role in advising on legal risk. The lawyer explains and advises on the legal aspects of the risk; the client takes the decision on risk; and both must ensure that the client understands the legal advice. Second, a more formulaic approach can sometimes help whereby legal advice is formatted to always include identification of the relevant legal risks and an assessment of their impact and consequences. This focuses the mind of both the lawyer and our colleagues on the most critical issues; it gets the colleagues used to seeing legal risk being routinely addressed in legal advice; and it sets out the impact and management of those risks in a way that they are able to easily follow. For example, using tables to identify and prioritize the key risks; to assess their impact on relevant business areas, including percentages and traffic light rankings where possible; and listing control/ management options, including any alternative ways of proceeding where risks are significant. While assessing risk in terms of probability may seem like a theoretical exercise (and can be tricky), colleagues can value such short-hand approaches and it enables us, the lawyers, to cover all relevant bases in a language that is understood, even if we need to add narrative elsewhere for context.
5. Get involved in wider business activities
One of the easiest ways for in-house lawyers to be actively involved in managing legal risks is via involvement on project teams and business groups and committees. If there is an established culture of appointing in-house lawyers to these then it is an excellent way for lawyers to highlight, in a proactive way, what the legal risks are and how they may be controlled and managed. It also helps the lawyer see problems in context and, having identified the risk, to work collaboratively with others to manage it. Exposure to working groups like this can also form an important part of the in-house lawyer’s career development. But even if we are not involved in formal project teams or groups, there are likely to be many situations, in meetings say, that provide an opportunity to highlight the legal risks of a particular course of action. Here, it’s important to listen but also to ask questions and speak up to voice ideas and concerns.
6. Manage your own risks
While today’s in-house lawyer may want, and be expected, to play a role in managing wider legal risks in the organisation, the narrow risks still need to be managed. It undermines the lawyer’s credibility if they (and any wider team) are not felt to be in control and managing the risks that they are primarily accountable for. Some of the more obvious ones include the use of external lawyers, regulatory compliance, recruitment and people management, contract management and the quality of legal advice. Legal needs to demonstrate best practice in the way it manages its own key risks. For the individual lawyer this also means being organised, efficient and timely in the way they deal with referrals and being constructive and approachable.
Where the organisation is in a regulated sector, relationships with regulators will form a key part of the stakeholder management agenda. Or, in a public body, the relationship with a government department. In-house lawyers are likely to have various dealings with lawyers and advisers in the relevant stakeholder body and the quality of these relationships can play an important part in the management of legal risk. Good relationships can be built on a clear understanding of the respective positions of both parties and a willingness to find workable solutions, where possible. Of course, the in-house lawyer must act in the best interest of their organisation and as instructed but knowing our regulatory or government counterparts and being able to talk to them constructively can be a really useful way of keeping regulatory risk under control.To read the next article titled 'Legal project management' click here.