- General Counsel on a journey from being seen as a “necessary evil” to integral part of the business
- Number of disputes in the high-tech sector in particular expected to rise
Companies around the world are threatened by a growing tide of regulation, according to a new report by KPMG which charts the views of 320 in-house General Counsel, but finds those using their legal skills to help make commercial decisions are the ones that will best thrive in the new environment.
The report, conducted by global research agency Meridian West, interviewed General Counsel from 32 countries who gave their views on a wide range of issues, from relationships with the board to the risk and regulatory challenges ahead and managing future disputes.
One of the key findings was that, although only just over one third (38%) sit on the main Board of their organisations, 70% agreed that giving commercial advice to the board is now just as important as giving legal advice.
Kathryn Britten, Partner and Chairman of Forensic for KPMG’s Risk Consulting team in the UK, said: “Companies are facing a cloud of regulation that is adding a layer of complexity to almost every commercial decision that they need to take and risks casting a further shadow at a time of low economic growth in mature economies. General Counsel are increasingly being required to act as the barometer for their organisations, gauging the pressure and helping to scan the horizon for future threats. It is clear that involving general counsel in commercial decision making is now the norm for those companies that are successfully navigating today’s risk landscape.
The need for General Counsel to pick up the mantle is clearly highlighted, with the increase in volume and complexity of regulation flagged as the greatest risk to organisations over the next five years by 90% of respondents. For General Counsel operating in the technology sector this is expected to play out in the form of disputes. While the overall average across all sectors was 51%, 83% of General Counsel working in the hi-tech sector agreed that the number of disputes would rise over the next five years with the biggest areas expected to be within regulation and intellectual property (both 78%).
David Eastwood, Partner in KPMG’s Risk Consulting team in the UK, said; “The spread of new technology and concerns surrounding data security and protection are growing risks for all organisations but for those in the hi-tech sector the global speed of change brings particular challenges. I was very surprised that even in the technology sector less than a third of General Counsel see new technology as a strong risk. The survey showed that today’s General Counsel must now keep pace with technology and other changes to anticipate and mitigate the risk of new disputes and regulatory issues in the future.”
This shift in role to forward-looking commercial consultant has not been without its issues for General Counsel. According to the survey around two thirds of General Counsel are now more involved in business decisions than they were five years ago, a very significant move forward. However, there is clearly some way to go, with 80% of General Counsel saying their involvement can reduce the number of disputes and regulatory issues their companies face. It is clear that some organisations still see legal departments simply in terms of their traditional function or as a “necessary evil” – a phrase that was used by around a third of those interviewed in-depth for the research.
Britten concluded: “It is not enough for businesses to use General Counsel purely for questions of law as and when they arise. The most successful organisations will have General Counsel who are integrated in the businesses, advising on the management of risks and the avoidance or resolution of disputes and offering commercial solutions that can be readily understood and implemented. The General Counsel we spoke to told us that they must continue to adapt to meet the increasing expectations of their role, focusing as much on business opportunities as legal considerations or risks.”
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KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.