As companies brace for heightened regulation globally, in-house general counsels (GC) want to become a more active influence in the strategic process, according to new KPMG International research in which lead corporate attorneys argue their early involvement in operations can stem disputes and regulatory issues their companies might face.
GCs responding to a KPMG survey across 32 countries acknowledged, however, that some of their colleagues view the legal department as the traditional, last-stop approval function, or worse, as a “necessary evil” – a phrase used by about a third of those interviewed.
By contrast, 67 percent of respondents say they have become more involved in business decisions than they were five years ago, and – as a result -- 80 percent of GCs say the early involvement of their departments in operational activity can pre-empt future legal issues.
Most (79 percent) of the 320 GC surveyed globally agreed that companies can excel when they leverage their legal teams early in the commercial decision-making process, especially in the new business landscape that requires more adept risk management of increasingly complex regulatory challenges. In North America, 96 percent of respondents felt that way.
The KPMG survey also found that more than 90 percent of respondents said the rising regulatory volume and complexity pose the greatest risk to their organizations, and almost 70 percent of the respondents’ companies now include training for GCs on legislative developments in order to help them anticipate issues before they arise.
The survey indicates that it may be beneficial to embed legal teams with business units where they can provide advice in a commercial context, beginning with help on policy decisions. Ideally, legal teams will also work closely with other risk-management functions across the enterprise.
“In many of our clients, it is the role of the Internal Audit and Compliance functions to confirm that the policy put in place at the behest of the General Counsel has actually been implemented,” said Richard H. Girgenti, an attorney and the Forensic leader for KPMG LLP, the audit, tax and advisory firm. “It is important that these functions speak a common language on corporate compliance.”
He noted that maintaining a legal presence on operational teams can help organizations avoid or resolve disputes, because they can offer commercial solutions that can be readily understood and implemented, rather than calling on GCs purely for questions of law when they arise.
Among other survey findings were:
- The top regulatory concerns over the next five years were competition and anti-trust (39 percent), consumer protection (34 percent) and anti-bribery/corruption (32 percent).
Fifty-eight percent of respondents cited resource constrictions, noting that they have sought outside advice for their organization’s regulatory and compliance issues.
Most General Counsel (83 percent) operating in the technology sector expect more disputes to evolve, with regulations and intellectual property being the area of biggest concern for most respondents (78 percent) in the next five years.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International.”) KPMG International’s member firms have 145,000 people, including more than 8,000 partners, in 152 countries.
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 145,000 people 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. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
CONSIDERATIONS FOR GENERAL COUNSEL ALONG THEIR JOURNEY
The following considerations are drawn from Beyond the Law: KPMG’s global study of how General Counsel are turning risk to advantage, a new report from KPMG International.
1. Offer advice with a commercial context
2. Take the time to really understand the business and its risk appetite
3. Work closely together with those dealing with the risk and governance agenda
4. Engage directly with the organization’s senior decision-makers
5. Spend time embedded in the other parts of the business
6. Build relationships across the business and work collaboratively
7. Put “dispute avoidance” before “dispute resolution”
8. Be flexible in dispute-resolution strategies
9. Work with commercial colleagues to protect relationships
10. Treat the resolution of disputes like any other strategic decision
11. Stay up to date with the ways the business uses new technologies
12. Don’t underestimate the potential impact of cultural differences
13. Analyze past incidents to anticipate future risks
14. Use the commercial language of the CEO and CFO to get points across
15. Be adaptable in responding to different regulatory environments
Contact: Robert Wade