Opinione | 06-08-20

Going In-house: Operations and Risk Management

Based on the article, Going In-house: A Changing Marketplace, first published in Legal Business World - 2020 here. SSQ’s expert APAC Senior Adviser Kenneth Tung explores the dynamic in-house market in the third of a series of articles. The first four editions are in SSQ’s publications archive here.

 

The in-house lawyer must meet today’s expectation, mainly to support business operations, but always be guided by a purpose to play an active role in shaping and executing the organization’s strategy. In facilitating business operations, with time and effort, a qualified corporate counsel will be able to improve legal tasks and processes by eliminating waste and improving efficiency, perhaps even deploying automation and self-help mechanisms that are actually adopted in the field. She must also keep in mind that efficiency gains should be made in the enterprise activities and not centered on just the legal aspects.

 

While lawyers may have often been perceived in the remedial context, i.e. at the bottom of a cliff, an in-house lawyer must manage risks in the context of relevant opportunities. A risk-only approach will have the legal function clapping with only one hand, being reduced to the department of “no,” even with all intentions to be commercial and business friendly. This is because an adversarial structure to risk management will in all likelihood isolate the lawyer who is perceived to pass judgments on risks. This in turn will induce a negative cycle of distancing the lawyer from facts and data and thus raising the lawyer’s adversity to consider any risks [1] Further, marshaling the evidence takes on a different complexion today in the age of data, and overwhelmingly data resides outside the legal department in most organizations that are heavily siloed. While a discussion of how technology impacts the legal space lies beyond the scope of this article, the following venn diagram [2] serves to remind in-house lawyers to keep in mind lawyering constitutes only a part of their job.

 

 

To arrest this state of affairs and generate a virtuous cycle, corporate counsel must start getting from behind the desk and grounding themselves further in the business organization. This will likely mean impressing people and doing one’s homework only starts and does not end with the acceptance of a job offer. It will also require thinking beyond organizational silos, appreciating the enterprise as a whole and a robust resilience in getting inside the heads of business colleagues in the company. A lifetime of learning the business will sharpen a mind frame of:

 

  • Anticipating and solving problems and passing less judgment
  • Thinking in probability and adopting a quantitative approach to risk
  • Rising above a bipolar (right and wrong) worldview
  • Adopting a flexibility to think beyond linear and uni-causal analyses
  • Gaining a second nature to seek and follow data

 

While the business colleagues will need to meet the in-house lawyer half-way, the lawyer must take the initiative to turn around the expectations.  A shift of the mind frame from one of the clean-up crew to an integral part of decision making will help bridge the gap between innovation and risk management. [3]

Refraining from defaulting into a singular focus on the one percent risk in a ninety-nine percent upside scenario will address the first of the twin challenges to lawyers by the enterprise – aversity to risk and over-reliance on past precedence. [4]  In-house counsel must also learn to think like a business owner in forging a future in addition to defending the past. This is where playing an active role in shaping and executing the organization’s strategy comes in.

 

[1] Innovation Risk: How to Make Smarter Decisions, Harvard Business Review, Apr. 2013. 

[2] How Google Works, (see note 14 above), section titled “Horseback Law.”

[3] Ecce Advocate - Reflections from Conversations in the Field of Legal Services Circa 2019, K. Tung, Legal Business World, May 30, 2019.  This is one reason why the “horseback” law approach suggested in How Google Works (2014), E. Schmidt & J Rosenberg, to deploy in-house lawyers to triage potential issues will not be optimal.  It is akin to using the legal function merely as a mobile canary in the coal mine, but yet to take into account that the foremen in the mine will not feed this canary accurate, real time data.  Perhaps when lawyers begin to be accepted as an integral part of the operations at strategic levels will they participate to shape the overall picture at the top of the cliff rather than being stuck in an ambulance at the bottom.  Indeed, Why Your Innovation Team Needs a Lawyer, E. Dhawan, Harvard Business Review, Jul. 21, 2016, advocated including legal and other verticals to add robustness to innovation by being a part of it.

[4] AI, the Internet of Legal Things, and Lawyers, K. Tung, Journal of Management Analytics, 6:4, 390-403, DOI: 10.1080/23270012.2019.1671242 (published online: Nov. 14, 2019); If “Software Is Eating the World,” is Legal Service on the Menu?, K. Tung, Legal Business World, International Edition no.5/6, pp. 50, 53 (2017).