Roundtable: Managing risk within global businesses

Thanks to the pandemic, managing risks within businesses has never been more challenging. In-house teams are shepherding their organisations through the turbulent legal and regulatory landscape, often with constrained time and limited resources.

Legal departments have also had to change the way they communicate with their businesses. The remote working environment has implications for identifying risks early enough to act on them.

Technology here is key, and teams are developing innovative techniques to roll out risk management protocols throughout their businesses within the new normal.

This roundtable session, co-hosted by Alan Ragueneau, Europe managing director of Dentons Nextlaw In-house Solutions, and Katherine Foran, Dentons’ deputy global chief legal officer, brought leading in-house minds together to share experiences and advice to professionals for navigating the risk landscape in these turbulent times.

International variation

The conversation first turned to a theme that was widely spoken about before the pandemic hit: globalisation.

While the suspension of international business travel, or any travel for that matter, put the brakes on some plans for expansion, the use of technology has shown that firms have the ability to successfully collaborate while working from home offices in all corners of the globe.

Businesses will continue to grow into different jurisdictions, and this presents legal functions with new challenges in navigating local laws and regulations.

Attendees discussed how they manage risks in the jurisdictions where the business doesn’t have a significant presence.

One delegate said: “We try to have a lawyer or two in every region. Where we don’t have lawyers we’ll work closely with local counsel. We only rely use the big law firms for large M&As.”

Another delegate was more open to using large firms and said: “We’ve aligned ourselves to one or two firms that have a global spread and can make good recommendations on a local level for us. We look for bespoke advice on certain areas rather than full reviews to save on cost.”

Given the global financial situation, legal teams are under increasing pressure to cut costs and deliver on a tight budget. “You don’t always have enough business in a region to justify legal counsel everywhere on the ground,” said one attendee. “We make sure that the staff throughout the business put forward tickets to HR for any legal expertise they require – this way we can limit costs.”

Identifying risk

One way to keep costs down is to identify risk at an early stage. Globalisation can make this tricky, with resources spread thin and less people on the ground in new jurisdictions.

To get around this issue, one respondent had shifted liability from the organisation to its local partners. “We use partners that are deemed local experts and include liability clauses within their contracts to transfer the risk onto them.”

“The ideal scenario would be to do comprehensive risk assessments in each territory, but generally that’s not how things work because compliance only becomes an issue for the business when it needs to be reacted to, rather than pre-emptively,” said another delegate.

Another sure-fire way to get knowledge on risk in a given jurisdiction is to speak to similar organisations that are operational in the region. “This is easier if your sector has a collaborative culture,” admitted one attendee.

Attendees also stressed the importance of speaking to the business and interviewing management and the executive. Getting good at identifying risk stems from properly understanding your business and getting experience through longevity.

Risk appetite

Those in attendance were under no illusions, it is impossible to pre-emptively mitigate every risk posed to a business.

The amount of risk that organisations are willing to tolerate can vary, even among different parts of the same organisation. The amount of risk you’re willing to take on is known as the risk appetite.

An organisation’s threshold is often associated with its size and the resources available to it. One attendee, senior legal counsel at a large telecommunications company, said: “Because we’re so large we know that it is impossible to ensure that everyone is doing the right thing in terms of our reputational, economic and legal risks. You learn to tolerate the odd bad apple, but what you can’t tolerate are systemic concerns. When it appears that there’s a systemic risk or gap in our defence, that’s when things get escalated to me.”

“The way that an organisation looks at risk often depends on who is in senior management,” said one delegate. “If you have someone who is experienced in stock listed companies on the board then your risk appetite will likely be lower. The same is true for executives with relatively little experience.”

Leveraging technology

We’ve seen how managing cost and reaching all parts of a large organisation are key challenges for the modern in-house lawyer.

The legal tech revolution has been permanently on the horizon for years now, without ever quite having the impact that was expected. The pandemic has changed this, and the importance of technology has been demonstrated for all to see.

But what does leveraging technology for effective risk management look like in practice?

“All of our training is automated,” said one delegate. “All new starters spend three days doing a training course and then we run yearly updates. This helps us neutralise exposure to certain liabilities, but you have to be careful not to ‘overtrain’ staff as they’ll just switch off.”

Another delegate said: “We rolled out four main compliance training packages via a third-party provider covering bribery, competition, GDPR and whistleblowing. Completing the training is a base requirement for all employees, including the executives.”