48 ASIAN LEGAL BUSINESS – DECEMBER 2023 WWW.LEGALBUSINESSONLINE.COM THE BACK PAGE THE LEGAL DEPARTMENT AS PROTECTOR OF THE BUSINESS BY ELIZABETH DUFFY Metrics that show a corporate law department can be a staunch protector of the business are becoming increasingly important in demonstrating value. Each year, the Thomson Reuters Institute conducts regular conversations with about 2,000 general counsels. In those interviews, general counsels tell us that they have four priorities: providing quality legal advice, protecting the business from risk, enabling business goals, and doing all that within budget. These themes are consistent across industries and regardless of the size of the organization that the legal team supports. However, GCs also tell us that they’re not collecting metrics that show their progress towards all four of those goals. It’s not that legal teams don’t collect metrics at all — 90 percent are doing so, up from 75 percent eight years ago. But too often, the focus is on measuring how much the law department spends. While that supports an important goal — meeting budgets — it doesn’t begin to show the true value of the legal function to the organization itself. Without metrics that show progress toward the other goals, it’s difficult for the legal team to be perceived as a true strategic partner. For the legal team, being a protector of the business means taking a proactive approach to risk by preventing legal issues from negatively affecting the business before they happen. This is an especially large and complex task at multinational corporations, of course, but one that is of singular importance. Of the four priorities described by most GCs, our research shows that protecting the business is the priority of most concern to boards of directors and shareholders. Of course, the range of legal risks that could potentially present a problem to the business is large and growing: Changing laws and regulations; an increasing focus on environmental, social and governance (ESG) issues; long, complex, and opaque supply chains; and the complexities of operating in multiple jurisdictions, and that’s just for starters. To that end, there are three categories of metrics that may prove helpful: 1. Risk discovery If the legal team is part of a larger organization, it probably already has a regular risk discovery or risk-mapping process in place. According to our research in 2023, almost half (45 percent) of GCs at organizations with $1 billion or more in annual revenue run annual risk-mapping exercises, while about one-third (34 percent) say they do this quarterly or even more regularly. Risk mapping allows legal teams to proactively identify and assess risks, with the goal of being able to implement a plan to reduce or manage them. Risks should be mapped across lines of business and regions to help identify the processes and training needed to prevent damage to the business and minimize legal costs. Metrics that show the department has a proactive risk-discovery program might measure: i) whether team objectives are set; ii) the frequency of risk mapping; and iii) whether there is continuous scanning of new laws and regulations. 2. Horizon scanning Horizon scanning is an important element of risk mapping, which helps the legal team systematically uncover new laws and regulations, as well as other relevant changes, across all active jurisdictions. In this case, the measure of success is not how many new risks are found, but the strength of the team’s process for finding them. The right metrics can help evaluate the effectiveness of their scanning system. In addition to maintaining risk-discovery and horizon-scanning programs, it’s important for legal leaders to maintain a regular presence in board and executive meetings. 3. Risk management After risks have been identified, the process of managing and mitigating them comes to the fore, and this is where risk management metrics can be vital. Metrics that could help illustrate the success of the legal team could include: i) number of disputes raised; ii) percentage of disputes resolved without litigation; and iii) number of risks registered, evaluated, and mitigated. These risks can be monitored by categories, such as antitrust, data privacy, supply chain, anti-corruption, and intellectual property. While legal departments have multiple and competing roles and priorities, the department’s role as a protector of the business is unique. It’s not often or easily duplicated by other departments, of course, and even top-flight outside legal counsel may not fully understand the challenges of the companies’ particular business or industry. It’s also a top priority for CEOs and corporate boards. For those reasons, it’s especially important for corporate law department leaders to design a metrics program that properly illustrates its success by focusing on the key outputs they hope to achieve, while creating structure and efficiency, and allowing for timely identification of risks that enables action. Elizabeth Duffy is senior director, Global Client Services at Thomson Reuters. A version of this piece was originally published by the Thomson Reuters Institute. Reprinted with permission. Asian Legal Business is seeking thought-provoking opinion pieces from readers on subjects ranging from Asia’s legal industry to law firm management, technology and others. Email ranajit.dam@tr.com for submission guidelines.
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