A major new study argues that risky markets enhance GC role. Alex Newman and Alex Novarese report

As the headlines attest seemingly every day, it's a riskier world out there for multinationals. Yet, judging by a major report on the attitudes of general counsel at some of the world's largest companies, senior in-house lawyers have learned to like it that way.

The oxymoronic observation emerges in the report 'Issues & Priorities for Senior In-House Counsel Worldwide', which is released this month. Eschewing the hackneyed focus on attitudes to law firms and panels, the report, conducted by the referral network World Law Group and consultant ELD International, finds risk and compliance concerns dominating the agenda of GCs, particularly in Western economies.

Respondents were drawn primarily from GC or other senior in-house roles at major companies across 33 countries, with 20.4% of the more than 350 respondents coming from China and a further 21.4% from other Asia-Pacific countries. The report focused on large companies, with 42% working at organisations with revenues of more than $10bn (£6.28bn).

With companies wrestling with the cross-border push towards aggressive regulatory enforcement, the four-year slump in the global economy and the uncertainties of expanding in markets like China and India – it is unsurprising that managing risk has moved up the GC agenda. Still, the results are stark.

Asked to identify their top three concerns, 45% of corporate counsel cited the difficulty of effectively covering risks in emerging markets and 43% keeping up with 'so many compliance challenges'. The most cited concern – the struggle to meet demand for services given resource constraints, cited by 56.6% –  also reflects risk, as GCs try to navigate an increasingly uncertain globalised marketplace. 

Risk also dominates the priorities of legal teams for the year ahead, with the aim of improving compliance capability named by 43.3% of respondents – the most popular goal. The second greatest priority was to 'reduce external legal costs', while other goals were dominated by attempts to improve the efficiency and sophistication of in-house legal teams via team restructurings or investment in technology and training.

Identifying specific regulatory risks, two areas stood out: anti-corruption/bribery and antitrust, cited by 38.7% and 38.4% of respondents respectively, while data protection/privacy was cited by 30%.

With GCs under cost pressure, 70% of respondents said that cuts to legal resources had increased risks for their company, with a further 15% believing there had been a 'marginal' increase in risk due to cost-cutting.

Yet despite what appears to be a gloomy picture of over-worked GCs struggling to cope with sprawling global networks, the report found clear evidence that job satisfaction has risen markedly since the banking crisis four years ago.

Fifty-four per cent of senior in-house counsel said they liked their job now more than 'a few years ago', against just 18.5% who said they were less satisfied. The contradiction appears to be largely due to the riskier environment providing a more central role for legal teams. Eighty per cent of those with rising satisfaction put it down to the 'stronger role of corporate counsel'.

Commenting on the findings, Edward Gretton, head of legal at Hanson, said: "I do not accept that less resource must always mean more risk. GCs need to be smarter in delivering their control output in matters such as risk management and compliance. Too often, lawyers lose themselves in the detail of risk management and the latest regulatory developments, without asking themselves whether their control measures will work to deliver the business culture their stakeholders deserve."

Sony Mobile Communications corporate vice president and GC Jonathan Pearl added: "This is a new era for multinational companies, which are now having to compete with competitors from emerging markets, which are working on a lower cost base and are generally subject to less regulation. GCs need to embrace this change and do things differently."

The focus on rising satisfaction via becoming a more integral part of the business has a number of implications for the corporate legal industry. When asked which key single element would improve the work of their legal team, 43.6% said greater integration with the business, while a further 12.8% cited more access to the executives/board.

This priority is reflected when GCs were asked about key strategies to improve the work of their team. The most popular existing approach was to invest in business or commercial training for the legal team.

Taken collectively, the findings raise the question of the extent to which in-house legal teams are downsizing the role of law firms. The report found substantial willingness of bluechip clients to turn to non-law firm providers to help support their work, though compliance training specialists and e-discovery/litigation support providers were more popular than legal process outsourcers.

Janet McCarthy, former GC at Mitsui & Co, commented: "GCs have to be smarter about what work they outsource in a difficult economic time coupled with a riskier legal environment. In-house teams will continue with a reliance on external firms to provide advice on specialist technical issues. On the other hand, I have seen a trend for GCs building expertise internally to ensure the in-house function can operate more efficiently for the business."

More positive news for law firms came from Chinese general counsel, who had little concern regarding the cost of legal advice and were far more concerned with the challenge of supporting the commercial activity of their employers.

However, the overall picture to emerge suggests global legal teams are increasingly eyeing a future in which they are more fully embedded with their employers – and far less reliant on external suppliers.

ELD president Leigh Dance sums up the mood: "You have to spend way less money as a GC now. What it all equates to is having to re-engineer and restructure. In-house lawyers are proceeding apace with or without law firms informed or at the table."

For more analysis, see Risk and return – can law firms get with the new GC agenda?

The multi-polar perspective – key findings

  • Risk concerns dominate the agenda of global GCs – risk, regulatory and compliance issues were cited across a key range of indicators
  • 88% of respondents have access to senior management
  • Despite a clear consensus that legal teams are managing on tighter budgets, job satisfaction has risen over recent years for more than half of respondents
  • GCs are overwhelmingly focused on improving their internal legal functions, whether through training, IT investment or reorganisation rather than refining services from outside counsel


Source: World Law Group; ELD International

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