Companies that recognise the true value of their in-house teams are more likely to thrive, says Kathryn Britten

The structures of global organisations, and the roles their executives play within them, are evolving rapidly to keep pace with the ever-changing global economy.

As the importance of technology to deliver today's corporate objectives in almost all sectors is giving the chief information officer a more high-profile and cross-functional role, the same can be said of the general counsel as legal, regulatory and other risk issues take centre stage in corporate strategies and board discussions worldwide.

The purpose of KPMG's first global survey of GCs was to find out how much progress they are making as business decision makers and what challenges they face in this evolving role. Interviews were conducted in 32 countries across a range of industries, in both mature and high-growth economies.

According to the survey, which canvassed the views of 320 GCs, there is a significant gap between the beneficial impact GCs can have and their actual involvement in strategic decision making.

It is increasingly being acknowledged that GCs have unique skills and approaches to business issues, and their influence at board level is growing – but the journey is far from over, with one in five GCs we surveyed not having a direct reporting line to the board.

In the current business environment, those companies that can turn their risks to their competitive advantage, with their GCs playing a pivotal role in so doing, will be best placed to thrive in the long term.

Disputes are an occupational hazard of doing business. But the complexity and disclosure implications of the commercial disagreements that GC are expected to handle – whether with regulators, suppliers, customers or even shareholders, for example – are changing.

The price of failing to recognise and address these facts proactively could be high – in terms of financial or reputational loss, business disruption and the risk of destruction of key business relationships.

Our research found that litigation is the second largest area of work undertaken by in-house legal teams around the globe (with only regulatory compliance, unsurprisingly, scoring more highly).

It ranked in the top three areas of work undertaken by 57% of GCs surveyed. This level of response is similar in both mature and high-growth markets.

Of real concern are the two greatest challenges GCs know they will face in relation to disputes, which are complexity of subject matter (61% predict an increase) and the volume of information needing to be disclosed (59% predict an increase).

From both a commercial and financial perspective, the stakes are getting higher, and avoiding rather than having to resolve a dispute is preferable for everyone concerned.

Preventative medicine

Seventy-nine per cent of GCs surveyed say their involvement in the commercial decision-making process reduces the number of disputes and regulatory issues faced by their organisations.

As such, there is likely to be real value in GCs being involved throughout the life of a contract, not just at the beginning to help shape the initial agreement. This requires both in-depth understanding of the business and the ability to frame their advice in an impactful commercial context that their colleagues will relate to.

There is a strong consensus that focusing on dispute avoidance is a priority, and that it is the responsibility of the wider business as much as the in-house legal team. In addition, 47% of our survey participants state that they seek external advice, either often or very often, on the avoidance and early resolution of disputes.

Adopting a 'fire fighting' approach – managing disputes as they arise – is becoming increasingly impractical as their number and complexity grow.

However, we see many organisations failing to put procedures in place to ensure that lessons are learnt from past disputes to reduce the risk of similar disputes in the future. Clearly, such an approach is essential if the GC is to have a more strategic and forward-looking role.

Potential risk blind spots

Surprisingly, more than three quarters of survey respondents said new technology poses little or no risk to their business. This contrasts sharply with what we have seen in the context of the increasing number of technology-related disputes over the last decade or so.

The pace of change is quickening, not slowing, and this suggests that this is an area of significant potential risk both now and for the future.

For example, the growing use of social media and cloud computing deserve the attention of the GC, who must understand the workings of, and inherent risks within, these technologies. Such a role does not solely sit with the IT department.

'Predicting the weather'

More and more corporate problems are likely to be directed to the GC's desk, enough for the GC to have a strong sense of the current and future climate facing the business.

Nevertheless, some companies still see their GC as a technical specialist, a 'necessary evil' to be consulted only when there is a specific legal aspect to consider.

Our survey found this to be more so in high-growth markets, where roughly 30% fewer GCs are involved in business strategy compared to those in mature markets.
Disputes clearly have the potential to be very disruptive and destabilising and, with

increasing regulation and rapidly changing technology, the complexity and logistics of managing them looks set to become even more demanding.

It is therefore critical that boards and chief executives facilitate the evolution of the role of the in-house legal team so that their GC can truly help them to recognise the changing business landscape and how risk can be turned to advantage.

The companies that are getting this right are using the GC as a 'barometer', encouraging them to broaden their networks within the organisation and realising the full potential of this increasingly critical resource.

Kathryn Britten is global head of KPMG's legal services sector and chairman of KPMG Forensic in the UK.