Common Concerns for CLOs
In the past, the law department was positioned solely as advisors on legal problems, but this year brings the chief legal officer’s role as a key business strategist to the forefront. While chief legal officers and general counsel work for companies of varying sizes within different industries and regions, their top concerns are universal.
Just as the 2007-2008 financial crisis paved the way for the age of the chief financial officer, 2018 has ushered in the age of the chief legal officer (CLO). In a time of great change in the regulatory climate, the CLO is a critical ally to the board of directors and executive leadership in establishing a company culture of compliance and ethics, as well as mitigating risks against a company.
It’s clear that the most pressing issues facing multinational corporations today are legal issues. From emerging legal and regulatory matters to cybersecurity and setting an ethical tone from the top, here are a few of the top concerns keeping today’s CLOs up at night.
Geopolitical and Regulatory Changes
Seventy-four percent of CLOs and general counsel (GC) across the globe rank regulatory or government changes as very or extremely important in the year ahead, and 29 percent say a regulator targeted their company in the past two years, the ACC CLO 2018 Survey found.
The C-suite consistently turns to the CLO or GC for guidance on laws and regulations impacting particular risks. Likewise, a higher proportion of CLOs and GCs who report directly to the CEO regularly meet with business leaders to discuss risk and operational issues, and the executive team almost always seeks their input on business decisions.
More than ever, as we look into 2018 and beyond, law department leaders will increasingly be measured by their personal effectiveness, diligence on management practices, and ability to understand the company’s risk appetite. Thus, it’s vital for CLOs and GCs to have a direct reporting line to the CEO and communication with board of directors in order to set an ethical tone from the top that supports a corporate culture of robust transparency and compliance.
Protection of Corporate Data
Data breaches and protection of corporate data are the fastest growing areas of focus for CLOs and GCs in 2018. Twenty-seven percent of CLOs and GCs worldwide stated their companies experienced a data breach in the past two years, noted by the aforementioned research. With no signs of slowing down and the growing number of countries developing their own forms of data privacy rules, the prevalence of data breaches has also increased attention on how companies respond to these incidents.
GCs and CLOs must ensure their companies are keenly focused on not only making changes to policies involving corporate data, but also on having the necessary resources to be successful. The movement away from simple awareness toward behavioral change, such as holistic and proactive incident response plan and employee training, better directs business leaders who operate in different functions throughout a company. This is certainly true for the CEO or CLO who may be responsible for answering inquiries from the board of directors.
Disruptive technologies such as blockchain, artificial intelligence and big data have raised the level of importance placed on technology developments. Up from merely 6 percent in 2013, one-in-five CLOs and GCs view the emergence of new technology as extremely important in the year ahead.
With continued pressure to do more with less and reduce costs, law department leaders will continue to embrace new technologies, as well as weigh corresponding risks, as a way to enhance their performance, processes and quality of work — further improving the overall operations of the legal function.