Young boxers entering the ring for the first time very quickly learn an important lesson: it’s not necessarily the hardest hits that floor you. Rather, it’s the punches you don’t see coming that knock you out.
The same is true in business – there’s nothing worse than being blindsided by an issue you weren’t aware of.
Take Credit Suisse for example. On an analyst call earlier this year, chief executive Tidjane Thiam admitted that he had been kept in the dark about some illiquid trading positions at the bank. The result? About $1 billion of write-downs across two quarters.
And it’s not just the CEOs at financial institutions who find themselves at risk if they fail to expect the unexpected. In-house legal teams can handle thousands of cases across hundreds of customers in an environment where missing even a single deadline might cost the firm dearly – perhaps even enough to wipe out profit for an entire year.
The only way to be sure that nothing slips through the net and protect the company is to gain a holistic view of all legal activity – one that enables in-house counsel to view the full picture of company exposure and take proactive steps to manage it, mitigating issues before they arise.
In a way, it’s a bit like classic sci-fi adventure The Matrix. The story begins with Keanu Reeves’ hero Neo being offered a choice between two pills. If he takes the blue pill he’ll remain ignorant about the true state of the world. But take the red pill and he’ll get to see the world for what it really is. Of course, he chooses the latter.
And this is how Legal Suite sees its mission. It allows their clients to take the metaphorical red pill, seeing the truth about their situation so that they can change it – in much the same way as Neo bends the Matrix to his will.
This allows those clients to add much greater value to the business. Typically, legal departments in financial firms have been thought of as cost centres within businesses but those with a holistic view of company exposure are different.
For the first time, legal departments have been enabled to act as trusted advisors, providing strategic counsel to the CEO on how to mitigate risk and grow the business – not just dodging bullets.
In particular, there are two areas in which legal teams can add value simply by seeing more clearly the true state of company affairs: control and corporate governance.
It’s very easy for a situation to spiral out of control, sometimes without people even realising it. A holistic view of company legal dealings allows in-house counsel to see in advance when a situation could get out of hand and take steps to rein it in – minimising the firm’s exposure to risk.
For instance, the company could be handling too many litigations at once. Of course, this can be difficult for a team if its resources are being stretched too thinly, but the bigger issue is the real risk it poses to the firm.
To put it simply, litigation is expensive – especially in a post-financial crisis world of fines that can run to hundreds of millions – and can be a severe drain on cashflow, even for the winner.
And given the proliferation on financial risk regulation in recent years, it’s only those legal departments able to see problems coming that can turn away from crisis mode and on to the front foot, taking control of their companies’ destinies.
Good corporate governance depends on efficient process. Efficient process depends on knowledgeable employees. And knowledgeable employees depend on a near real-time holistic view of all moving parts – both present and historic.
Take contract lifecycle management for example. One of the major issues with a negotiation can be when one party is determined to force a clause through and keeps adding it in at every stage – even after it has already been rejected.
Tools that display the complete transaction history so users can see exactly what was agreed and when, along with what was rejected at each stage – allowing in-house teams to keep control of their negotiations, doing deals more quickly and on more favourable terms, even in the event of personnel changes is crucial to improving corporate governance.
And this is the fundamental point. Credit Suisse’s Tidjane Thiam was living in the Matrix, with only an illusory view of the bank’s affairs. But in-house legal teams that take the red pill can see the truth, picking up on problems before they appear and – just like Neo – their personnel can move faster and their advice can punch harder. Protecting the boss, the bottom line and the business.
Sourced by Thierry Mallat, chief executive and co-founder of Legal Suite