In recent years, the geopolitical environment has become highly volatile and unpredictable. From international trade wars to political instability, businesses are dealing with a wide range of challenges that require an agile and robust legal strategy. According to a published discourse by Jane Allen, a PwC US consulting principal, such a strategy is crucial for businesses to protect not only their local but global interests as well.
Having a legal function that is intimately involved in the company’s strategy and operations is instrumental in managing these risks. The function’s understanding of geopolitical issues and their potential ripple effects informs the necessary response at a organizational level. However, the approach to risk management requires a broader perspective than traditional legal training and should involve greater integration into the business’s overall functions and strategy.
Among the suggested strategies is better embedding the legal function within the business strategy. The legal department should engage different parts of the business, work collaboratively, and play a key role in executing transformations. This approach allows businesses to respond with agility and address issues in their supply chain, consumer sales, workforce, and overall business continuity.
The crisis response is another area that needs to evolve, given the increasing frequency of significant geopolitical events such as wars, pandemics, or inflation pressures. Companies need a broad crisis framework that accounts for a range of potential risks while ensuring clear decision-making structures and an understanding of specific risks being considered.
Furthermore, general counsel should have regular conversations with their board of directors, giving an overview of potential risks and proactive strategies in place for dealing with geopolitical changes. Jane Allen suggests that these conversations could occur during board retreats, further emphasizing the need for the board’s involvement in crisis planning and response.
Significant geopolitical events bring a new level of complexity to the government affairs team’s roles and responsibilities. Everyone, from the board and C-suite to the general counsel and government affairs teams, must be aligned. The firm’s goals, approaches, and perceptions can easily be influenced by unexpected geopolitical issues, hence the need to take a proactive role in the government affairs team’s mandate, goals, and capabilities.
In the end, regulatory response is critical, especially for multinational companies dealing with regulatory bodies in jurisdictions around the world. A response program should be in place to manage inquiries from regulators, provide consistent information, and handle inquiries within constrained timeframes. This necessitates the consolidation of regulatory response data management across industries, all the while strengthening core teams and technology workflows.
The unpredictable and volatile geopolitical environment presents significant business risks, and a proactive, strategic approach to legal risk management is more important than ever for businesses to instill and maintain. A robust and well-integrated legal function can reduce businesses’ risk exposure, streamline their operations, and even potentially catalyze growth or provide a competitive advantage.