Looking Glass Report 2020

N A V I G A T E

T H E R O L E O F G E N E R A L C O U N S E L I N N A V I G A T I N G T H E G L O B A L R I S K L A N D S C A P E

C O N T E N T S

F O R E W O R D B Y C L Y D E & C O

It’s easy to fall into the trap of thinking that the COVID-19 global pandemic, such has been its impact across our lives, has changed everything for businesses, forcing organisations to abandon existing plans and rethink old certainties forever. But amid all this uncertainty, it is important to remember that many of the issues and underlying concerns that General Counsel and their businesses faced prior to this crisis have not gone anywhere. The Looking Glass study results are encouraging. Before the crisis many General Counsel and their Boards harboured concerns about their organisations’ ability to cope with rapid change or to successfully adopt new technology. Most of these concerns have been alleviated by their competent response to COVID. Meanwhile, other important issues that have been simmering in the background have come into sharper focus and new risks have emerged from the crisis, all of which look set to define many organisations’ commercial priorities for years to come.

0 1

0 3

0 4

General Counsel are playing an increasingly central role in the leadership and governance of their organisations, notwithstanding crisis responses such as that to COVID-19. They are developing their in-house legal teams to become closer to the organisation’s leadership structure, which has necessitated a deeper and more integrated understanding of commercial objectives, operations and the broader risk landscape. Both Boards and General Counsel agree that the most important aspect of the latter’s role is to align the legal function to business strategy, but it appears there is still more that Boards could do to support them with this. Given the ongoing and at times rapid shift in emphasis for the role of General Counsel, it is incumbent upon Boards to ensure they recognise and understand the pressures impacting their legal teams, and to give them the time, trust, authority and budget to provide full value to their organisations. I would also argue that this necessitates a different type of counsel and support from private practice firms such as Clyde & Co, who must pivot their services to support their General Counsel and in-house legal clients more effectively, with a fuller understanding and appreciation of their commercial objectives as they face these increasingly complex business and leadership challenges.

That’s why this year’s Looking Glass survey is particularly pertinent. It captures the opinions and sentiments of in-house legal teams and Boards just as the pandemic was emerging, giving us one last glimpse of the ‘pre-COVID’ concerns of business around the world. It also tracks their thinking as COVID-19 has progressed, providing us with some useful clues as to what the pandemic has done to shift opinions around core business themes and risk management and what the permanent impact might be.

Foreword

Introduction

Executive summary

0 6

2 0

3 4

4 6

Section 1 The risk landscape

Section 2 Growth

Section 3 Technology and innovation

Section 4 The role of General Counsel and the Board

6 0

6 1

About Winmark

About Clyde & Co

Peter Hirst Senior Partner, Clyde & Co

I N T R O D U C T I O N

Winmark and Clyde & Co are pleased to present the latest edition of our annual Looking Glass report.

Winmark and Clyde & Co’s latest annual Looking Glass report comes at a time that could hardly be more dramatic – and appropriate – for a study that looks at how organisations deal with the complexity of the global risk landscape. COVID-19 has forced all organisations to re-think their plans, strategies and purposes; and to re-evaluate their outlook for risk management and approaches to achieving growth and technological transformation. The quantitative research for this year’s report was completed just as the epidemic became a pandemic in March, but consultations and interviews have continued throughout the period of crisis right up to publication of this report, when leaders are grappling with the long-term strategic implications of the outbreak.

For ten years the Looking Glass has monitored the global risk landscape and the evolution of the General Counsel role, and tracked how businesses operate in the face of economic, political and technological disruption. We have seen how some of the changes underway pre- COVID-19 have been accelerated by the pandemic, some possibly reversed and how new dimensions of risk have been introduced. We have also seen how legal departments have supported their organisations through this time of stress and pain and become an even more essential part of the strategic and resource management of organisations. We are extremely grateful to the 162 General Counsel and Board Directors who have generously given up their time, 120 by completing the original survey and 42 by taking part in our subsequent depth interviews and consultations. Their knowledge, insights and experiences are greatly appreciated during this period of unprecedented upheaval.

John Madden Research Director, Winmark

E X E C U T I V E S U M M A R Y

T H E R I S K L A N D S C A P E

G R OWT H

T E C H N O L O G Y A N D I N N OVAT I O N

T H E R O L E O F G E N E R A L C O U N S E L

– Digitisation of operations has accelerated at a pace unthinkable at the start of 2020, with profound implications for risks related to operations and security – Although Brexit is no longer the primary focus it once was, General Counsel and Board Directors remain concerned about its operational impact on their business, but have become less concerned about long- term financial implications – Environmental risk remains near the bottom of the hierarchy of risk concerns. The prominence of climate change on the global business agenda does not translate into a concern about an immediate impact for most respondents. However it is important to recognise that environmental issues are increasingly recognised as touching on organisational, reputational, economic, competitive and regulatory factors

– The Board and General Counsel are becoming increasingly more aligned in their view of who is responsible for risk identification and management – Harnessing technology and creative management techniques

– For many, COVID-19 is an impetus for digital innovation. Many organisations have swiftly become adept at digital delivery and distribution and are beginning to appreciate the speed with which their organisations can move – Political risks are a concern, particularly China’s trading relationship with the rest of the world in the wake of the coronavirus, and the threat the situation poses to the viability of China’s manufacturing plants – Given the expected decline in globalisation, greater diversification in supply chains will be desirable and increased stockpiling of critical supplies is likely – General Counsel identify increasing regulation, including sanctions, as the biggest barrier to entering new markets. Board Directors place concerns about local compliance procedures, terrorism and political stability at the top of their list – A legal function that understands what the business wants to achieve and makes decisions in harmony with the Board can be a key engine for growth. This is possible if legal teams pro-actively identify problems and are not seen as simply firefighting – Risk assessments and decisions have to be aligned with the Board’s priorities and the Board should

– Market and economic risks are now the immediate top priority. Maintaining liquidity in the context of suddenly plummeting customer demand is the primary focus for most organisations – Political risk had been declining as a concern for Boards and General Counsel (GCs) because of the reduction in US-China trade tensions and Brexit uncertainty. However, COVID-19 raises new fears about the global trade relationship with China and highlights the need to re-evaluate supply chains and manufacturing strategies. The massive government intervention as a result of COVID-19 means that the economic role of government will be a key question over the next decade. Public scrutiny of business is likely to increase which may mean increased regulation, particularly in the areas of supply chain management and employee and public health – Organisational risk (talent management and managing change) has significantly risen in the hierarchy of concerns for both GCs and Boards even before COVID. Staff well-being and mental health has become an immediate priority. Employee engagement initiatives have increased alongside digital engagement

– COVID-19 has accelerated digital commerce and automation to an extent that all organisations are re-assessing their digital initiatives – Digital interaction has become essential in all operations forcing both organisations and individuals to adopt technologies at rapid speed – All organisations are thinking in terms of more investment in secure,

– COVID-19 has highlighted the need to have the correct balance of skills on the Board and between legal teams. It is essential to have the necessary strength in depth to withstand a crisis – Most General Counsel and Board Directors are positive about the agility and speed with which they have made and implemented decisions – Many feel that the stress-test provided by the pandemic has resulted in learnings about culture and purpose that can be extended beyond the timescale of the crisis – Boards are increasingly recognising the strategic contribution of GCs but there is a business-wide underestimation of the increasingly complex operational challenges facing senior leaders. It is likely that the COVID-19 crisis will increase recognition by the Board and across all functions that delivery of strategy is dependent on establishing an integrated and multifaceted operational structure

will be an important driver of improved reporting, cross- function communication and departmental integration

remote infrastructure to be in a better position for future crises

and to capitalise on the efficiencies and practical benefits that some organisations have discovered for the first time – Data security has become an even greater priority as a result of the move to remote workforces – The biggest perceived challenge to the effective harnessing of technology remains having access to the budget and skills to resource innovation projects, but the ability to respond to COVID-19 technology pressures quickly and effectively has increased confidence – General Counsel are at the forefront of conversations about digital ethics. Developing ethical rules and codes of conduct for data management will be a central responsibility of legal

departments, demanding greater understanding of the objectives, priorities and responsibilities of other corporate functions

always be included in these discussions and decisions

T H E R I S K L A N D S C A P E

T O P R I S K S A S I D E N T I F I E D B Y B O A R D D I R E C T O R S A N D G E N E R A L C O U N S E L

(% respondents identifying each risk as expected to have a high or very high impact on their organisations)

Our initial survey was conducted just as the COVID-19 pandemic was emerging as a major global threat. Since then we have consulted in-depth with General Counsel and Board Directors to trace how their perceptions of the risk landscape have been changing as the crisis evolves and how this will impact their future strategies and actions. The key components that have shaped the risk landscape in recent years- namely globalisation, the growth of complex and digitised supply chains, AI and automation and an unpredictable geopolitical environment – have not changed, but they are all now viewed through the lens of an epidemic that has fundamentally altered our assumptions.

In the short-term legal teams are focused on analysing contracts, reviewing force majeure clauses and terminations and suspension rights. They are also focused on the short-term impacts of production interruptions and disrupted supply chains, with one eye looking ahead to what implications the current experiences will have for future risk management. Longer-term, it is abundantly clear from our conversations that many of the risks that were expected to have an impact over the next five to ten years have been abruptly brought into sharp focus.

eg IT disruption, data loss, new technology

Technological

50 %

62 %

Organisational

eg talent management, succession planning and managing change

44 %

58 %

Political

eg Brexit, Trump presidency,political extremism, trade tariffs, sanctions, supply-chain disruption, new trade deals

50 %

57 %

Reputational

eg operational, governance or quality risks

44 %

56 %

Market competition

eg new entrants, new business models, market consolidation

44 %

54 %

Economic

eg currency volatility,USD trading reliance / credit risk

28 %

44 %

COV I D - 19 I S TOP OF EVERY AGENDA AND I BET THAT VERY F EW BUS I NES SES HAD TH I S I N THE I R R I SK ANALYS I S . THE B I GGEST R I SK TO THE BUS I NES S I S SOMETH I NG YOU HAVEN ’ T THOUGHT OF.

Regulatory

eg increasing burden, compliance with bribery and corruption legislation and modern slavery regulations

39 %

44 %

Environmental

eg climate change, natural disasters, energy restrictions

28 %

34 %

Societal

eg cultural / attitudinal shifts / labour / public health / #MeToo

28 %

24 %

General Counsel, Financial Services

General Counsel Board

Section 1 – The risk landscape

T E C H N O L O G I C A L R I S K S

P O L I T I C A L R I S K

OVE R A R E LAT I VE LY SHORT P E R I OD OF T I ME WE ’ VE GONE F ROM 3 0 0 P EOP L E ENAB L ED FOR R EMOT E WORK I NG TO MOR E THAN 2 0 0 0 I NC LUD I NG CAL L CENTR E S TAF F B E I NG AB L E TO DO THE I R J OB S F ROM HOME .

This risk factor was on the wane prior to COVID-19 with Brexit seemingly settled and US-China trade tensions easing. However, COVID-19 has caused government intervention on a scale that hasn’t been seen for decades. How much, how fast, and in what ways governments reduce their economic role will be one of the most important questions of the next decade. Last year, Brexit and the US-China trade war caused concerns about political risk to spike to the highest levels in the study’s history. The global trade relationship with China is now more uncertain than ever and organisations are rapidly re-evaluating their supply chains and manufacturing strategies. With most businesses likely to be operating to some extent with public money (for example, the furlough schemes introduced by many governments), government scrutiny of business is likely to increase. This could mean increased regulation, particularly in the areas of supply chain management and employee and public health.

Already a top concern, technology risks are now writ even larger in organisations with the digitalisation of operations having accelerated at a pace unthinkable at the start of 2020, with profound implications for operations, security, business accommodation and customer delivery and distribution. O R G A N I S AT I O NA L R I S K S This had moved up the hierarchy of risk concerns prior to COVID-19 with worries about managing people and change an increasing concern, particularly for General Counsel. Clearly the risks they face as a result of COVID have changed rapidly. Staff well- being and mental health has become a short-term priority and has highlighted practices that may well prove to be beneficial in the long-term as remote working becomes more common. Employee engagement initiatives have accelerated at pace alongside digital engagement. Team management and managing change had already moved up the hierarchy of concerns prior to COVID-19 as attraction, development and retention of skilled teams had become an increasingly pressing challenge, exacerbated by the need to develop skill resources to deliver digitalisation and defend against data privacy and cybersecurity threats. The crisis has also revealed shortcomings in succession plans as leaders have fallen ill and replacements have been required across all departments.

Paul Donovan, NED, Thames Water

COVID-19 WI LL HAVE A LONG-TERM EFFECT ON THE UTI L I SATION OF OFF ICE AND INDUSTRIAL SPACE . THE IMPACT WI LL PLAY OUT IN DI FFERENT WAYS : REDUCED OFF ICE SPACE DUE TO INCREASED REMOTE WORKING, AND INCREASED E-COMMERCE POTENTIALLY LEADING TO INDUSTRIAL SPACE OPPORTUNITI ES .

MY CHA I RMAN AND I REAL LY RAMMED HOME ON DAY ONE THAT AL L OF OUR SEN I OR L EADERS NEED TO SUP PORT OUR STAF F AND I DENT I FY AND HE L P VULNERAB L E PEOP L E .

Haidee Klein, CHRO, Gazeley

STAFF WELLBE ING HAS BEEN HIGH ON OUR AGENDA, SUCH AS ENABL ING WORK SCHEDULES THAT ARE FLEXIBLE TO ALLOW PEOPLE TO GET FRESH AIR AND DAYL IGHT.

Head of Legal, Technology

MA R K E T A N D E C O N OM I C R I S K

CEO, Business Services

AWARENESS OF MENTAL WELLBEING HAS BEEN CENTRAL TO OUR APPROACH AND WE’VE WORKED WITH A CLINICAL PSYCHOLOGIST WHO’S HELPED US FOCUS ON BUILDING RESILIENCE. THIS WELLBEING FOCUS, ALONG WITH PROACTIVE COMMUNICATION, HAS HELPED OUR LEGAL FUNCTION TO COPE WITH THE RECENT, SUDDEN CHANGES. WE HAVE ALSO ORGANISED JOB EXCHANGES TO MATCH RESOURCE SUPPLY AND DEMAND ACROSS THE GROUP AND ITS LOCATIONS.

THERE WI L L BE A REAP PRA I SAL AROUND THE ROL E OF OUTSOURC I NG AND THE MANAGEMENT OF THE SUP P LY CHA I N I N ORDER TO BETTER MANAGE R I SK GO I NG FORWARD.

In our survey, these risks were relatively low on the priority list and had subsided on the prior year as markets leapt to record levels and growth was stable. This relative calm felt at the start of the year was swept away by COVID and our conversations suggest that dealing with the existential threats of maintaining liquidity and access to cash in the context of suddenly plummeting customer demand is the primary focus for most organisations.

General Counsel, Financial Services

Oliver Canning, Chief Legal Counsel, NBCUniversal International

Section 1 – The risk landscape

I S Y O U R O R G A N I S A T I O N P R E P A R E D F O R H I G H I M P A C T R I S K S ?

C L I MAT E A N D E N V I R O NM E N TA L R I S K

The prominence of climate change on the global business agenda (something that might arguably increase still further thanks to the potential COVID-19 has to shine a spotlight on more existential, global and indiscriminate risks) does not translate into a concern about an immediate impact for most respondents. However it is important to bear in mind that environmental issues are increasingly recognised as touching on organisational, reputational, economic, competitive and regulatory factors, all of which are seen to have a bigger impact than environmental issues – it is therefore important to see environmental drivers in the context of the overall risk picture.

Societal and environmental risks were identified as the least likely to have an impact on organisations. There has been a small increase in the proportion of both General Counsel and Board Directors who say that environmental risk will have a high or very high impact on their organisations, but it remains near the bottom of the hierarchy of risk concerns.

Risks (as ranked by Boards)

Respondants answering – No Difference (%pts)

30 % 18 %

-1 2

Organisational

24 % 29 %

Environmental

Market competition

-8

20 % 12 %

ENV I RONMENTAL RISKS ARE INCREASINGLY I NTEGRATED WI TH L EGAL , REPUTAT I ON AND F I NANC I AL R I SKS . I F CL IMATE CHANGE I S NOT CURBED AND TACKL ED, THERE ARE POTENTIALLY SERIOUS CONSEQUENCES. THERE I S AN I NCREASE I N CL IMATE - RE LATED LAWSU I TS AROUND THE WORLD…SUCH AS RWE , THE LARGEST CARBONS EMI TTER I N EUROPE , BE I NG SUED FOR CL IMATE - RE LATED MATTERS .

18 % 6%

-1 2

Societal

17 % 18 %

Political

-7

13 % 6%

Reputational

12 % 0%

-1 2

Technological

7% 18 %

Regulatory

+1 1

-6

6% 0%

Economic

16 % 12 %

-4

Mean average

Partner, Business Services

General Counsel Board

Section 1 – The risk landscape

G C P E R S P E C T I V E

B O A R D P E R S P E C T I V E

Risks (as ranked by Boards)

Preparedness

Risks (as ranked by Boards)

Preparedness

26 %

29 %

Organisational

20 %

21 %

18 %

47 %

Environmental

18 %

35 %

18 %

53 %

Market competition

16 %

26 %

6% 12 %

18 %

Societal

14 %

29 %

12 %

35 %

Political

1% 12 %

47 %

35 %

Reputational

2% 10 %

29 %

10 %

29 %

Technological

+1 6%

36 %

53 %

Regulatory

44 %

29 %

12 %

Economic

Not prepared Extremely well prepared

Section 1 – The risk landscape

G E N E R A L C O U N S E L A N D B O A R D W H O A G R E E O R D I S A G R E E W I T H S T A T E M E N T S

T H E R I S K L A N D S C A P E I S

At the start of the crisis we asked Boards and General Counsel about their organisation’s preparedness to respond to high impact risk events. While the aggregate figures were similar, there were noticeable divergences, such as on technological and organisational risks where Board Directors were more positive about their preparedness, especially around technology where despite ranking it as a top two concern, all the Board respondents felt their organisations were prepared for technology risks. Under the pressure-test conditions of the COVID-19 crisis, it would appear that Board Directors may have had a more accurate view of the position. All the feedback we have received from General Counsel has expressed how impressed they have been with their organisation’s ability to respond and adapt quickly. While it is not a top risk concern for either audience, both feel relatively unprepared to deal with environmental risks, suggesting once more that this is an emerging threat that, while of less immediate concern is at least a known omission, but perhaps not for long. The areas of divergence have been largely consistent year on year. A silver lining of the current crisis may be that Boards and General Counsel will be forced to discuss attitudes around legal risk in order to find greater understanding and alignment. Overall, it is striking how aligned Board and General Counsel perspectives are, challenging the characterisation of the legal function as being particularly risk averse.

B E C OM I N G MO R E C OM P L E X AT A N AC C E L E R AT I N G R AT E Even prior to COVID-19, given uncertainty over the influence of China, changing societal values around work, political and market pressures to respond to environmental concerns, data and cyber risks, the technology skills gap, the increasingly data driven nature of organisations and ever-increasing connectivity and mobility, it was no surprise that most respondents perceived an increase in risk, and also perceived that the pace of change is accelerating faster over time. Prior to the crisis legal functions

I ’ M I MP R E S S ED WI TH EVE RYONE ’ S AB I L I TY TO CHANGE P ROCE S S E S AT H I GH S P E ED. WH I L E WE HAD DEVE LOP ED AN AG I L E AP P ROACH I N SOME AR EAS OF OUR BUS I NE S S TH I S WORK - F ROM- HOME P E R I OD HAS E L EVAT ED US TO A D I F F E R ENT L EVE L .

80 % 2%

88 % 6%

The risk landscape is more complex than 2-3 years ago

GCs

Boards

51 % 13 %

59 % 6%

The pace of change in the risk landscape is accelerating rapidly

GCs

Boards

Oliver Canning, Chief Legal Counsel, NBCU International

also experienced a particularly demanding period of new and

increasing regulatory requirements, including both regional legislation (such as GDPR) and additional sector specific regulation. COVID-19 has only accelerated those concerns. Preparing for an increasingly challenging risk landscape is a priority for both Boards and General Counsel alike. The boundaries between legal, reputational and regulatory risk have continued to become less clear, so integrating and aligning activities of separate departments (such as corporate affairs, risk and compliance) is more necessary than ever. It is an encouraging step in achieving this alignment that General Counsel and Board Directors largely agree about the risk priorities they face and the extent to which competitive pressures are increasing the appetite for risk.

49 % 11 %

41 % 12 %

COMP L EX I TY COME S F ROM THE SHE E R VOLUME OF I NFORMAT I ON. I F TRUMP TWE E T S , WE HAVE TO R EACT TO THAT. WE HAVE TO ACC L I MAT I S E TO H I GH VOLUME S OF I NFORMAT I ON WH I CH NOW I NC LUDE I NTU I T I VE AND P E R SONAL V I EWS DUE TO THE P LAT FORMS AVA I LAB L E .

Risks have increased significantly in the last 2-3 years

GCs

Boards

39 % 22 %

35 % 24 %

Competitive pressures are increasing the willingness of organisations to take on risk

GCs

Boards

18 % 29 %

29 % 34 %

It is harder to identify risks than 2-3 years ago

Ronald Cheung, Legal and Risk Management, Fung Group

GCs

Boards

Agree Disagree

Section 1 – The risk landscape

B R E X I T – N E G A T I V E O R P O S I T I V E I M P A C T ?

1% 45 %

6% 41 %

2% 27 %

12 % 29 %

Staff morale

Investment in UK-based staff

GCs

Boards

GCs

Boards

2% 37 %

6% 35 %

6% 24 %

6% 35 %

Supply chains

Business relationships with companies in other jurisdictions

GCs

Boards

GCs

Boards

1% 30 %

18 % 35 %

13 % 17 %

24 % 12 %

Expected financial performance for the current financial year

Investment in overseas (non-UK) based staff

GCs

Boards

GCs

Boards

2% 29 %

29 % 29 %

2% 12 %

0% 12 %

Expected long term financial performance

Legal team budget

GCs

Boards

GCs

Boards

2% 12 %

18 % 12 %

Investment in technology

GCs

Boards

Positive impact Negative impact

Section 1 – The risk landscape

E X T E N T T O W H I C H # M E T O O H A S H A D A N I M P A C T

B R E X I T S T I L L E X P E C T E D T O H AV E A N E G AT I V E I M PAC T Although Brexit is no longer the primary focus it once was, General Counsel and Board Directors remain concerned about Brexit’s impact on their business; the emphasis is now less about long-term financial impact and more about operational issues such as staff morale. Nearly half expect the long-term impact on staff morale to be negative. Supply chains are also expected to be negatively affected, and a third expect short term financial performance to suffer.

# M E T O O C H A N G E D WO R K I N G C U LT U R E B U T H A D L E S S I M PAC T O N O P E R AT I O NA L P R O C E S S E S Before the lockdown started, the greatest impact of the #MeToo movement was perceived to be the way it changes the work environment and culture, with Board Directors in particular recognising a transformation. However, relatively few respondents said that #MeToo directly impacted specific operational processes such as use of non-disclosure agreements (NDAs) or people management procedures and processes. This may imply that the fundamental legal and operational framework to address concerns raised by #MeToo is largely in place; and that the most significant impact has been raising awareness and changing cultural attitudes. The impact has been more about how issues relating to sexual misconduct are perceived and considered rather than changes in the processes to deal with them.

Changed the working environment and culture

40%

24%

Increased the severity of disciplinary measures taken

22%

Changed the way we manage people

27%

19%

Changed risk escalation processes

20%

18%

Changed the way we manage retention of talent

13%

B R EX I T ’ S E F F ECT ON FX RAT E S HAS A B I G I MPACT, AS I S THE CAS E FOR ANY R E TA I L E R THAT PURCHAS E S I NT E RNAT I ONAL LY.

Reduced the use of NDAs

Tim O’Gorman, General Counsel and Company Secretary, Halfords Group

General Counsel Board

G R O W T H

B Y R E G I O N

I NVE S TMENT I N OUR OVE R S EAS MARK E T P R E S ENCE HAS B E EN PAUS ED AND THE R E HAS B E EN I NCR EAS ED I NVE S TMENT I NS T EAD I N OUR ONL I NE CAPAB I L I TY.

The organisations consulted to give their perspective on growth drivers, opportunities and success factors for this year’s Looking Glass have a truly global footprint, with half being headquartered outside the UK: Asia-Pacific (16%), Europe (4%), North America (12%), Middle East (3%) with the remainder in South America and Africa. With the COVID-19 outbreak unfolding rapidly, organisations have focussed on cash control, operational efficiency and staff wellbeing. In the short-term many organisations; growth plans have been interrupted and developing a strategy for future supply chain transparency and flexibility is becoming a priority. Given the expected decline in globalisation, greater diversification in supply chains will be desirable and increased stockpiling of critical supplies is likely. Greater border restrictions and increased preference for local over global products and services are also possible consequences of the crisis. For many COVID-19 will be an impetus for innovation as organisations get a better sense of what can be achieved, particularly in the digital sphere. Many are having to swiftly become adept at digital delivery and distribution and are beginning to

appreciate the speed with which their organisations can move. As businesses are forced to do more with less, many are finding better, simpler, less expensive, and faster ways to operate. As conditions return to normal, organisations will be seeking out global markets with resilient economies and the potential for growing demand. In Europe, there will be concern about how successfully the EU can establish a new working relationship with the UK against a backdrop of a global recession and recent political transitions in Germany, Italy, and Spain. The recent situation in Hong Kong and China’s potentially confrontational relationship with the US and other regional powers also threatens stability. Organisations that already have a presence in Asia have said this helped them to be somewhat ahead of the game and better equipped to deal with the current crisis because of the experiences and lessons learned. The current economic and geopolitical uncertainties coupled with technological disruptions, climate change, and demographic shifts make it hard to predict what the global commercial landscape will look like in five years’ time. This section of the report examines how organisations are facing this uncertainty and how legal departments are supporting long- term strategies for sustained growth particularly when navigating new and emerging markets.

Europe

81%

64%

69%

Asia-Pacific

45%

53%

Middle East

Head of Legal, Technology

38%

45%

North America

WE WE R E S L I GHT LY AHEAD OF DEC I S I ONS B E I NG MADE BY THE UK GOVE RNMENT AND EVE RY S T E P ALONG THE L I NE B E FOR E FORCED LOCKDOWN. WE HAVE THE EXP E R I ENCE F ROM WHAT WAS HAP P EN I NG I N THE FAR EAS T AND WE S TART ED A P ROCE S S AHEAD OF T I ME .

Africa

34%

40%

—

South America

31%

Other

59%

—

CEO, Business Services

% Organisations operating % Respondents with responsibility

Section 2 – Growth

A S I A - PAC I F I C I S T O P G R OWT H O P P O R T U N I T Y

Respondent organisations are generally positive about the long-term prospects of the USA as a growth opportunity. Opportunities are possible even in sectors and markets where conditions are challenging if the quality of the product or service is sufficiently strong.

S P END I NG POWE R I N AS I A WI L L I NCR EAS E . THE MARK E T FOR LUXURY I T EMS HAS B E EN I NCR EAS I NG … THE R E WI L L B E GROWTH FOR THE NEXT 1 0 TO 2 0 YEAR S I N TH I S AR EA . THE HONG KONG DEMONS TRAT I ONS I NTRODUCED THE THR EAT OF UNR E S T I NTO AN AR EA THAT HAS B E EN H I S TOR I CAL LY VE RY S TAB L E . THE R E I S AL SO POL I T I CAL R I S K I N MALAYS I A AND, I N PART I CULAR , I NDONE S I A .

SUCCE S S CAN B E ALMOS T I RR E L EVANT TO THE GROWTH LANDS CAP E OR S ECTOR . WE TH I NK THE R E AR E P L ENTY OF OP PORTUN I T I E S TO I NCR EAS E SAL E S , EVEN I N OUR TRAD I T I ONAL , MATUR E MARK E T S BUT DO I NG TH I S R EQU I R E S THAT WE DE L I VE R THE S E RV I CE S WE OF F E R I NCR ED I B LY WE L L AND P E R FORM B E T T E R THAN OUR COMP E T I TOR S

Expanding demand is the key factor encouraging entry into new and emerging markets and Asia-Pacific presents the primary demand led opportunity for the businesses consulted for this year’s Looking Glass. Asia-Pacific markets are perceived to offer the best long-term growth potential because of an expanding middle class, economic growth and demand opportunity across a wide range of products and services, placing it ahead of Middle East, Russia, Africa and South America. Two thirds of General Counsel believe the region presents a growth opportunity for their organisation and a half are confident that their ability to do business in the region will improve over time. Political risks are a concern in the region, particularly China’s trading relationship with the rest of the world in the wake of COVID-19, and the threat the situation poses to the viability of China’s manufacturing plants. Competing on price against low-cost local competition can also be a challenge.

Tim O’Gorman, General Counsel and Company Secretary, Halfords Group

Ronald Cheung, Legal and Risk Management, Fung Group

Section 2 – Growth

W H I C H R E G I O N D O Y O U S E E A S G R O W T H O P P O R T U N I T Y F O R Y O U R O R G A N I S A T I O N ?

C O N F I D E N C E T H A T A B I L I T Y T O D O B U S I N E S S W I N R E G I O N W I L L I M P R O V E

Asia-Pacific

44%

67%

64%

46%

63%

20%

34%

42%

Europe

North America

31%

25%

32%

26%

Americas

South America

13%

22%

14%

Middle East

26%

Europe

Africa

Middle East

25%

17%

12%

25%

Africa

33%

22%

General Counsel Board

Section 2 – Growth

E X T E N T T O W H I C H T H E F O L L O W I N G F A C T O R S E N C O U R A G E Y O U R O R G A N I S A T I O N T O E N T E R N E W M A R K E T S

E X PA N D I N G D E MA N D O P P O R T U N I T I E S A R E T H E B I G G E S T D R I V E R T O E N T E R N EW MA R K E T S , F O L L OWE D B Y T H E P R E S E N C E O F A FAV O U R A B L E R E G U L AT O RY A N D P O L I T I C A L E N V I R O NM E N T After establishing that a demand opportunity exists, a stable and supportive regulatory and political environment is the primary influencer of new market entry. New markets may also be targeted for more defensive reasons such as offsetting declining demand in existing markets or to compete against competitors entering into new territories. The availability of government incentives is a relatively unimportant factor in expansion decisions – only 17% of General Counsel and 11% of Board Directors believe such incentives encourage entry into new markets.

80 % 84 %

Expanding demand in new markets

49 % 42 %

Favourable regulatory environment

45 % 53 %

Favourable political and security environment

32 % 21 %

Declining demand in existing markets

A K EY F EATUR E OF SUCCE S S I S HAV I NG C LAR I TY OF WHO I S R E S PONS I B L E FOR WHAT: COMP L I ANCE , R I S K AND L EGAL FUNCT I ONS NE ED TO HAVE C LAR I TY ABOUT THE I R PUR POS E AND ROL E . R I S K DEC I S I ONS HAVE TO B E AL I GNED WI TH THE BOARD ’ S P R I OR I T I E S AND THE BOARD SHOULD ALWAYS B E I NC LUDED I N D I S CUS S I ONS .

28 % 11 %

Competitors being active in these new markets

17 % 11 %

Availability of government incentives

Anonymous General Counsel

General Counsel Board

Section 2 – Growth

GENERAL COUNS E L PERCE I VE I NCREAS I NG REGULAT I ON AS THE B I GGE S T BARR I ER TO ENT ER I NG NEW MARKE T S 46% of General Counsel identify increasing regulation, including sanctions, as the biggest barrier to entering new markets. Board Directors place concerns about local compliance procedures, terrorism and political stability at the top of their list. Identifying and managing the risks associated with new market entry requires integrated input across the business as well as input from local experts. YOU HAVE TO TAKE ACCOUNT OF RISK AND ANALYSE DIFFERENT SCENARIOS TO IDENTIFY THE CORRECT BALANCE BETWEEN RISK AND REWARD. YOU HAVE TO BE MODEST AND CLEAR ABOUT RISK APPETITE. IT’S NOT A ONE-PERSON JOB, IT IS MULTIDISCIPLINARY AND YOU NEED LOCAL HELP.

Our respondents gave practical advice on how they have achieved success in new markets despite the daunting barriers they have faced. An intelligent, experienced legal function that understands what the business wants to achieve and makes decisions in harmony with the Board can be a key engine for growth, but this is dependent on having a skilled team in place.

Extensive networking through existing contacts and visits to regional events is recommended in order to build on-the-ground partnerships with supply businesses and political contacts. Technology has made this process quicker and cheaper to achieve at a distance, but the benefits of face-to face interaction should not be underestimated.

GROWTH , PART I CULAR LY I NT E RNAT I ONAL GROWTH , I S

I T I S QUE S T I ONAB L E WHE THE R MOS T BUS I NE S S E S S E E THE L EGAL FUNCT I ON AS AN ENG I NE OF GROWTH . I T I S P R I MAR I LY S E EN AS AN OVE RHEAD, BUT A WE L L - R E SOURCED L EGAL T EAM CAN DR I VE GROWTH I F THE B E S T QUAL I TY P EOP L E AR E P LACED I N THE R I GHT PART OF THE ORGAN I SAT I ON.

DE P ENDENT ON B E I NG AB L E TO NEGOT I AT E I N VE RY D I F F I CULT ENV I RONMENT S WI TH DEMAND I NG

Anonymous General Counsel

P ROCUR EMENT CHAL L ENGE S .

AF R I CAN MARK E T S HAVE B E EN SUCCE S S FUL FOR US , BUT THE CHAL L ENGE S P R E S ENT ED BY GEOPOL I T I CAL AND CORRUP T I ON R I S K AR E MOR E S I GN I F I CANT THAN ANYWHE R E E L S E WE HAVE EXP E R I ENCED. WE AR E DEAL I NG I N COMP L EX S TRUCTUR E S AND I T CAN B E CHAL L ENG I NG TO COMMUN I CAT E COMP L EX I T I E S OF I DEAS I NTO DE L I VE RY. WHE R E AP P ROP R I AT E WE WI L L DE P LOY S TAF F LOCAL LY, AND T ECHNOLOGY HAS HE L P ED WI TH V I RTUAL CONF E R ENC I NG AND SHAR I NG OF I NFORMAT I ON. GOOD LOCAL PARTNE R S AR E K EY TO GE T GOOD ADV I CE ON LOCAL LAWS , BU I LD I NG R EGULAT I ONS , VAT E TC . WE LOOK AT THE WOR S T- CAS E S CENAR I O AND D I S CUS S WI TH OUR PARTNE R S WHAT R I S K THEY S E E I N T E RMS OF F RAUD, R E PUTAT I ON E TC . R E PUTAT I ONAL R I S K I S AN I MPORTANT FOCUS AS DAMAGE I S POT ENT I AL LY VE RY HARD TO UNDO.

SUCCE S S COME S F ROM THE BAS I C E L EMENT S : I NT E L L I GENT P EOP L E WI TH GOOD J UDGEMENT MAK I NG THE R I GHT DEC I S I ONS AT THE R I GHT T I ME .

Anonymous General Counsel

S EN I OR P EOP L E I N THE L EGAL T EAM I S AN ADVANTAGE – THEY CAN CUT THROUGH AND GE T TO THE R EAL I S SUE S . THEY CAN EXT END B EYOND A P ROCE S S DR I VEN AP P ROACH AND DE L I VE R THE DYNAM I C AND AG I L E OUTCOME S THAT COMPAN I E S WANT.

Gary Davison, Legal Director and Company Secretary, AKT II

Ronald Cheung, Legal and Risk Management, Fung Group

Anonymous General Counsel

Section 2 – Growth

Understanding cultural differences and being confident in working with different business temperaments and attitudes is a key component of success. It is also important to recognise the increased risk of data privacy and cybersecurity risk in markets where technology infrastructure is less sophisticated. Building contingency into budgets and timing is also essential as delays and overruns in planning and implementation are inevitable. ENT E R I NG NEW MARK E T S ENTA I L S UNDE R S TAND I NG D I F F E R ENT T EAMS , HOW THEY TH I NK AND WHAT THE I R CULTUR E I S . HOW WI L L THEY R EACT TO A COMMENT ? AR E THEY MOR E T I M I D, CONF RONTAT I ONAL , HAP PY TO EXP R E S S THE I R V I EWS F RANK LY AND SO ON? CYB E R S ECUR I TY R I S K I S AL SO I NCR EAS ED I N L E S S DEVE LOP ED NAT I ONS WHO AR E NOT SO WE L L EQU I P P ED TO DEAL WI TH I T.

Effective entry into new markets is a skill built up through experience and trial and error. The barriers and obstacles are great but the expertise built up over many years can produce substantial rewards. Documenting processes and providing guidance that can be passed on to current and future senior staff and legal, risk and compliance teams is important to ensure learnings are embedded and built upon. The ability for legal teams to proactively identify potential problems and suggest solutions is also a key aspect of success. This changes the

THE R E I S A T ENDENCY FOR AL L P ROCE S S E S

THE GENE RAL COUNS E L HAS TO B E S CANN I NG THE HOR I ZON FOR COMME RC I AL R I S K – THEY AR E NOT DO I NG THE I R J OB OTHE RWI S E . I T I S CRUC I AL TO UNDE R S TAND THE B ENE F I T S OF WHAT THE BUS I NE S S I S TRY I NG TO ACH I EVE AS WE L L AS THE R I S K .

TO B ECOME MOR E COMP L EX , WH I CH MAK E S I T HARDE R FOR SMAL L E R

ORGAN I SAT I ONS TO COMP E T E , ALTHOUGH T ECHNOLOGY CAN B E UT I L I S ED TO S I MP L I F Y TH I NGS . T ECHNOLOGY AL SO SUP PORT S

Anonymous General Counsel

OUR P EOP L E HAVE GROWN TO UNDE R S TAND WHAT GOOD L I K E I N T E RMS OF CONTRACTUAL AND R EGULATORY F RAMEWORK S TO OP E RAT E I N. WE HAVE TAK EN THE L E S SONS THAT HAVE DEVE LOP ED OVE R 3 0 YEAR S AND TRY NOT TO MAK E THE SAME M I S TAK E S AGA I N. THE R E I S NO MAG I C TO I T, I T COME S DOWN TO F I R S T P R I NC I P L E S . THE B I GGE S T TH I NG I S EDUCAT I NG YOUR P EOP L E SO THAT THEY AR E P RO - ACT I VE ON AN OP E RAT I ONAL L EVE L . I F YOU RA I S E THE I R AWAR ENE S S , THEY WI L L COME TO YOU B E FOR E P ROB L EMS AR I S E , NOT AF T E R .

focus of the legal function from firefighting and dealing with the

E F F ECT I VE ENTRY I NTO EME RG I NG MARK E T S BY

aftermath of problems, towards taking a more proactive approach that is less passive and anticipates rather than reacts to risk.

R EDUC I NG THE NE ED FOR ON THE GROUND P R E S ENCE .

Anonymous General Counsel

General Counsel, Financial Services

WE AL SO AS S E S S R I S K F ROM THE P E R S P ECT I VE OF THE OP PORTUN I TY. DOE S TH I S P R E S ENT A GAP ? CHAL L ENG I NG MARK E T S CAN P R E S ENT OP PORTUN I T I E S AS THEY AR E S E EN AS TOO D I F F I CULT OR P ROB L EMAT I C TO ENT E R FOR A LOT OF CONSULTANT ’ S WHOS E R I S K AP P E T I T E DOE SN ’ T AL LOW THEM TO EVEN B E CONS I DE R ED.

Gary Davison, Legal Director and Company Secretary, AKT II

Ronald Cheung, Legal and Risk Management, Fung Group

Section 2 – Growth

E X T E N T T O W H I C H T H E F O L L O W I N G F A C T O R S D E T E R Y O U R O R G A N I S A T I O N E N T E R I N G N E W M A R K E T S

E X T E N T T O W H I C H F A C T O R S W I L L I M P A C T O N O R G A N I S A T I O N ’ S G R O W T H

46 % 16 %

Concerns about global trade regulations eg sanctions

External economic growth or lack of it

68%

38 % 37 %

Concerns about legal compliance policies and procedures eg anti-bribery

Downward pressure on budgets

58%

57%

35 % 26 %

Concerns about the lack of infrastructure in chosen country

Rising cost of doing business

74%

53%

29 % 32 %

Previous negative experiences entering other markets

Increasing competition in marketplace

28 % 37 %

47%

48%

Concerns about terrorism, political instability and security

25 % 21 %

Concerns about global economy

Increasing regulation

47%

20 % 16 %

Unfamiliarity with local laws

General Counsel Board

T E C H N O L O G Y A N D I N N O V A T I O N

THE AB I L I TY TO WORK V I RTUAL LY AND I N AN E F F I C I ENT, PAP E R L E S S MANNE R HAS B E EN EMPHAS I S ED. WE ’ VE

I ’M EQUAL LY IMPRESSED WI TH THE RAP I D ADOPT I ON OF TECHNOLOGY; I T WOULD HAVE TAKEN US A PROTRACTED LENGTH OF T IME TO GET EVERYONE US ING TEAMS AND DOCUS I GN, BUT THI S WAS ACHI EVED, ON A MASS SCALE , IN MERE DAYS . I T ’ S CLEAR THAT WE CAN WORK FROM HOME SUCCESSFUL LY AND EF FECT I VELY. I ’M P LEASANTLY SURPR I SED TO SEE HOW WEL L LARGE - SCALE MEET INGS CAN WORK ONL INE AS PEOP LE BECOME MORE ACCUSTOMED TO THAT METHOD OF COL LABORAT I ON.

Corporate legal functions are at the forefront of introducing technological innovation into their operations, alongside the financial and IT functions. This is as a result of the substantial opportunities for automation in litigation, case preparation and due diligence processes. There are significant opportunities for General Counsel and their commercial legal teams to be freed up from repetitive tasks and redeployed onto more strategic, complex and value creating work. Technology can also play a vital role in helping organisations achieve a clear, integrated view of risk, such as utilising self-service tools and technology that can track, consolidate and proactively manage risk data.

COVID-19 will have a profound impact on the pace of this technological innovation. It has accelerated digital commerce and automation to an extent that all organisations are re- assessing their digital initiatives. Digital interaction has become essential in all operations forcing both organisations and individuals to adopt technologies at rapid speed. All organisations are thinking in terms of more rapid investment in secure, remote infrastructure to deal with the current necessity for remote working, to be in a better position for future crises and to capitalise on the efficiencies and practical benefits that some organisations have discovered having been forced to try out the technologies at scale for the first time over the last few months. Data security has become an even greater priority as a result of the move to remote workforces. Common themes emerging from our consultations include a widely held desire to build on the flexibility of remote working, to accelerate digital adoption and to refocus digital efforts to reflect changing customer expectations.

HAD TO B ECOME TRULY PAP E R L E S S

AND HAVE ACQU I R ED A DOCUS I GN L I CENS E . THE R E HAS B E EN AN EMPHAS I S ON ONL I NE TRA I N I NG FOR BOTH SOF T AND HARD S K I L L S AND WE HAVE HAD I NCR EAS ED US E OF V I DEOS /WE B I NAR S

Oliver Canning, Chief Legal Counsel, NBCUniversal International

I T HAS WORK ED S TAGGE R I NGLY WE L L . OF COUR S E THE R E HAVE B E EN N I GGL E S BUT WE ’ VE HAD NO SHOWS TOP P E R S , NO DOWNT I ME AND HAVE ME T EVE RY CHAL L ENGE THAT C L I ENT S HAVE PUT TO US . I T WI L L CHANGE AT T I TUDE S TOWARDS ME THODS OF WORK I NG AND I T HAS P ROVEN THAT ‘AG I L E ’ WORK S . WE HAD S CE P T I C S I N OUR ORGAN I SAT I ON WHO HAVE SA I D ‘WE SA I D I T WOULD NEVE R HAP P EN. I T HAP P ENED, I ’ M A CONVE RT ’ . TH I S WI L L AL SO L EAD TO AN I NV I GORAT ED ANALYS I S OF P ROP E RTY NE EDS I N AL L P ROF E S S I ONAL S E RV I CE F I RMS .

AS A ‘ SHAR ED EXP E R I ENCE ’ .

Head of Legal, Technology

CEO, Business Services

Section 3 – Technology and innovation

G C C H A L L E N G E S E N C O U N T E R E D W H E N T R Y I N G T O H A R N E S S T E C H N O L O G Y

T E C H N O L O G Y I N I T I AT I V E S H AV E

There is a significant knowledge and skills gap. 37% of General Counsel see deciding what technology would make the best investment as a barrier, while a quarter cite lack of knowledge. The accelerated development of tech-based partner and supplier relationships is required to fill knowledge gaps and upskill teams. The GDPR remit of General Counsel, coupled with their crucial role in managing the legal implications of the use of AI and data within their organisations, is bringing them to the forefront of conversations about digital ethics. Developing ethical rules and codes of conduct for data management will continue to evolve as a central responsibility of legal departments, demanding further integration with and understanding of the objectives, priorities and responsibilities of other corporate functions including marketing, HR, technology, operations and finance functions.

N O T A LWAY S L I V E D U P T O E X P E C TAT I O N S

Our survey conducted just at the outset of the pandemic suggests that most General Counsel in large legal departments have embarked on transformational technology projects, but that implementation has often been problematic. 38% of General Counsel say that past technology initiatives have not lived up to expectations, up from 25% last year, and a fifth have experienced schedule overruns. However, despite these frustrations, the biggest perceived challenge to the effective harnessing of technology is having access to the budget and skills to resource innovation projects. Although the situation has been improving and the ability to respond to COVID-19 pressures so quickly and effectively has increased confidence, the in-house legal community has been slow to develop its use of innovative technology – budgets remain tight and false economies of under-investment are holding back many legal functions.

Difficulty getting budget

59 %

Hard to decide in which technologies to invest

52 %

Issues with legacy systems

47 %

Lack of time

41 %

Lack of relevant knowledge

41 %

Technologies did not live up to expectations

38 %

Concerns about data privacy and data regulation

25 %

Technology implementation overrunning

21 %

The legal framework for some technology is still in development

20 %

Resistance to change from the Board

20 %

Page 1 Page 2-3 Page 4-5 Page 6-7 Page 8-9 Page 10-11 Page 12-13 Page 14-15 Page 16-17 Page 18-19 Page 20-21 Page 22-23 Page 24-25 Page 26-27 Page 28-29 Page 30-31 Page 32-33 Page 34-35 Page 36-37 Page 38-39 Page 40-41 Page 42-43 Page 44-45 Page 46-47 Page 48-49 Page 50-51 Page 52-53 Page 54-55 Page 56-57 Page 58-59 Page 60-61 Page 62-63 Page 64

Made with FlippingBook - Online catalogs