TRANSFORMING LEGAL DEPARTMENTS FROM RISK MANAGERS TO BUSINESS ENABLERS

Chief legal officers (CLOs) have more power than ever before, wrote The Economist more than 12 years ago. Back then, the newspaper referred to the top in-house lawyer and his team as guardian and guide of the C-suite.

For decades, legal departments have been viewed primarily as risk managers, focusing on compliance, mitigating legal risks and handling litigation. However, the modern business environment demands a more dynamic approach.

In the evolving corporate landscape, legal departments are shifting from their traditional role of risk managers to becoming business enablers. In-house legal teams are increasingly recognised as key enablers of business strategy and innovation.

This transformation is driven by globalisation, technological advancements, business complexity and the need for strategic integration.

Historical role: risk management

Historically, legal departments have been tasked with ensuring compliance with laws and regulations, mitigating potential legal risks and liabilities, handling litigation and disputes, and drafting and reviewing contracts to safeguard the company’s interests.

While this risk-averse approach is essential for protecting organisations from legal pitfalls, the role of legal departments is expanding to encompass more strategic functions.

Drivers of transformation

Several factors contribute to the evolving role of legal departments. The first is globalisation, as cross-border operations necessitate dynamic legal strategies to manage diverse regulatory requirements. Second is technological advancements, with legal technologies, including artificial intelligence (AI) and data analytics, streamlining operations and enabling data-driven decision making. Third is business complexity, as complex regulatory environments require proactive legal guidance to navigate business challenges. Last is strategic integration, where embedding legal expertise into business planning and decision-making processes enhances competitive advantage.

Jul-Sep 2024 Issue

BVG