The legal function within businesses and organisations will be more critical than ever in the wake of Australia’s first recession in 29 years, providing unique opportunities.
Last week, Lawyers Weekly reported that the newly announced recession will not only enhance the importance of the legal function in businesses and organisations, but also further constrain the capacity of that function to spend money. Here, three senior corporate advisory lawyers speak to the place of the legal department during such turbulent times and how best said department can leverage the recession.
The importance of the legal function
The legal function will continue to be critical for businesses during the recession and the ongoing COVID-19 era, said Gilbert + Tobin partner Kevin Ko.
“Risks which are unlikely during boom times may be exacerbated during a recession and the legal function will be expected to proactively take steps to mitigate and protect the business from those risks,” he outlined.
Norton Rose Fulbright managing partner-elect Alison Deitz agreed: “Some of the changes brought by the pandemic have been a sudden and temporary relaxation of regulations – for instance, those governing trading while insolvent, and proposed changes to continuous disclosure laws regarding class actions. In-house lawyers, supported by their law firm partners, have a big role to play in keeping on top of these changes and advising boards on their obligations.”
Facilitating the business to operate with confidence is core to the in-house role, Mills Oakley partner Gavin Douglas posited, “but to be able to foresee upcoming changes and their impacts in a rapidly changing environment is also important”.
“To be able to act in a way that assists commercial outcomes but does not compromise the proper management of risk (which often increases in [downturn]) is always appreciated by business. On top of everything else, GCs are usually expected to be able to look forward, see what is on the horizon and act on it in a way that is meaningful and successful to the business. This will become more meaningful than ever,” he advised.
There is, however, a silver lining, Mr Ko noted: “But with risks come opportunities, and the legal function can also add significant value as long-term trusted advisers by ensuring that the business is well positioned from a legal perspective to take advantage of those opportunities.”
The constantly changing regulatory environment, combined with a volatile geopolitical and cultural environment, Ms Deitz explained, provides a “unique” opportunity to place business policy and legal strategy at the fore of organisational thinking, she surmised.
“No matter what business we’re in, we are all being forced to think less about what is legally acceptable and more about what is right and culturally acceptable,” she argued.
“Forward-thinking legal departments should have a seat at the table providing strategic input into the organisation’s moral compass. We see a role for law firms in helping advise on risks and opportunities on the horizon that can form part of this forward planning.”
For Mr Douglas, education will be key moving forward.
“Part of the reactive and proactive roles that in-house teams are expected to play is one of education. Whether it is through providing regulatory updates, policy drafting and implementation, management oversight or by mandatory coursework, educating the business (although [time-consuming]), can be an effective way of better equipping those on the [frontline] with skills required to more effectively do their jobs,” he suggested.
“It should, [over time], have the added benefit of minimising the number of issues presenting to legal teams that require triage.”
Elsewhere, Mr Ko spoke about the importance of business continuity as an opportunity.
“During difficult and challenging times like a pandemic or a recession, the idea of self-preservation is often top of mind – many businesses are being put to the test and are focusing solely on business continuity,” he said.
“Legal departments will be key contributors to decision-making during this period and so there is an opportunity for legal departments to expand their seat at the table by ensuring that their advice is not just defensive and focused on survival, but also strategic and focused on longer-term opportunities for growth.”
The next 18 months
The coming year and a half will be “extremely challenging” for many businesses and organisations, Mr Douglas reflected – especially those with direct exposure to the impacts of coronavirus.
“Some will thrive, others will fail in part or in full. Having a good strategic view of how to plan for and manage the current and future business environment will be critical. Investing in that now would be time well spent,” he mused.
“Where in-house teams are continuing to work from home, I think it will be important for both the business and the in-house legal function that each continues to feel proximate, accessible and responsive to the other.”
All of this, Mr Ko concluded, gives an opening for the legal function to take the wheel.
“A recession is a challenge for the entire business community and lawyers have an important role to play in ensuring that businesses act as outstanding citizens who do the right thing by the broader community,” he said.