The Relationship Between Legal Advice and Business Risk-Taking During Uncertain Times
The legal industry has long held a reputation for being conservative and risk-averse. However, as we head into our third year of uncertainty, the business appetite for legal counsel that promotes confidence in risk-taking is growing. (And we’re here for it!)
How Conservative Legal Advice Impacts Business Activities
Gartner’s 2019 research shows that conservative legal advice results in business decision-makers being:
- 2.5x more likely to forego business opportunities;
- 4.25x more likely to scale down an opportunity; and
- 2.5x more likely to delay capturing the opportunity.
In monetary terms, Gartner determined that conservative guidance creates a loss of $17.5 million annually by the average legal department.
How Legal Can Build Confidence in Business Risk-Taking During Uncertain Times
Today’s legal departments must recognize their role in business decision-making – and adapt accordingly.
Your legal counsel should actively work with your business to:
- Outline your risk appetite;
- Understand the business’ current reality;
- Set a risk-management approach;
- Catalog long and short-term risks as well as the risk magnitude; and
- Manage your compliance weaknesses.
From that foundation of understanding, your legal counsel can help to build confidence in decision-making by providing pragmatic guidance that contemplates cost and effort and balances it against the actual risk.
Putting It Into Practice
More than ever, it’s essential that lawyers provide guidance to businesses that is agile, practical, and actionable. Your lawyers should be able to consider your budget or the opportunities presented to you and outline which risks must be addressed, which can wait, and which might need further attention from decision-makers (the bet the company risks).
In the same vein, your lawyers should be able to swiftly and accurately determine what’s urgent vs what’s important. Tackling unplanned work gets in the way of efficiency and effectiveness at almost every level in every company – and lawyers aren’t immune.
For your legal counsel to minimize the negative impact of unplanned work and to provide future-focused guidance, they must know about the company’s goals and plans (and its current reality).
Historically, lawyers provided answers to specific questions. However, that is a perilous approach in uncertain times – where answers given in a vacuum are more likely than ever to be unhelpful.
Instead, legal counsel should be focused on getting a complete picture of what the business challenges are so they can provide relevant guidance. This generally offers significantly better outcomes in terms of legal compliance and business decision-making.
If you need assistance navigating risk during these uncertain times, reach out.
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