Many experts are predicting that we will see growing business uncertainty during 2023 in the US and that perhaps a recession may even be on the horizon.
If that is the case, a challenging economic climate provides opportunities for in-house counsel to really “show-up” for their clients and to deliver higher-impact legal services. For instance, during this period of economic “headwinds,” our clients will need corporate counsel to help (1) unblock new revenue opportunities with customers/partners, (2) lower their costs of doing business; and (3) make sure they are still acting with integrity and compliance.
Back in 2017, I wrote an article for Bloomberg Law entitled “10 Things Lawyers Should Consider When Taking Risk” where I put together a methodology which I have used in my career to help my clients engage in smart risk-taking.
I believe these principles – which I call the 10 Ps of Smart Risk-Taking – are still applicable for in-house counsel and their clients. I’m sharing excerpts of that article below for lawyers to leverage to help their clients during these uncertain times:
While there’s no singular definition or way to engage in smart risk-taking, a good starting point involves embracing these two fundamental concepts: (1) never, ever assume any integrity risks; and (2) never put your customers, partners and employees at risk.
Since embracing compliance and respecting your customers, partners and employees should be straightforward foundational pillars to guide your clients in making risk-based decisions, let’s consider some specific smart risk-taking practices that you may want to consider employing when advising your clients. Over the years I’ve developed a methodology that I call the “10Ps” of smart risk-taking. While I originally created these “10Ps” to help advise my clients in taking smart risks during complex contract negotiations, I believe this framework can also be applied more broadly.
Let’s review these “10Ps” one by one:
Consider whether you are focusing on theoretical risk or on the actual and tangible effect in assuming a specific risk regarding the matter where your advice is sought. It is much easier to thoughtfully assess a potential risk if you break it down to understand its real, quantifiable and practical impact to your clients versus viewing it in an abstract fashion.
Simply put it is not a smart risk to undertake any obligation that your organization cannot perform and fulfill. Doing so may lead to confusion, unhappy customers and partners and potential disputes.
Be mindful of the future expectations and precedent that you may set by taking on more risk. When you decide to assume additional risk in a certain situation, make sure that you take a long-term view of that risk, as it may not be contained to just one isolated matter.
Depending on the level of risk that you are asked to assume, it is critical to first obtain any applicable approval from specific stakeholders(s) that may be required as part of your organization’s internal processes. Respecting and following through on an organization’s internal controls and procedures is an important element of smart risk-taking.
It is always instructive to understand what your organization has done in the past to address a specific risk. Any prior approval, denial, lessons learned or alternative solutions for such risk (and their associated analysis) will help shape your risk-taking determination.
Try to ascertain whether the key players in your industry – your competitors and other marketplace leaders – are also agreeing to the same types of additional risk that your organization may be considering. While it may be challenging to obtain such information since it may be confidential, any publicly available marketplace intelligence may be helpful in determining whether the additional risk that your organization is considering is indeed commercially reasonable and industry standard for your marketplace – and thus more easily rationalized as a smart risk or not.
As we all know in our social media driven environment, news and other information travels extremely fast. Actively consider how your smart risk-taking guidance may be perceived outside of your organization in the event it becomes public.
When analyzing and balancing risk your organization should stay true to its fundamental core values and principles. Such values and principles should always serve as your organization’s “north star” that guides its smart risk-taking decision making process.
Even though we live in a fast-paced and technology-driven world, please make sure that you are deliberate and patient regarding your smart risk-taking decision-making. Take the necessary time to gather the appropriate facts, slow down a bit so that you and your clients can think clearly, and do not be pressured into making a quick and less than ideal smart risk-taking decision.
Remember that your clients are busy professionals who probably do not have a legal background. Be sure to clearly communicate your smart risk-taking recommendations in a format that is succinct and easily understood by a regular person.
Helping your clients engage in smart risk-taking during these uncertain times provides all lawyers with a great opportunity to demonstrate their skills as trusted legal advisors.