Looking Glass Report 2020

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

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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.

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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

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Section 1 The risk landscape

Section 2 Growth

Section 3 Technology and innovation

Section 4 The role of General Counsel and the Board

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About Winmark

About Clyde & Co

Peter Hirst Senior Partner, Clyde & Co

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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

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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 – >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

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