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Deloitte's on General Counsel

In a report 'Managing the Risks' by Deloitte presents the result of their second General Counsel survey, conducted in conjunction with Legal Week. They found an increased role in risk and regulation brought about by new legislation and regulation and increased enforcement activity.

The report points to ever vigilant regulators, anxious boards and demanding shareholders that ensures keen, outcomes-focused risk management remains firmly on the agenda. Financial services firms and beyond have made strides in fostering new cultures of risk-mitigation and accountability, and public facing transparency regarding these actions. 

Furthermore, boards and senior management are beginning to look beyond box ticking for regulators to the business case for compliance. Despite this progression, colassal fines and criminal sanctions in the world's major financial centres for poor risk management and compliance violations continue to make headlines and keep legal and compliance departments up at night [see for example the recent fine of £1.3 m against PWC by the AADB [ now the FRC] for its role as auditor to JP Morgan who were fined £33m by the FSA for mixing client funds.

Deloittes also point out that enforcement of legislation that was previously concentrating on financial services has begun to be felt by other industries. Data protection privacy in outsourced client cloud services, social media and market expansion mean that increased regulatory risks and penalties will occur. The introduction of the Prudential Regulation Authority ( PRA)  Financial Conduct Authority ( FCA) and new leadership at the Securities and Exchange Commission ( SEC) will bring about increased activity in this field.

The report found a colossal 88% year on year increase in boards discussing risk mitigation at every board meeting, whereas the 'infrequent' answer had dropped from 38% to 18% overall. Those who responded to the report felt that this is because regulators have been 'turning up the heat'.  

Other issues include data protection/privacy where inconsistent rules apply across Europe and throughout the rest of the world, meaning what a company can do in one country, it cant do in another. The situation becomes more complicated where companies operate in global markets where agreement on consistency in data protection is some way off.

The conclusion of the report is that the only predictable constant is more regulation and a compliance landscape that is moving from financial services into other industries. There has been a steep learning curve over the past five years and the burden is increasingly falling on General Counsel.

Key Findings 

  • 43% of respondents say legal risk assessment is discussed in every board meeting and 18% say it is discussed infrequently.
  • The compliance function reports most frequently to general counsel/in house legal team ( 36%) , followed by the board.
  • Data Privacy and security, bribery and corruption, leaks of confidential/price senstive material, are the most significant focuses for legal and compliance functions.
  • 44% of respondents say that the average number of staff dedicated to compliance is only 2 - 10 individuals.
  • The top goals of compliance programmes are meeting regulatory requirements, raising awareness within organisations of business specific risks and promoting core values.
  • Organisational complexity is the most pressing obstacle for effective compliance , followed by lack of resources

Click here to download the full report.

Jeremy Barnett acts as Independent General Counsel [IGC] for small and medium sized firms. Click here for more information about the service that he can provide.

For any advice and assistance for issues like these please do call Jeremy on 0844 2722322 or submit a comment below. Jeremy will come back to you at the earliest convenience.

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