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Technology can save your firm from legal exposure

(Image credit: Image source: Shutterstock/everything possible)

Faced with a new era of political uncertainty, it’s no surprise that businesses continue to keep cashflow at the top of their list of priorities. But mitigating against unexpected costs isn’t a job for CEOs and CFOs alone. Thierry Mallat, chief executive of enterprise legal management software provider, Legal Suite, argues that technology enables all areas of a business to take control of cashflow issues – including legal exposure.   

There’s an old saying in business: revenue is vanity, profit is sanity and cashflow is reality. It’s an attitude that has been adopted with renewed vigour by CFOs all over the country over the last few years. 

In fact, Deloitte’s latest CFO Survey revealed that despite rising optimism within the ranks of the UK’s financial directors, cashflow concerns still rank among the highest priorities for a third of CFOs. And this is no surprise, with unexpected votes across the Western world posing the possibility of a new era of volatility.

But it’s not just political risks that pose an unpredictable threat to businesses. Companies can be hit by significant costs from all sorts of sources. At any time. 

Take Credit Suisse, for example. On an analyst call last year, chief executive Tidjane Thiam confessed to having been kept in the dark about some illiquid trading positions at the bank. This was a costly admission and Credit Suisse faced around $1 billion of write-downs across two quarters.

The lesson? Expect the unexpected. And it’s not just true for CEOs at financial institutions. In-house legal teams can handle thousands of cases across hundreds of customers in an environment where missing even a single deadline might cost the firm dearly – perhaps even enough to wipe out profit for an entire year. 

A holistic view

The only way to be sure that nothing slips through the net and protect the company is to gain a holistic view of all legal activity – one that enables in-house counsel to view the full picture of company exposure and take proactive steps to manage it, mitigating issues before they arise.

In a way, it’s a bit like classic sci-fi adventure The Matrix. The story begins with Keanu Reeves’ hero Neo being offered a choice between two pills. If he takes the blue pill he’ll remain ignorant about the true state of the world. But take the red pill and he’ll get to see the world for what it really is. Of course, he chooses the latter.

And this is how we see our mission at Legal Suite. We allow our clients to take the metaphorical red pill, seeing the truth about their situation so that they can change it – in much the same way as Neo bends the Matrix to his will.

This allows those clients to add much greater value to the business. Typically, legal departments in financial firms have been thought of as cost centres within businesses but those with a holistic view of company exposure are different.

For the first time, legal departments have been enabled to act as trusted advisors, providing strategic counsel to the CEO on how to mitigate risk and grow the business – not just dodging bullets.

In particular, there are two areas in which legal teams can add value simply by seeing more clearly the true state of company affairs: control and corporate governance. 

Taking control

It’s very easy for a situation to spiral out of control, sometimes without people even realising it. A holistic view of company legal dealings allows in-house counsel to see in advance when a situation could get out of hand and take steps to rein it in – minimising the firm’s exposure to risk.

For instance, the company could be handling too many litigations at once. Of course, this can be difficult for a team if its resources are being stretched too thinly, but the bigger issue is the real risk it poses to the firm. To put it simply, litigation is expensive – especially in a post-financial crisis world of fines that can run to hundreds of millions – and can be a severe drain on cashflow, even for the winner. 

And given the proliferation on financial risk regulation in recent years, it’s only those legal departments able to see problems coming that can turn away from crisis mode and on to the front foot, taking control of their companies’ destinies.

Governing efficiently

Good corporate governance depends on efficient process. Efficient process depends on knowledgeable employees. And knowledgeable employees depend on a near real-time holistic view of all moving parts – both present and historic. 

Take contract lifecycle management for example. One of the major issues with a negotiation can be when one party is determined to force a clause through and keeps adding it in at every stage – even after it has already been rejected. And as we all know, every clause could be costly. Tools like Legal Suite display the complete transaction history so users can see exactly what was agreed and when, along with what was rejected at each stage – allowing in-house teams to keep control of their negotiations, doing deals more quickly and on more favourable terms, even in the event of personnel changes. 

This is the crux of the issue. Tidjane Thiam may as well have been living in the Matrix, denied a true view of Credit Suisse’s affairs. In-house legal teams must take the red pill. It’s paramount that they can see the truth, so they can pick up on problems before they appear and – just like Neo – move much faster to prevent them. Ultimately, saving their business’s world.

Thierry Mallat, chief executive and co-founder, Legal Suite
Image source: Shutterstock/everything possible

Thierry Mallat is chief executive and co-founder of Legal Suite, the leading supplier of enterprise legal management software.