Are lawyers cutting down forests?

When we see a forest, we see the beautiful trees, animal habitats and environmental wonder. When a firefighter sees a forest, she sees the possibility of a forest fire - the thick underbrush, the dry kindling, the threat posed by extreme weather.  We see wonder, the firefighter sees risk. 

But we don’t allow firefighters to go around mowing down all forests in order to eliminate that risk.  So why in a business setting do we allow lawyers to pursue a no-risk scenario? Why do we allow them to metaphorically mow down forests?

Lawyers are generally risk-averse. It’s the way we were trained. It’s a noble pursuit of trying to help a client.  When they are reacting to an issue, which is most of the time, they see a set of facts and know which ones materially hurt the client. They often think the client wouldn’t be in the mess they find themselves in if only they had done things differently.  So, in the usually rare circumstance where lawyers can address something proactively, they try to gerrymander the facts to eliminate the risk and avoid the problem altogether. Again, it’s a noble and valuable desire to protect the client.

The problem lies in the fact that most internal legal departments are often siloed off from the business rather than being integrated within the business.  As a result, its lawyers focus on their function rather than the business. They focus on their mandate as lawyers - reducing risk. This is exacerbated in an organization that does not have internal counsel and relies instead on external counsel. As a result, lawyers try to set the company on a path that avoids any type of unfavourable fact scenario from ever coming to fruition. Again, not necessarily a bad thing but it does have unintended consequences.

Here, I’ll explore two of those problems.

First, most legal departments are not set up in a way to allow its lawyers to span boundaries, cross functions or integrate properly within the business. As such, legal focus is narrow. In addition, lawyers are trained to focus on protecting their client from legal risk, as opposed to facilitating their client’s business and business objectives. The result is an approach that is not multi-disciplinary. This is a problem because very few problems these days are just legal problems.

Second, it presents a problem because it can end up eliminating too much, or all, business risk. Companies that don’t accept business risk often don’t reap business rewards. I’ve always said, the department of no is also the department of no value.

So much - perhaps too much - deference is paid to legal departments and external counsel that their word is often accepted as an authoritative business decision-maker. Certainly many in-house lawyers have learned their business, gathered a wealth of relevant experience, and trained in fields outside the law; however, these folks are the exception, not the rule.

An organization should challenge its own lawyers - not to the point of ignoring the law but certainly to the point of having a fulsome conversation about risk. What kind of risk are we talking about? Just legal risk?  What is the reputational risk? What are the chances of the legal risk materializing? What are the consequences of that risk materializing? What are the trade-offs of eliminating that risk? Are there steps to mitigate instead of eliminate risk? How does that risk (or the associated steps to eliminate or mitigate that risk) align with the company’s mission, vision, values, strategy and culture? Which stakeholder group is the most interested in this decision and why? Has the issue been reviewed in a collaboratively way with public relations/communications, marketing, finance, or sales?

Companies often work through several analyses in order to figure out if it’s worth it to take on significant debt to finance expansion or growth. If you’ve ever done a net present value analysis for a potential investment, you know it’s complex but also healthy.  The company does its analysis and accepts the business risk.

Companies and their lawyers need to perform thorough, boundary-spanning analyses of legal risks too. Assessing and eliminating legal risk in a vacuum isn’t healthy. It results in misalignment and misinterpretation of risk, as well as too much deference to legal counsel. Creating a system within a company that allows internal lawyers to integrate within, and work side-by-side, other functions will help them treat risk differently. It will also allow a company to challenge its lawyers, the same way it challenges all its staff.

Risk is only a four-letter work in a literal sense.  Treating risk like the kind of four-letter word we teach our kids not to say comes at a cost for a business - killing opportunities to reap rewards.