In-house ACCess : In-house ACCess: Association of Corporate Counsel : ACC : The In-house Counsel Bar Association

A former ACC Chair once defined a successful conference as one that provided a good idea that you could take home and use immediately to improve your department, business or yourself. The recent ACC Annual Meeting in Denver clearly met and far-surpassed that standard. Below, you will find some ideas and observations that I gleaned from the meeting. I credit the speaker or the session where I am able. If no credit is listed, it is because the observation is from an off-the-record meeting, a comment from an audience member, or an amalgamation of my own thoughts and comments from several individuals, and thus, not so readily identifiable.

I hope you find them useful or at least thought provoking.

On your career:

1. Comfort and growth are incompatible. – Michele Mayes

2. Get comfortable outside your comfort zone. – Susan R. Lichtenstein

3. You cannot be so focused on what you think you want, that you miss what you get.  – Michele Mayes

4. If your values get crossed, you must be willing to walk [away from your job], even though you do not know your next step. Fortunately, there are few times when your advice is non-negotiable. – Michele Mayes

5. To be good, you must talk the language of the business; to do that, you must learn to listen. When you understand how the money is made, you are halfway there. – Michele Banks

6. Nobody cares about a legal problem except as a business problem. If you couple that with an understanding about how the money is made, you will be successful. – Susan R. Lichtenstein

On value and value-based fees:

7. For my company, the billable hour is a cost of production. We make money by reducing our costs. Why don’t law firms think that way? For most of them, the billable hour is a unit of production, and they want the number to go up! – GC of a manufacturing company.

8. We have made great progress in the movement toward value — today, nearly everyone acknowledges its importance and is talking about it. However, the enemy remains us. I estimate that 40 percent of the in-house community is actively seeking to achieve value-based arrangements with their law firms, but the remaining 60 percent are too busy, find it too hard or simply like their existing firms. – GC of a technology company.

9. Do not underestimate the importance of the lessons-learned process — a post-mortem analysis is a key part of knowledge management. – Comment from audience in session on Value Fees in Litigation

When crisis strikes

10. Identify those who can derail the situation and develop relationships with them. This could include regulators, clients and major bankers. Make sure your stakeholders are fully informed and part of the process. – Judge Sven Holmes

11. A crisis is a defining event that can take you to the next level. – Ed O’Keefe

12. Planning and preparation are crucial; even though no plan survives the first engagement, planning does. – Ed O’Keefe

13. Your first obligation: Breathe and stay calm. Your first question: Do we actually have a crisis?

14. You begin by collecting the facts. You must be able to gather, protect, analyze and report on the information you collect. Avoid “ready, shoot, aim” and jumping to conclusions without facts. – Brad Lermer

15. You should have a team in place prior to the crisis, and know who will collect the information, where it will be kept and how you will communicate information. Identify the other professionals that you will work with both internally and externally (finance, accounting, law firm, etc). – Ed O’Keefe

16. Know your legal team and identify whom you would go to on your own staff. It should be someone who has an enterprise focus, is fact-based and has the guts to say when you are wrong. Character matters. – Ed O’Keefe

17. Get your message straight. Determine who talks with the media on background and on the record. Be ready to deal with information and misinformation that comes out. Companies have changed how they deal with the press. They are much more willing to engage press even when there is no big story or crisis. This raises credibility and allows for a long-term relationship strategy.

18. Make certain everyone understands his or her role and responsibility. At the close of a meeting or phone call, specify decisions made, who does what and next steps.

19. My biggest mistake — not giving the full picture to the CEO about how bad things are when they are worked up and do not want to hear about it. You must have confidence in the maturity of your business leaders.

20. My biggest mistake — not listening to that little voice inside you when something looks funny. It is probably worth looking into. – Stasia Kelly

21. Decide in advance how to handle difficult sets of facts involving senior management, and have protocols in place that determine what and when to report to the board and audit committee. Have a relationship with the board and audit committee before problems arise. Never forget that you are the lawyer for the organization, not senior management. – Judge Sven Holmes

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“Past performance does not guarantee future results.” I thought about this warning commonly seen on mutual fund prospectuses when reading an excellent column by Robert Samuelson in the Washington Post on the dangers of success, “Oil Spill Reveals the Dangers of Success.”  Samuelson’s piece provides an excellent corollary to a David Brooks column and risk management that I wrote about last week, “Risk Management: Art or Science? ”

Samuelson opens with the apparent triumph of technology and the success of deepwater drilling and its excellent safety record.  However, he believes this led to overconfidence that possibly caused the failure and remarks on “the stark contrast between the disaster’s magnitude and the previous safety record…Continuing achievements obscured the dangers.”

Samuelson also sees this pattern in other setbacks:

1. The financial crisis:  (Subprime mortgages did not cause the crisis but rather the decision by sophisticated investors to buy these products.)  He asserts that this was reasonable behavior at the time as the economy seemed less risky and there was less volatility in the market.
2. Toyota scandal: Toyota was a model company with an enviable reputation.  Its very success explains the slow response by both the government and the company—the problems were out of character.

As Samuelson notes, the current assumption is that the disaster at Deepwater Horizon could have been prevented because it was caused by human error.  He suggests that the post-crisis investigations will complete the story and we will learn what happened.  

However, for in-house counsel (and those charged with responsibility for compliance and risk management for their employers), he goes on to ask the more important question, not “what happened?” but “why?”

He concludes with the theme that there is “a cycle to our calamities, or, at any rate, some of them. Success tends to breed carelessness and complacency.  People take more risks because they don’t think they’re taking risks.”

Of course, after each crisis or catastrophe we analyze and study and in many cases the “risk” becomes more obvious because we have the benefit of looking back at what happened; we suffer from ”hindsight bias.”

In short, we celebrate success by relaxing; then unknowingly take on more risk.  For lawyers, risk managers and society, Samuelson succinctly describes the challenge. How do we “acknowledge this urge without being duped by it?”

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I just returned from Vienna and the annual conference of our European chapter--ACC Europe.   Strategic Risk Management: Art or Science? engaged our more than 250 participants with outstanding speakers from across Europe. The discussions in the sessions and during the breaks were lively and informative. The topics were especially relevant given the recent international financial meltdown and, of course, the Deepwater Horizon environmental tragedy in the Gulf of Mexico. 

The panelists of our opening plenary session, Gouverner c’est prévoir or the Art of Strategic Management: How Does Management See Our Role?  encouraged us to take our eyes away from our in-boxes and the possibly low risk daily legal service demands we are bombarded with, and spend more time identifying and mitigating the larger risks facing our companies. Moderated by David Bernick, Senior VP and General Counsel of Philip Morris International, the panel also examined the role of in-house counsel in strategic risk management.

Other panels discussed the nuts and bolts of risk management, the counsel’s role in company ethics programs, and specific legal and business issues facing companies that do business in Europe.   I found each session to be valuable and educational, and I greatly appreciate all our members who served on panels and added so much to the conference.

While at the conference, I read a column by David Brooks of The New York Times on risk and society’s response. His words were both timely and disconcerting. His sobering comments have particular relevance for in-house attorneys and others responsible for risk management in their organizations.

Brooks discussed risk assessment and the intersection of complex technology and human psychology. Technology allows us to live well but much of it and the financial and other systems it enables have become too complex for any single person to comprehend. Yet at the same time, it is individuals who must monitor and make decisions about risk. As Brooks notes, “humans are not great at measuring and responding to risk in situations too complicated to understand.”

He goes on to make five key points:

1.           We do not understand how little failures combine to create catastrophes (citing Three Mile Island).

2.           We acclimate to risk and think if something worked the last time it will work again (the Challenger disaster).

3.           We have too much faith in safety and back up systems (more people are killed in cross walks than jaywalking because they fail to look both ways).

4.          We combine complicated tech systems with complicated governance structures and tangled and confusing lines of authority and responsibility (Deepwater Horizon).

5.           We tell good news and hide bad news (just about everyone).

These are challenging times. Brooks concludes that we must go beyond making technology safer and develop better ways to assess risk and make choices that guard against risk creep, false security and good news bias.

The Brooks column certainly came at an opportune moment for the ACCE delegates as we thought about identifying and mitigating risk. ACC staff asked a number of delegates to identify the risks facing their companies and how they approach it.

Thirty-five conference participants responded to our survey and identified the top five risks their companies face. Most commonly cited were: Contractual (66%); Data protection/Privacy (58%); Anti-trust (54%); Regulatory (54%); Fraud (52%) and Ethics (46%).

Most compelling, companies have developed policies to address these risks and to measure their results. The areas for which companies most commonly have policies are: Data protection (72%); Contractual (69%); Ethics (58%); Corporate governance (52%); Anti-trust (49%); Financial (46%) and Fraud (46%). An impressive 64% of respondents said their organizations assess the effectiveness of their compliance programs. And, 90% of those that do such assessments use similar methods – audits, either random or regular, of specific business functions; general data keeping about the nature and incidence of compliance problems; and qualitative reporting (for example, debrief after an investigation).

As we discussed in Vienna and the data clearly shows, in-house counsel understand the risks facing their companies; and, the in-house bar is actively seeking solutions and putting together sophisticated programs to mitigate these risks and to measure the results.

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