Corporate and in-house lawyers are increasingly told they must be more commercially astute, delivering advice that blends technical legal knowledge with business acumen to provide simple, practical guidance.
However, this does not simply mean understanding their strategy, operations and commercial environment.
Increasingly, and as regulatory lawyers will know, it means having deep knowledge of risk management practices, best practice governance, community expectations and culture.
Financial services regulatory reforms since the Banking Royal Commission provide excellent examples of the need for all corporate and in-house lawyers to upskill and enhance how they provide advice.
Risk Management
Compliance with the law, for a complex client, is often a conversation about risks and controls.
The Design and Distribution Obligations, which started in October 2021, require financial product issuers and distributors to design and sell their products with the needs of the consumers in their target markets in mind.
What is a simple enough premise, and a relatively easy law to explain, finds complexity not in its legal interpretation or application to a client’s circumstances, but instead in how the client goes about meeting this obligation.
Most complex clients will establish controls to ensure they design their products in line with the needs of the consumers to which they, or third-party distributors will sell them. Those distributors will also put in place controls to reduce the risk that the products are miss-sold.
The easy advice for a lawyer to give is to explain this law and how it applies. The harder, but more valuable advice, requires a lawyer with a deep understanding of risk management practices. Strong governance experience also doesn’t go amiss.
Governance
A client will need to establish product governance arrangements to decide what financial products they sell and how. These governance arrangements will also support the monitoring of the performance of the product and the potential for consumer harm.
The Financial Accountability Regime, and the Banking Executive Accountability Regime before it, requires in-scope entities to identify and document who is accountable for what in their organisation. This necessarily incorporates a need to review and understand how decisions are made in the organisation and by whom.
This decision-making analysis is best done by a lawyer whose understanding of best practice governance matches their technical understanding of the Regime they are applying. Effective accountability and governance arrangements will serve the regulated entity by not just complying with the law, but performing better and making better decisions more efficiently. Advice that marries governance with law will be most valued.
Community expectations and culture
Since the Banking Royal Commission, and sometimes springing up around large-scale governance failures outside financial services (such as in high-risk industries like gaming), lawyers have increasingly been asked to apply an ethical lens to their counsel, and to support and guide clients – both in-house and external – to make decisions that better meet community expectations.
To navigate this responsibility, a well-regarded lawyer will need to understand what those community expectations are. These expectations are sourced not just from regulators or government, but also from the client’s customers. This must then be married with an understanding of the clients collective conscience – it’s culture – and how best to shape that culture to allow for better decision-making (bringing in governance skills) that aligns with community values and expectations.
This is a significant responsibility and not an easy task. An adept lawyer will understand the brand and reputational risk profile of their client, the client’s internal culture (and how corporate culture drives behaviour generally), their operating environment and best practice governance.
Learning lawyers
However, all this does provide lawyers with a laundry list of upskilling opportunities to enhance the advice they provide and expand their practice. Financial services regulation offers just a few examples of the need for this professional development broadly across corporate and in-house roles, and the benefits that it will bring for the lawyer who is happy to learn.
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