Legal Leaders Must Begin Looking Beyond Pandemic-Related Risks.
Gartner, Inc. has identified four emerging risk trends that legal, and compliance should anticipate over the next two years. These trends will determine the significance of legal, compliance and privacy risks to organizational objectives and the demand for new legal and compliance services.
“The pandemic was a huge shock for most organizations: the last two years have been about organizational survival,” said Abbott Martin, vice president, research in the Gartner Legal & Compliance practice. “It’s only now that legal, regulatory and social systems are catching-up with new conditions and the extent of technological change that has occurred.”
To help legal leaders make sense of the new risk landscape as organizations start to emerge from pandemic crisis mode, Gartner experts have identified four key themes that help to explain the many risks they face.
Evolving Societal Expectations
Fundamentally, the role of businesses in society is changing. The influence of stakeholders has grown, and their expectations have both shifted and, in some places, are converging on new visions of corporate purpose. Organizations that do not keep pace with this change face punishing reactions from governments, customers, supply chain partners, employees, and other stakeholders.
“Long-term sustainability of revenue is increasingly dependent on an understanding of social expectations, what we call the voice of society,” said Martin. “Climate change and governmental reaction to it is increasingly critical strategic context for all companies, and employee and customer social expectations must be taken into account.”
The impacts of social expectations are felt across supply chains, operations, sales and into the board room. General counsel have a role to play in helping the company understand, navigate, and respond to these changing demands which are now inseparable from strategy.
The New Employee-Employer Relationship
The pandemic was a catalyst for many people to re-evaluate their working lives and for companies to think differently about how work gets done. This is reflected in what is often referred to as “the great resignation” and in staff shortages across industries. This ongoing phenomenon is leading towards a New Employment Deal quite different from what was normal before the pandemic struck.
“Legal and compliance have a role to play in putting the policies, processes and practices in place that balance employee needs for flexibility and purpose with equal treatment and the long-term mission and values of the organization,” said Martin. “General counsel must also recognize the potential for the significant lawyer burn out and the risk of department attrition.”
Overall, legal and compliance departments will need to build the policy infrastructure for the New Employment Deal, administer vaccine policies across jurisdictions and help the company manage the potential for significant employee and legal attrition.
Geopolitical Competition and Corporate Disruptions
A growing mismatch between what the public expect and what governments deliver is driving tension within and across societies. This widening gap portends more political volatility and more country-specific approaches to economic and regulatory governance.
“Companies must prepare for a world of more political, legal, environmental and criminal disruption,” said Martin. “Aside from the governmental aspects, accelerating technology change, digital interconnection, climate change, and continued pandemic-driven volatility suggest the potential for significant and persistent disruptions to corporate operations.”
As a result, the cost and complexity of regulatory compliance is likely to rise and so will the value of relationships with local regulators and business partners. Corporate resilience will become a key competitive differentiator for many firms facing such a volatile geopolitical environment with increasing impacts on trade, tariffs, ransomware, cybersecurity, and M&A
New Frontiers of Technology Regulation
The legal and regulatory system is adapting to a corporate landscape increasingly driven by data, platforms and autonomous decision making. Regulators and courts are putting in place rules that will govern competition, AI use, and the use and housing of personal information.
“These laws and regulations will reshape corporate action today and define the shape of markets in the future,” said Martin. “The importance of data mapping and AI governance will clearly increase alongside increased use of these technologies in business applications. Legal and compliance departments will need to work more closely with the CIO, Chief Strategist, and other executive partners to establish effective data and AI governance.”
