In a sharp piece for Thomson Reuters, Sterling Miller says out loud what a lot of business teams mutter about legal. Lawyers are risk-averse, and when they push their own comfort level onto the company, deals stall and contracts drag. His rule is simple. The board and the C-suite set the company’s risk tolerance. The business owns the risk. Legal advises, and makes sure the right person is the one deciding.
A flat “no” is for the criminal, the dangerous and the unethical. Everything else gets five things: what the risk is, how likely it is, the range of outcomes, the options, and a recommendation if one fits. Then write down who made the call, because when it goes sideways someone will ask how legal let it happen. Cynical? A little. Accurate? Very. It is the difference between a good in-house lawyer and the department everyone routes around…
“Most importantly, the legal department should not impose its level of risk tolerance on the business. Lawyers tend to be very risk-averse, and that predilection often leads to clashes with the business and unnecessary friction in the day-to-day operations of the business, especially when it comes to contracts.”
Read: Risky business: Aligning the legal department with the company’s risk tolerance levels at Thomson Reuters