Actual Risk and Lawyer Risk
There's a big difference between actual risk and what your lawyers tell you.
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Actual Risk and Lawyer Risk
Big companies and tiny ones all have one thing in common. At some point or another, they are going to need legal advice and that means calling in the lawyers. This is not meant to be an anti-lawyer post nor will it contain any lawyer jokes. Seems like that’s been done enough. And before I say another word, please do not take anything in here as legal advice. I’m not your lawyer nor, more relevantly, a lawyer at all.
But this post is going to remind you of a very important nuance when figuring out what to do with the legal advice you receive. It also highlights something that I’ve noticed sets some lawyers apart from others. Like any other job, there are people that excel at their jobs and others who are just getting by. The same is true for lawyers. The one big thing I’ve seen that offers some differentiation is how advice and guidance is presented. That’s what today’s post is about.
Before digging too deep, it’s important to remember what you’re paying legal folks to do. This same thing applies to your regulatory team who are not necessarily lawyers, but are responsible for ensuring compliance to other rules (like pharma companies handling FDA regulations on the promotion of a drug).
You pay these folks to deeply understand the rules and their nuances and, ultimately, how they impact your company. However, you do not pay them to make decisions for your company. And because you pay them to do this (and you get paid to make decisions) your incentives aren’t completely aligned, but that’s a good thing if you understand how to work well together.
When I worked for and with big pharma companies, I worked with regulatory teams whose incentives and “grades” were basically to ensure we received ZERO violation notices from the FDA (technically DDMAC for your healthcare nerds). So, in order to make sure they hit this goal, they are naturally very conservative in the “advice” they give you. I call out “advice” here because at many of these companies, the direction these teams gave was unchallengeable gospel. If they said it had to be a certain way or use a certain phrase, that was the end of the story.
I’ve seen this extended to other companies I’ve worked for and others who I’ve consulted with over the years. And the result is predictable: your company shies away from pushing the envelope a bit and is NEVER the first to try something new because there is zero precedent. And these two things mean that you’re always suck back in the pack.
To be clear, I’m not advocating breaking the law or going completely rogue on guidelines that (presumably) exist for good reasons. However, the important thing to remember is that there is VERY little in these cases that is black and white. And, more importantly, there is always a spectrum of risk.
This latter part is what titled this post “Actual Risk and Lawyer Risk.”
Let me simply state my key point: when you receive guidance from your legal team, your first question should always be: “what is the level of risk if we don’t follow that guidance?”
The really good lawyers out there will present their guidance and present the risk at the same time with equal weight. As the business leader, you should understand what you stand to gain if you follow your original plan and ignore the legal recommendation. Your decision is then very simple: is the potential gain worth the risk?
Sometimes this is very clear. The risk might be very tiny. For example, it might be regulation that is never enforced per the letter of the law and company stands to win big. Or it might be something that is enforced very tightly with huge punishments and where the company stands to gain very little. You would obviously make very different choices here.
I’m not advocating breaking the law or ignoring the rules, but, as I said, very little is truly black and white and I’m sure you’re making these gray area decisions all the time. These often happen where the regulatory or legal frameworks are very complicated or open to interpretation. Here are few common areas off the top of my head:
Tax planning - is that really a deduction or (my “favorite”) software amortization?
Regulatory frameworks like GDPR - are you pre-checking those opt-in boxes?
Intellectual property - is it really fair use?
Employee classification - are they really a 1099 employee or are they really full-time?
And many, many more. Again, don’t break rules that you know are clear and can cause major damage (to society and your company), but also be reasonable. If you’re a brand new start up and pre-check an email opt-in box, the chance of you getting fined under GDPR is zero. If you’re Google or Meta, then you’re a target and the chance is probably closer to 100%. In the former case, the risk to the company is nothing, but there is a non-zero cost (e.g., spending more engineering time to tweak how opt-ins work) and obviously some upside to opting-in more people (don’t be a jerk though).
So, be smart about how you deal with legal guidance and make sure you truly understand the risk to the company (and you personally) when deciding how much of the advice you take.
Before you go…