GeoLegal Weekly #6: GC of Haleon on Geopolitics / Munich Security Conference
This week I speak with a top GC on managing geopolitics; also I dissect the pessimism of the Munich Security Conference.
Last weekend, a bevy of government leaders gathered for the Munich Security Conference - a US and EU-heavy gathering of global diplomats taking stock of international security. One commentator noted “the ratio of worries to solutions has rarely felt higher.” Indeed, the 2024 annual Munich Security report is perhaps most optimistic on its title page - “Lose Lose?”- which at least has a question-mark (in contrast to the 125 pages of downside risks that follow.) Chapter titles like “Middle east: Abraham Discord" and “Indo-Pacific: Shoring Up Defenses” convey the political moment the world finds itself in. Thinking about a backdrop for our businesses and practices where the world is no longer on positive-sum footing but is increasingly measuring everything in terms of relative gains and losses is heavy stuff.
My entire purpose with GeoLegal Notes is a call to action for legal leaders to realize how important global affairs is at this exact moment in time for their businesses. I was recently called “alarmist” by a legal community leader who felt like I was trying to “scare the horses.” I take issue with that characterization because what I’ve been trying to highlight is the complexity of the political world and the uncertainty around so many events at this exact moment. And while there is lots of downside risk at the moment, there are plenty of opportunities for businesses to turn uncertainty and risk into opportunity and competitive advantage.
To dive deeper into how GCs and those that work with them should think about the world, I had the opportunity to interview Bjarne Tellmann, General Counsel of Haleon - the world’s largest standalone consumer health company - recently spun out of GSK. Before that he was GC of Pearson. Bjarne is one of the most thoughtful people out there on how to build an outstanding legal team. Seriously, he wrote a book with that title and you should read it. You can watch our full conversation by clicking the video below and playing it in the web version of this post.
Risk Levels
Have I been overbaking downside risk? Let’s hear it from the perspective of a GC. Here’s how Bjarne characterized it:
“We're really sitting at a point in time where the political and geopolitical risk are at a high watermark, at least in terms of the time that I've been working as a general counsel. There's an uptick in conflicts and geopolitical tensions, populism, etc. around the world, and that creates a lot of challenges in terms of how to think about and address political risk. Not to mention Black Swan events like COVID and war in Europe. So it's really, really important, for corporations to increasingly look at how they configure political risk into their enterprise risk strategy. And it requires big picture thinking, as well as drilling down into operational scenario planning. “
Bjarne and I aren’t the only ones taking note of this shift in expectations. My own survey of news and literature on GCs and external risks turn up GCs who refer to themselves as “chief horizon scanner” (GC of Rolls Royce);“a businessman with a law degree” (GC of McDonald’s Singapore) and many others. The Chief Legal and Corporate Officer at Anheuser-Busch Inbev recently noted that “law schools ‘don’t teach’ about geopolitical risk…’ but that’s something the business is asking you to navigate.’”
Navigating the new normal
So how do companies and GCs traditionally manage political risk? From my perspective, it is often crisis management and reactive. Companies, at best, monitor what is going on in their external environment and when a shock becomes imminent, they react. It is hard for a company to spend considerable time and energy on potential events and much easier on certainties – which leads to underweighting things like the sweeping and very material impact of legal risk caused by a newly elected regime and overplaying things like complying with extremely minor regulatory provisions. There’s a significant return on investment to anticipating and planning for how politics translates into legal risk.
Deloitte breaks down the role of GC into Catalyst, Strategist, Guardian and Operator, noting that “most CEOs and boards want new executives to spend about 60–70 percent of their time in the catalyst and strategist categories, with the remaining 30–40 percent in the guardian and operator categories. However, based on our conversations with new CLOs, their time allocation is often reversed.” What’s critical to realize is that that geopolitical work doesn’t just sit in the guardian category with risk; rather the need to “Anticipate and proactively develop a strategy to address changes in regulatory requirements and public policy” is strategic work.
I’ve always liked the quote in Bjarne’s book which says “risk management trumps cost management every day.” One reason this is often missed is because nobody owns these events since they are cross-cutting.
As Bjarne told me:
“If you step back and look at the traditional way that risk is organized, it tends to be around functional departments. That can cause institutional blindness because it limits information flow and it restricts thinking. The reality is that risks have very permeable and soft boundaries that cross easily from one artificial human constructed category into another. And so that's why political risk in particular sits precisely at this intersection of different boundaries within a corporation, which is one reason why it's really hard to pin down and it's really hard to tackle and yet very easy to get blindsided by it.”
Tips for the Modern GC
Bjarne’s been practicing law for 30 years and in GC roles for much of it. So I asked him how this has changed over time and what the modern GC needs to be equipped for. He responded that:
the “GC serves as a connector in the risk mitigation context. The general counsel tends to be aware of things across the corporate span of the company, as well as being aware of things outside the company's remit. So that puts the general counsel in an increasingly advantageous role when it comes to risk and political risk in particular.”
For those of you who serve as GCs or who serve GCs (law firms, legal operations leaders, software builders) do you agree?
As Bjarne told me:
“what I'm seeing is that many GCs are taking on increasingly formal roles in this space, whether that's government affairs or communication roles. You're also seeing, an increased role, whether it's formal or informal, in both strategic and operational accountabilities in the space. And an increasing accountability for leading or managing risk enterprise capabilities more broadly. That would be including political risk, for example, incorporating political risk into executive and board agendas. And increasingly, I think general counsel need to begin thinking about themselves more as chief risk officers rather than chief legal officers. And that means that they need to always be aware of group think, untested assumptions, silo effects, and so forth.”
This is a super interesting point because it requires a different set of skills than many lawyers have honed over their careers or were educated for. For instance, Bjarne pointed out that:
“from a strategic perspective, GCs are increasingly required to help the board and the CEO think strategically about when the company should be taking positions directly on key political issues or political developments and when they should not. And that, in many cases, depends on how a given issue might impact the company's mission, its priorities, how the broader industry is thinking about it, etcetera.”
We’ve all seen the successes and failures of companies responding to global events with statements and positions in recent years. COVID, #MeToo, Black Lives Matter, Russia/Ukraine, Israel/Hamas – none of these are easy issues for which to formulate a corporate position. But what may work from a marketing or communications point of view may not work from a legal point of view. That is to say that striking a bold position to support one side in a conflict (“We stand with Ukraine”) may trigger a whole downstream set of legal and business implications (“We need to now rush to exit Russia”).
That’s strategy but Bjarne also discussed how this works operationally:
“GCs are increasingly tasked with thinking about the legal implications of political and geopolitical risk. So for example, anticipating or assessing how the contractual or litigation exposure of the company might flow from changes in trade policies or incidents that arise around the world, how that might impact supply chains and then how that might impact than the contracts that flow from those supply chains, for example.”
So how do you do all of this? Bjarne had some useful tips, which I summarize below:
Identify the areas of potential concern for your business and make sure you have the right internal and external advisors to address those concerns.
Think of this as a broad field – the help you need includes expert advisors on political risk, security, business intelligence, the right media and communications advisors, as well as legal advisors.
GCs have discovered at their peril that there’s a cost to not having those experts in place before they are needed in a crisis because you can waste valuable time.
Develop appropriate crisis management business continuity plans and have those in place.
Make sure the CEO is up to speed and thinking about political and geostrategic issues. You or one of your colleagues should be providing executive briefings to keep this front of mind.
Stay abreast of geopolitical and macroeconomic events and always think about the impact for your company.
And of course, to accomplish the last point, you need good resources. Besides this newsletter and our community conference calls (which Bjarne noted), he suggests:
Grazing broadly on different formats – news, podcasts, network conversations.
On news, FT, WSJ, NYT, Washington Post, Economist and Foreign Affairs are all helpful.
On Podcasts he recommended taking in perspectives across the political spectrum including - GZERO World, Fareed Zakaria GPS, Lawfare and Good Fellows by the Hoover Institution
Beyond the GeoLegal network that Hence is building, he recommended GC50.
For books, Robert Kaplan’s “Revenge of Geography” and Tim Marshall’s “Power of Geography” were really helpful in understanding the role geography plays in political risk. “Chip War” by Chris Miller sets the context in terms of technology and conflict. And the “Black Swan” by Nassim Nicholas Taleb.
So that wraps up how GCs can think about political risk but what about those who serve them - like law firms and software providers. I suggest the following:
Absorb this evolution in role of the GC and look for opportunities to share your broader understanding of the marketplace with them. Don’t just build narrow software tools and law firm services for responsibilities of the past; think about broadening your aperture with respect to your audience.
Tap into your knowledge resources for historical parallels that may be relevant to helping GCs understand the risks they face today. Clients are paying your for your knowledge and expertise - not just your ability to execute legal products. Have you organized your knowledge to be able to mine it?
Consider whether you can convene expertise that will truly be considered a value added service to help your audience make sense of the world - whether that’s on your team or using your network. For instance, forgo bland content marketing that summarizes known regulatory changes and think about hosting speakers or co-authors who can make sense of where the world is going in a legal perspective.
Consider whether embedding such expertise into you own team makes sense to give customers more of a one-stop-shop advisory experience.
I’d be happy to brainstorm further strategies one on one if you’re so inclined.
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That’s it for this week. Next week I’ll be diving into geopolitical risk management from a legal operations perspective. Thanks as always for your readership, comments, and for sharing onward.
- SW