Tackling business crisis – The expanding role of the General Counsel

The widening of the GC’s strategic remit means that when a corporate crisis strikes, it’s down to them to investigate it. So knowing what steps to take and what skills to develop in preparation is vital.

This article was first featured in the March edition of The Lawyer.

The changing role of the GC

GCs are increasingly being asked to use their role to drive even more competitive advantage for their organisation. Our GC clients often tell us that they need to develop their skills and responsibilities in ever more complex areas – especially in preparation for when crisis strikes.

From suspected bribery and corruption, allegations from a whistle-blower, a regulatory violation or some other potential wrongdoing – the task of investigating and addressing crisis often falls to the GC.

Most GCs find that such a situation comes along fairly infrequently, and may happen only once in their career, if at all. But lacking previous experience in crisis investigations doesn’t reduce the responsibility for getting it right.

So, what are the key steps you should be thinking about now, to prepare you for when a business crisis arises?

Establishing the objectives…

So, what’s the best approach? The first step in responding effectively to any crisis is to establish the objectives you’re looking to achieve. These differ depending on the circumstances: there may be numerous stakeholders to engage with – the board, regulators, customers, media – or a need to reassure the markets. The HR function is also likely to be involved, and there may be an intention to recover money that’s been misappropriated.

…and getting the basics right

Having decided what success looks like, the next step is to get the basics right so the investigation will stand up to scrutiny. This means focusing on some basic aspects: the scope of the work, the independence of the investigation, and the expertise of the people working on it.

In terms of scope of work, the goal is to look at the right issues in sufficient depth to establish the full extent of the situation. This means thinking through and covering every angle – if an employee is suspected of bribery in one country, do they work in any others? – and drawing on all relevant data sources: internet, email, chat, phone, open source intelligence, interviews, hard copy records and financial and non-financial data. It’s also important to use the right language skills if needed, and appropriate technology – such as applying machine learning techniques to speed up the data reviews.

On independence, the key is to ensure that whoever is leading the investigation is sufficiently remote from the alleged wrongdoing: if a finance employee is suspected of making inappropriate payments, you may not want the finance director running the inquiry – they may be too close to the issue. For serious issues, the chair of the Audit Committee or a non-executive board director may be the best choice to instruct and oversee the work. There may also be a need for HR to suspend individuals during the investigation, to ensure that results are not compromised.

Turning to expertise, it’s vital to get the right people involved with the right skills to look at the full range of evidence, applying the right technology and techniques, and maintaining the integrity of the investigation. These requirements apply if an internal investigation capability such as Internal Audit is used – and it’s often a good idea to seek additional subject matter expertise externally if niche areas of expertise are needed.

Hidden pitfalls to avoid

Even with these basics in place, there are traps that can catch the unwary GC. For example, ensuring the investigation approach complies with employment and data protection laws in the countries involved? In some jurisdictions it’s illegal to transfer or look at employees’ personal data. Also, is any action taken in response reasonable and proportionate and necessary – and how would the approach taken play out on the front page of the press?

Depending on the nature of the crisis, there can be a need to keep regulators informed – potentially including the decision to self-report the wrongdoing. And there could be grounds to make a claims on insurance.

Next steps

As GC, you may never have had to manage a crisis. But that can change very quickly. So invest some time now in thinking about how you and your team would respond to a crisis. There’s training available to help with this – as an example, we’ve recently developed Investigate, a simulation that allows you to play the role of investigator and experience a business crisis first-hand. How would you react to a dawn raid, or a serious whistle-blower allegation?

For more information, please speak with Umang Paw or I, details are below.

[email protected]

[email protected] 

www.pwc.com/investigate