Controlling legal risk goes beyond the legal department, and in-house counsel need a pragmatic approach, without letting perfection be the enemy of progress. Prominent counsel Peter Zhang offers advice from his decades of experience
Controlling legal risks is a perennial challenge for in-house counsel. In a sense, managing legal risks isn’t very different from compliance management, although each in-house counsel has his or her own successful formula in legal risk control, depending on their industry. I want to share a non-exhaustive list of ideas that I have gained from my years of practice.
Where are the risks?
Risk control begins with identifying the sources of risk, some of which are explicit, such as the sales team limiting resale price, while some can be judged only by in-depth case analysis. So, we have to pay more attention to those hidden risk sources.
Risk sources are identified in terms of links and chains, for example, product life cycle and full-process identification. While product life cycle identification is targeted at research and development, material procurement, manufacturing, packaging and transportation, sales and promotion, after-sales service and product recycling, full-process identification is targeted at recruitment, employment, on-the-job management, and resignations.
It is necessary to consider the nature of the industry to deal with legal risks. For example, special attention should be paid to anti-money laundering and anti-bribery for consulting businesses, while social media companies have higher data privacy and network security compliance requirements.
Companies that make frequent acquisitions must pay more attention to issues related to trade secrets and obligations of non-competition arising from integrations. For global businesses, the unique requirements of local markets where those businesses operate, such as localisation ratios and language habits, create legal risks.
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Peter Zhang is a former general counsel of Sony Mobile (Greater China), with 30 years of previous experience at various prominent high-tech multinational companies. Zhang is also a member of the China Business Law Journal Editorial Board