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General Counsel In Manufacturing -- Navigating A Tangled, Shifting Web Of Global Regulations

Date: 16 October 2017

Today, worldwide political turbulence and events such as Brexit are prompting global economic, trade and political alliances to shift. Many of Europe’s top manufacturing companies are expanding to new geographical markets in search of fresh business models and revenue streams.

These global upheavals are having a profound impact on the role of the general counsel within the manufacturing sector. Today’s general counsel must be equipped to steer their companies through a multitude of risks associated with these changes while taking full advantage of the opportunities they offer.

To measure the impact of this technological and geopolitical change, and shed light on the new legal responsibilities and challenges facing general counsel, Forbes Insights and global law firm K&L Gates conducted a survey of 200 general counsel, as well as nonlegal senior executives, and engaged in qualitative interviews with general counsel in Germany, the U.K., France, Italy, Poland and Spain.

The full report, “General Counsel in the Age of Disruption,” sponsored by K&L Gates, explores the role that the general counsel plays, as well as future expectations for the manufacturing industry, outlining the trends reshaping this role and the strategies manufacturers are embracing to ensure success in this age of disruption.

The survey shows that one of the most important job characteristics for general counsel is to possess international and geopolitical acumen. And although executives agree that the regulatory environment is continuing to intensify and become more critical to business success, only 27% say that legal risks are completely factored into decisions concerning growth.

From tougher privacy laws to stringent climate controls, an intensifying regulatory environment tops the list of concerns among general counsel. A clear majority of executives (94%) see an ever-increasing volume of regulations and greater significance of the impact of the regulatory environment on their organizations.

Consider, for example, the new EU General Data Protection Regulations (GDPR). This legislation dictates that any company that targets consumers in the European Union, and holds or transports data relating to them, must prove that it is taking the necessary precautions to protect this data. The EU GDPR will be enforced starting on May 25, 2018, and noncompliance for protecting personal information could result in financial penalties of up to 4% of global annual revenue.

With the pending arrival of the EU GDPR, and other initiatives such as the Paris Agreement, which commits participating countries to reduce their greenhouse gas emissions, complex challenges are mounting for general counsel. But it’s not enough to simply meet these stringent regulations. General counsel must also ensure strict compliance without sacrificing an organization’s ability to respond to market fluctuations or to innovate.

Yet actively managing a challenging and intensifying regulatory environment can serve as a competitive edge. Companies that are aggressive about developing products that meet regulatory requirements may have an advantage over rivals.

Another trend impacting the role and responsibilities of general counsel is the increasing number of European manufacturing companies revamping their international footprints. About one in five companies expect substantial or major shifts in markets, 15% in location of operations, and 22% in the workforce.

These geographical shifts are taking European manufacturers away from what have traditionally been their home markets of Western Europe. At the same time, European manufacturers are increasing their presence in Asia, Eastern Europe and the Middle East. A number of legal concerns arise from expanding internationally.

For example, after invalidating the Safe Harbour pact in 2015 for failing to protect the fundamental rights of Europeans, the EU cracked down on data privacy with the EU GDPR. However, this highly complex and restrictive legal framework differs significantly from the approach to data privacy in the U.S., where consumers are raised on a steady diet of Facebook feeds and Google ads. All of which presents a considerable challenge to the general counsel of geographically expanding manufacturing companies: how to support growth strategies without violating global regulations.

Ensuring compliance with these disparate regulations requires in-depth knowledge of international legislation, as well as real-time information on the kind of data being collected, where this data is being transferred, how the data is being stored and what databases and systems are managing this data — expertise that is typically beyond the scope of general counsel.

We’ll revisit this topic in an upcoming blog post, with a closer look at technology risks.

This article, by Hugo Moreno, originally appeared in the Thought Leaders blog.

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