Priya Bahal, associate general counsel at KPMG, makes the argument for why in-house legal teams need to shift to a proactive working style
The role of in-house counsel has transformed in the past few years. Traditionally, legal teams operated more in a reactive capacity by intervening when a legal problem arose, by addressing firefighting issues such as responding to notices and penalties, by handling disputes only after escalations, compliance after breach, reviewing contracts at the last stage, and by drafting policies only after incidents occurred.
The traditional reactive approach of the legal team often created a perception that legal was a roadblock, slowing down business decisions. However, the proactive stance of some legal teams has transformed the legal function to be seen as a true business enabler and a strategic business partner.
These legal teams are not just troubleshooters and problem solvers who go beyond resolving issues. They are now expected to do much more by playing a role in strategic corporate governance, risk management, engaging with business partners, drafting watertight contracts, handling litigation management, M&A and whistleblower complaints, shaping business policies, compliance, and settlement strategies.
This shift is driven by the need for companies to be more agile and compliant in an evolving business landscape. Companies realised that waiting for issues to arise (reactive) could not only trigger penalties but also reputational collapse. The approach taken by reactive versus proactive legal teams can have a significant impact on the company’s strategic, operational, financial, legal, regulatory and reputational outcomes. The proactive legal team helps businesses stay prepared and resilient, rather than merely reacting to crises. In today’s evolving business landscape, companies that invest in proactive legal teams are better positioned for long-term success, stability and resilience.
Proactive legal teams forecast legal challenges such as upcoming laws, including the Digital Personal Data Protection Act, ESG reporting norms, and amendments to existing laws such as labour laws. They also identify onerous contracts, loose policies and processes, and compliance gaps. These teams implement preventive measures and ensure that their company always operates within a legally secure framework.
In today’s fast-changing world, where regulatory shifts and risks evolve, a proactive legal team is an invaluable asset, helping businesses navigate uncertainty with foresight and confidence. A proactive legal team keeps itself abreast of the latest changes, networks with peers, and adopts best practices. They sit with their business teams early, not just at the time of approvals, simplify complex laws and legal jargon for the business teams, regularly train stakeholders, maintain ongoing communication, and avoid working in silos.
Analogies and metaphors
A proactive legal team is not just a group of subject matter experts. They are strategic problem solvers dedicated to identifying, mitigating and resolving legal issues in a practical, timely and efficient manner without compromising the legal framework. Rather than simply interpreting laws and regulations, they actively collaborate with business leaders, anticipate risks, and develop forward-thinking legal strategies that align with the company’s goals and objectives.
Just as a navigator ensures that the ship stays on course, even in dangerous waters, a proactive legal team anticipates legal risks, providing strategic direction and helping the business steer clear of costly disputes and compliance pitfalls. As a navigator scans the horizon for hidden obstacles such as icebergs or reefs, the legal team identifies hidden risks in contracts, partnerships and business deals.
Navigators adjust course based on new information, just as the legal team adapts to new regulations, market shifts and emerging risks by updating company policies, training employees, and refining legal strategies.
To use another analogy, a proactive legal team serves as a “traffic light”. A legal green light gives the all-clear to move forward while staying within legal boundaries. A yellow light signals caution to business leaders to slow down and assess the situation. The proactive legal team identifies potential risks and mitigations in business decisions before they escalate into legal issues, helping leadership make informed choices and decisions. By enforcing the legal red light, the proactive team prevents legal disputes and protects the company from harm when the risk is too high to proceed further.
The above-mentioned analogies emphasise how a proactive legal team does not just react to problems but actively prevents them, thereby safeguarding the business and enabling smooth operations.
Outcomes of different approaches
The following examples illustrate how reactive legal teams typically deal with problems only after they are escalated, rather than anticipating and mitigating risk beforehand. In contrast, proactive in-house counsel can help businesses prevent legal issues before they become costly and damaging.
If a company faces a data breach exposing personal data, a reactive legal team will respond by managing regulatory reporting, managing the regulator’s investigation, defending against lawsuits, etc.
However, a proactive legal team will ensure that the company is compliant with data privacy laws, establish robust data protection policies, provide data protection training, review and negotiate contracts to include adequate data protection clauses, participate in industry discussions on evolving data protection laws, and ensure compliance with changing privacy regulations. This reduces the likelihood of lawsuits, regulatory penalties, and reputational damage.
Another example is when an employee files a lawsuit alleging workplace harassment and a toxic work culture. A reactive legal team steps in only after the issue has escalated into formal litigation, by which time the company may already face legal battles, reputational damage, and potential regulatory fines for failing to address workplace misconduct earlier.
In contrast, a proactive legal team takes preventive measures, such as developing good workplace policies, conducting regular training on healthy work culture, implementing anonymous reporting channels, and establishing early intervention protocols such as internal mediation to resolve conflicts before they escalate into lawsuits.
When an employee files a lawsuit for unlawful termination, a reactive team gets involved only after the terminated employee takes legal action claiming wrongful dismissal due to discrimination, retaliation, or a breach of contract. In such an event, the company is now forced to deal with costly litigation, reputational damage, and regulatory investigation.
On the other hand, a proactive legal team ensures that the termination decisions are legally sound and well documented, so reducing the risk of lawsuits before they arise. Their approach includes developing clear employment policies, ensuring proper documentation before termination, and implementing fair and transparent exit procedures.
By integrating these proactive measures, the proactive legal team can significantly reduce the likelihood of wrongful termination claims, protecting the company from unnecessary litigation, financial losses and reputational harm. Instead of reacting to a lawsuit, the proactive legal team ensures terminations are fair, justified and legally defensible, preventing costly legal battles altogether.
The above-mentioned examples demonstrate that in today’s fast-changing business environment, proactive legal teams are more effective than reactive legal teams. By anticipating risks, strengthening compliance, and integrating legal oversight into business decisions, proactive legal teams help companies navigate complexities, protect their interests, and reduce costly litigation.
In an era where regulations evolve rapidly, and business risks are far more dynamic than ever, adopting a proactive legal approach is not just beneficial but essential.
Historically, legal teams were often viewed as primarily focusing on compliance and risk avoidance. They were seen as a department that slowed down decisions, adding layers of legal scrutiny that sometimes hindered business agility. However, this perception has significantly evolved.
Today, some teams are strategic partners, working alongside business leaders to find creative, legally sound solutions that support business objectives. They think out of the box, balancing legal issues with commercial realities.
Instead of simply saying “no” to risky situations, the proactive legal team focuses on making things work, helping to navigate complexities, mitigate risks and seize opportunities, while staying within the legal framework. This shift has transformed legal departments into value-driven enablers rather than mere risk managers.
So, would you like to be proactive or reactive? Isn’t it high time to move beyond a reactive mindset and embrace a proactive approach that safeguards the company’s future while enabling innovation and success?
Priya Bahal is associate general counsel at KPMG.