Manage Real Risks, Not Theoretical Ones

It’s not that I don’t care about the difference between contributory negligence vs. comparative negligence, it’s just that the lawyer I had been negotiating with on the phone for the last hour was fixated on that issue as the key element in deciding on the choice of law provision in our contract. At least it was his key element.

Me? I could not imagine the distinction was ever going to be a meaningful issue. In the end, while he got what is law training taught him to get, I got what my client needed.

In my last post, I talked about wanting business people who know a lot about the law rather than lawyers who know a little about business. My contributory negligence friend is a perfect example of why. As a businessperson, your General Counsel will spot the real risks that need to be properly accounted for, while the other lawyer is caught up in the minutia chase. Your GC is spending her time is getting it right on the real issues, the ones that matter to the client in a dollars and cents fashion, not the theoretical ones. A lawyer focused on winning the legal negotiations rather then creating a successful business deal is not the lawyer you want as your GC.

If there are five theoretical risks and two real risks (let’s call them “deal risks”) in a given transactions, it seems a fair trade from a contract negotiation standpoint to get the deal risks covered for my client at the cost of taking some theoretical risks. Some argue that you cannot or should not make these kinds of distinctions but as lawyers we make these kinds of distinctions all the time. Treating all risks as equally important is equally risky - and is not why our client hired us.

Managing “deal risks” is hard, and it does not mean you don’t pay attention to the minutia, the theoretical or the unlikely. It means you have to understand the business, the deal, and the real transaction risks.

You need a General Counsel who manages real risks and not just theoretical ones.

Ask your next GC candidate these:

1. What was your role in the last significant transaction you were involved in?
2. What were the key issues that you advised on?
3. Why did you consider them key?
4. What was your client’s reaction to your input?
5. How were they resolved?

Thanks for reading!

Richard Russeth

[This is Pt. 3 of "Good GC or Great GC: The Seven Characteristics That Make The Difference", a series of seven weekly blog posts discussing what makes a great GC]