There’s an old curse that goes, “May you live in interesting times.” Today, many clients certainly wish they lived in less interesting times.
Volatility in the regulatory and policy environment — whether for institutional investors, energy companies, health care providers, and entities involved in homeland and national security, to take just a few — threaten business opportunities, profit margins, and strategy itself.
The recent congressional elections, with the switch of the House to a Republican majority and the Senate remaining under narrower Democratic control, augur an even more divided federal government. We will surely see increased turmoil surrounding regulatory decisions and clashes between different branches of government, including through investigations.
Today’s volatile environment naturally makes many clients feel uncertain and nervous. Many leaders of both for-profit and nonprofit organizations naturally have classic type-A personalities. They may even — keep this between us — be control freaks. This means these clients will try to get as much control over changing situations as they can.
This is why more clients should consider a new process to give them more strategic control over their regulatory and policy activities and expenses: an “audit” to evaluate their current activities and counsel them on strategy going forward.
Today’s regulatory and policy jungle is prowled by exotic, enticing creatures. Left to wander by themselves, clients are vulnerable to a wide variety of what might be called “policy predators.” Oftentimes, these predators look innocent. They may even have good intentions. But they can be dangerous, whether measured in sweat or treasure.
They include the interest group looking for a sponsor for a conference; the industry or association group looking for an annual membership; the think tank looking for an exhausting and research-intensive paper; the trade mission looking for sponsors; the lobbyist looking to increase his or her monthly retainer; and the large law firm ominously warning of regulatory threats that demand expensive hourly guidance.
These activities can be hugely expensive. Lobbying alone can run to millions of dollars a year for a large organization. Regulatory counsel can be hundreds of thousands of dollars. An annual sponsorship can easily be the expense of a full-time employee.
And these endeavors can also cross lanes (and budgets) inside an organization, meaning that the differing strategic objectives of different departments can conflict. Sponsoring a conference might be business development as well as government affairs. A paper might be R&D as well as government affairs.
Even more significant is confusion within the overarching aims of the entity itself. For too many clients, regulatory and policy activities end up becoming the tail wagging the dog. The demands (whether financial or operational) of a particular activity end up becoming the goal. In other words, rather than being focused on strategy, clients end up stuck on tactics. And the tactics end up warping the strategy.
This is why these undertakings often feel reactive rather than proactive. Discussing the wide variety of “clean economy” nonprofit activities his firm was constantly drawn into, the CEO of a large energy firm recently told me, “I don’t feel like I have any strategy. We’re paying all this money for all these panels and conferences and I don’t know what it’s for.”
This was confirmed by the VP for government relations of a large international company, who described her company’s interaction with think tanks and affiliation groups.
“We’re always putting out fires,” she said to me. “So many of our activities feel reactive, just when we need to be proactive.”
The question is how to shift regulatory and policy activities back to the strategic space — how to ensure that every dollar spent, every calorie burned, goes toward an overarching strategic objective embraced by leadership.
One option more entities should consider is a “regulatory and policy audit.” In this process, a client subjects all of its government affairs, regulatory and policy-related activities and expenses to an internal strategic review.
This “audit” can enable a client to become more proactive and less reactive, more strategic and less tactical, in their attempts to understand and manage regulatory threats and opportunities. Moreover, unlike an accounting audit, the process can be entirely bespoke — designed and adjusted for the principals charged with making strategic decisions.
An important question for the client is who to trust with the evaluation of regulatory and policy activities. Too often, lobbying firms and law firms have a perverse incentive to increase expenditures in these areas, rather than subject them to searching critical review and savings. These firms often directly benefit from these activities. They also often have friends and colleagues throughout the regulatory and policy ecosystem, meaning that these friendly predators can multiply.
An independent boutique law
or consulting firm with substantial experience in policy and regulatory issues therefore can make the most sense for undertaking this process. Their “audit” should begin with in-depth interviews with principals and other stakeholders at the client about the strategic aims of regulatory and policy activities. The interviews should also aim to assess concerns, misgivings and other subjective considerations. The “auditor” should have confidential, substantial, and unimpeded access to objective data, including records related to ongoing regulatory and policy activities and their effectiveness.
In the end, the “audit” should produce a strategic briefing, with an accompanying report, that assays the strategic aims of the client regarding regulation and policy; critically reviews existing activities and expenses; and counsels particular tactics, both negative (reducing or removing existing efforts) and positive (taking new steps forward).
While lawyers can’t do much to make the times less interesting, we can better give clients a clearer path through the jungle. A regulatory and policy “audit” won’t provide clients with perfect peace of mind, but it will provide them with more strategic control when faced with even the most well-meaning predator.
This article originally appeared on CorporateCounsel.com, a website affiliated with the Legal. •
Michael Signer is managing principal of Madison Law & Strategy Group in Arlington, Va. Signer served as a counselor to then-Gov. Mark Warner in Richmond and was a member of WilmerHale’s Public Policy and Strategy Group in Washington, D.C. His practice concentrates on financial regulation, energy, national security, and governance. He can be reached at email@example.com.