Conflict Potential for British Companies Unveiled in Clyde & Co Study
In the ever-evolving business landscape, companies are grappling with a myriad of challenges and risks. A recent report by global law firm Clyde & Co has shed light on these issues, highlighting the legal, commercial, and liability risks that climate change poses for businesses and their boards.
Sam Tate, Partner at Clyde & Co in London, has pointed out that regulatory compliance has expanded to encompass businesses not traditionally considered highly regulated. This expansion is a response to the increasing complexity of the business environment.
The report, titled "Climate change: a burning issue for businesses and boardrooms," looks at what is driving the heightened risk environment and how most companies are addressing it. According to the report, operational risk, people challenges, market disruption, increased regulatory and compliance burden, economic risks, geopolitical risks, reputational risks, technological risks, climate change risks, and societal risks are ranked as the top 10 risks, with a high impact percentage ranging from 29% to 82%.
One of the key risks identified is the cross-border legal conflicts and compliance complexity that companies involved in international operations face. Navigating conflicting legal regimes, such as U.S. subpoenas clashing with European Union GDPR data privacy laws, requires meticulous legal compliance, balancing treaty obligations with privacy protections, and managing data transfers carefully to avoid legal penalties in multiple jurisdictions.
In addition, the strategic use of legal instruments in geopolitical business rivalries, particularly in sectors such as cybersecurity, complicates procurement, industry cooperation, and trust among global business partners. This issue is particularly evident in the context of U.S.-China relations.
Eva-Maria Barbosa, Partner at Clyde & Co, has noted that this year's report shows a risk environment that is increasingly complex, connected, and challenging, requiring heightened diligence, patience, and resilience. However, she also pointed out that opportunities exist for organizations able to adapt rapidly to the volatility.
The report also highlights the evolving legal landscapes and uncertainty that businesses must cope with, such as new investigatory powers or international agreements that redefine legal processes. This ongoing evolution introduces unpredictability and risks that certain legal actions may have unforeseen consequences across jurisdictions.
Another significant challenge identified is the increased regulatory and investigative burdens that lawfare tactics can lead to. These burdens result in significant compliance costs, operational disruptions, and the risk of damaging reputations or losing competitive intelligence to rivals or governments.
Despite these challenges, there are signs of resilience. For instance, despite an increase in high-profile cyber-attacks, 77% of respondents are more confident in their ability to defend against and respond to cyber-attacks and breaches than they were five years ago.
Moreover, 83% of General Counsel respondents play a more strategic role in risk management compared to five years ago, with increased complexity reshaping their jobs.
The survey of over 400 business leaders worldwide examines the biggest risks facing organizations, including geopolitical risk, economic risk, technological challenge, and operational, people, market, regulatory, reputational, climate change, and societal risks.
Interestingly, 36% of respondents said climate change is a secondary concern for organizations until it has a significant, sustained, and material impact on their operations. On the other hand, 46% of respondents said they are bracing for a surge in disputes due to tough economic conditions and the complex risk landscape.
Furthermore, 46% of respondents said that diverging ESG regulations in the US and Europe are negatively impacting their businesses. Additionally, 64% of businesses said that regulatory compliance is delaying investment, with obligations materially impacting their growth plans for 2025.
The Clyde & Co's annual Corporate Risk Radar report has warned that businesses are preparing for a wave of disputes and conflicts due to a complex web of risks. Ben Knowles, Partner at Clyde & Co in London, has stated that geopolitical tensions and supply chain issues are leading to more regionalisation.
In a notable development, Clyde & Co has successfully defended a group of 20 insurance companies against a USD $470m energy construction claim. The use of "lawfare" in business disputes is increasingly affecting global industries by introducing complex legal conflicts that intersect with international laws, data privacy regulations, and national security concerns. This legal-strategic approach often involves leveraging legal systems to gain competitive advantages, impose regulatory burdens, or disrupt rivals, particularly in contexts involving cross-border investigations, data subpoenas, and compliance with evolving cybersecurity and privacy laws.
As businesses navigate this complex risk landscape, it is clear that legal expertise, strategic compliance, and international law navigation will become increasingly critical for companies operating globally to manage risks and protect competitive positions effectively.
- The increased complexity of the business environment has led to a broader scope of regulatory compliance, extending to non-traditionally highly regulated businesses.
- Operational risk, people challenges, market disruption, increased regulatory and compliance burden, economic risks, geopolitical risks, reputational risks, technological risks, climate change risks, and societal risks are the top 10 risks companies are dealing with, according to a recent report.
- Cross-border legal conflicts and compliance complexity are a significant challenge for companies involved in international operations, requiring careful navigation of conflicting legal regimes.
- Strategic use of legal instruments in geopolitical business rivalries complicates procurement, industry cooperation, and trust among global business partners, particularly in sectors such as cybersecurity.
- Regulatory compliance is delaying investment for many businesses, with obligations significantly impacting their growth plans for 2025, according to the report.
