An unstable economy and the growing volume of global regulations are the biggest business threats, according to a recent poll of in-house legal counsels.

Grant Thornton, which surveyed 243 in-house counsel in both private and public companies across a variety of industry sectors, found that more than half say that regulatory compliance and enforcement was among the top threats to organizational growth.

According to the study, 57 percent of in-house counsel ranked “economic uncertainty” as one of the most significant threats to organizational growth. Ranking as the second highest threat to growth was “regulatory compliance and enforcement,” cited by 53 percent of respondents.

Brad Preber, national managing partner of Grant Thornton's Forensic and Valuation Services practice said the findings are “particularly shocking when you see that in-house counsel believe regulation is a bigger threat to growth than competitors or sales to customers.”

Another concern cited by in-house counsel included “global or domestic competition,” ranking third by 36 percent of respondents. All other perceived threats garnered 25 percent or less of responses. Of the 13 listed threats, “supply chain challenges” and “fraud and corruption” ranked the lowest, cited by only seven and five percent of respondents, respectively.

The findings reveal that the issue of regulatory threats is much more acute than imagined. “It was expected that in-house counsel would identify a few key types of regulatory threats. Instead, a staggering 45 different regulatory threats were noted,” stated the Grant Thornton study.

Only three of these threats—labor law violations, the Foreign Corrupt Practices Act, and environmental issues—were selected by more than 15 percent of respondents. “The number and diversity of responses is remarkable and may help explain why in-house counsel perceive regulatory compliance and enforcement as such a large threat to organizational growth,” according to the study.

Of in-house counsel who cited litigation as their primary threat to organizational growth, the plurality (47 percent) identified “regulatory” matters as their biggest litigation threat. Other litigation threats cited by 30 percent or more of respondents included contractual; intellectual property; and labor and employment.

Budget Allocation

Considering that many in-house counsel perceive regulation to be one of their biggest threats, the resources spent on compliance and enforcement appears relatively low. Even though 53 percent of in-house counsel cited regulatory compliance and enforcement as a significant threat, only 38 percent said they spend the majority of their resources in this area.

This disparity widened significantly for regulatory-related litigation, the study indicated. Forty-seven percent of respondents said regulatory issues are a top litigation threat, but only 10 percent indicated that the majority of the resources provided by their organizations were spent on this threat.

“This may mean that organizational resource allocations are misaligned, considering the magnitude of regulatory threat,” said Preber. “Alternatively, it could indicate that regulatory litigation costs have not yet reached the levels of more traditional problem areas for in-house counsel.”

The study concluded, “it bears watching to see if organizations put their money where their fear is and increase resources devoted to compliance over the next few years.”