The importance of commercial awareness

Rima Hadid – Al Masri, ‎board secretary & general counsel, Bahrain Mumtalakat Holding Company

Commercial awareness is no longer a ‘nice to have’ skill for law graduates entering into the employment market. It is a mandatory requirement for a legal professional, especially a GC steering their organisation through legal and regulatory risks.

Commercial awareness does not only include industry specifications for the job you hold, but understanding of the workings of the business that your employer is in, and the varying contributing factors (be they national or international) that impact this business.  Such knowledge can only be attained by taking a pro-active approach in getting to know the industry, by immersion into the environment and familiarising oneself with the main players as well as their movements. Commercial awareness for a legal professional is not only understanding an industry and a business though; it is also about having skills in other professional sectors as well – having a reasonable understanding of finance and accounting, as an example.

Being a general counsel (GC) of a sovereign owned investment company, it is imperative for me to have a basic understanding of all industries and sectors in which Mumtalakat has commercial interests. This does prove to be challenging as our company operates in the industrial sector, aviation, real estate, tourism, healthcare, finance and education (to name a few). That said, it is only with such familiarity with the related industries, that a legal professional can be effective in understanding legal and commercial risks and how to mitigate them. Furthermore, basic financial knowledge goes a long way when contemplating the structuring of potential investments, as well as reviewing due diligence documentation prior to an investment being made.

Today, businesses operate in a very prescriptive and regulated business environment. This has meant that a company’s GC is now required to play a more prominent role in business decisions rendered by a company, as well as help shape their strategy and assist the company to meet its corporate objectives. An informed GC, engages with all business units to gage a feel for the company’s status and anticipate problems before they occur.

Whilst there are companies that view the role of the GC in a more technical light, only to be consulted on specific legal matters, many companies are shifting away from this position. Both boards of directors and executive management are leveraging on the GC’s position to help maximise on return on investments. It is imperative for GCs to maintain strong commercial knowhow, to be strong communicators, and to be a link between thought silos and business challenges in the company. Their role becomes vital in bringing together key parties in any given business: the board of directors; executive management; and colleagues across the organization.

The days where a GC would outsource the drafting of a legal document, or even draft it in-house and have their role end there, are limited, if not long gone. I would argue against the effectivity of such an employee in the first place. The legal team at Mumtalakat is heavily involved in all aspects of any given transaction. Frankly, this is the way it should be. We work closely with the commercial teams from the request for a non-disclosure agreement onwards, reviewing the investment teaser, understanding the structure and nature of the potential investment. We raise potential legal risks as well as mitigate potential legal obstacles to our commercial teams, whilst they are still at the stage of reviewing and considering a potential investment. As GC, I am a voting member of the Management Investment Committee, ensuring legal input on commercial considerations of a potential investment. This allows both my team and I direct insight into the commercial leanings of the company towards a transaction, ensuring that this is correctly translated into negotiations and the drafting of definitive documentation.

An effective commercially savvy GC will be a solutions provider that manages the company’s risk landscape without hindering business or having a negative impact on potential business opportunities and returns on investments.

Columnist:

Rima Hadid – Al Masri, board secretary & general counsel, Bahrain Mumtalakat Holding Company