“Be more commercial”: what that actually means for Legal & Compliance

Federica Pavesi, General Counsel at AideXa Bank in Italy, considers what being “commercial” actually means for Legal and Compliance – understanding the business objective, exercising judgment and knowing where to allocate the function’s time, attention, expertise and budget.

“Legal needs to be closer to the business.”

It is a sentence most in-house lawyers have heard at some point in their careers. The same is increasingly true for Compliance.

I agree with it. But I have always found the expression slightly incomplete.

What does being “closer to the business” actually mean on a Tuesday morning, when someone asks whether a new initiative can be launched, a contract needs to be negotiated, a regulatory question lands in your inbox and three other matters are competing for your attention?

It cannot simply mean saying yes more often. Nor does it mean accepting more risk.

For me, being commercial is much more practical than that. It is about understanding what the organisation is trying to achieve and deciding where Legal and Compliance can create the most value with the time, attention, expertise and budget available.

Here are a few things I have learned along the way.

Start with the objective, not the legal question

Someone comes to Legal and asks:

“Can we do this?”

Our instinct as lawyers is often to start analysing “this”.

But sometimes the most useful first question is:

“What are you actually trying to achieve?”

Imagine a business team proposing a particular use of customer data. The original solution raises a privacy issue.

One approach is to analyse the proposed solution and explain why it cannot be implemented in that form.

Another is to understand the underlying objective. Is the team trying to reach a particular group of customers? Improve conversion? Personalise an experience? Use a specific communication channel?

Once the objective is clear, there may be another route to the same commercial outcome.

Of course, sometimes there isn’t. Part of our job is still to identify boundaries.

But the value of Legal and Compliance is not measured by how frequently we turn a no into a yes. It is measured by how well we help the organisation understand what is possible, under which conditions and with which risks.

Learn how the company makes money

It is difficult to give commercial legal advice without understanding the economics behind the decision.

That does not mean lawyers need to become finance professionals. But we should understand our products, customers, distribution channels and operational processes. We should know where value is created, what slows it down and which issues genuinely matter to the organisation.

That knowledge changes the way we work.

Imagine spending three days negotiating a contractual point on a relatively small transaction when the potential exposure is limited and an acceptable market solution is readily available.

The clause may be legally interesting.

But legal interest and business relevance are not always the same thing.

Good judgement includes proportionality.

The question is not simply:

“What is the best legal position?”

It is also:

“How much time and attention does this issue deserve?”

Spend the Legal budget commercially

Commercial thinking should also apply to the way we manage our own function.

External lawyers are enormously valuable. They bring specialist knowledge, experience across different organisations and markets, and perspectives that an internal team may simply not have.

The interesting question is therefore not whether to use external counsel.

It is what we should buy from them.

Take the review of a complex contract.

One option is to send the entire agreement to an external firm and ask for a complete review. Sometimes that is exactly what is required.

But often the internal Legal team already has something extremely valuable: knowledge of the organisation.

We know our processes. We know which obligations are operationally feasible. We know our risk appetite, our products, our previous negotiations and the history behind certain contractual positions.

So, another approach is to review the agreement internally first and then identify the questions where external expertise genuinely adds value.

Instead of asking:

“Can you review this agreement?”

We might ask:

“We are comfortable with the agreement except for these three points. How are you seeing the first issue handled in the market? Have you seen a particular regulatory approach to the second? On the third, do you agree with our interpretation?”

The difference is important.

We are no longer simply buying hours of legal work.

We are buying expertise we do not already have.

The same commercial discipline can apply to fees. Fixed fees, caps, portfolio arrangements or simply a conversation about scope can create better alignment between the work required and the value of the external expertise.

After all, lawyers negotiate for a living. There is no reason to stop negotiating when the contract happens to be our own engagement letter.

Stop writing legal essays

In-house legal advice is not an academic exercise.

A business colleague rarely needs three pages explaining the regulatory framework before discovering, in the final paragraph, what Legal actually thinks.

The analysis behind the answer may be complex. We may have reviewed legislation, case law, regulatory guidance and different interpretations before reaching a conclusion.

But complexity in the analysis does not have to become complexity in the answer.

I increasingly believe that one of the most valuable skills for an in-house lawyer is the ability to do a lot of legal thinking and show very little of it.

The business usually needs to know:

Can we do it? If yes, under which conditions? If not, what can we do instead? And what is the risk?

That should normally come first.

The legal reasoning can follow, to the extent necessary to explain and support the recommendation. Copying lengthy sections of legislation into an email rarely makes the advice more useful.

Our colleagues do not need us to show them how much law we know.

They need us to tell them what we think they should do.

This becomes even more important when the law is not entirely clear.

It can be tempting to present every possible interpretation and conclude that the matter is uncertain. Sometimes that qualification is necessary. But uncertainty does not remove the need for judgement.

If there are two defensible interpretations, we should understand the business objective, assess the likelihood and impact of the relevant risks and make a recommendation.

“My recommendation is option A. There is some legal uncertainty, but I consider the residual risk acceptable for these reasons.”

Or:

“I would not recommend option A. The exposure is significant enough that I would use option B instead.”

The analysis belongs to Legal. The decision needs to be usable by the business.

Being commercial also means respecting other people’s time.

Do not give every risk the same amount of Legal

Being risk-based is familiar territory for Legal and Compliance.

But I think the principle should apply not only to our controls. It should also apply to our attention.

Not every question requires a memorandum. Not every contract requires the same depth of negotiation. Not every regulatory uncertainty requires the same level of escalation.

At the same time, something that appears commercially small may occasionally deserve significant attention because of its regulatory, reputational or precedential implications.

The difficult part is knowing the difference.

One of the most important decisions a senior Legal or Compliance professional makes every day is therefore rarely written down:

Where should we spend our next hour?

Time is one of the function’s most valuable resources. Allocating it well is part of being commercial.

Sometimes go where nobody has asked for Legal

Being close to the business also means understanding it before there is a legal problem to solve.

Occasionally joining a product, sales or operations discussion can be extraordinarily useful, even when nobody needs legal advice.

Ten minutes listening to a sales team explain why customers abandon a process may teach us more about the real impact of a contractual requirement than ten emails discussing its wording.

It also changes future conversations.

Once we understand how a process actually works, why a particular deadline matters or what customers are experiencing, our advice becomes more relevant almost automatically.

Legal does not need to be at every table.

But it should understand what happens at the tables that matter.

Give options, not just conclusions

Sometimes the answer really is no.

But even then, there is often more value we can add.

Compare:

“Legal does not recommend proceeding.”

With:

“Option A creates this risk. Option B would achieve most of the commercial objective with materially lower exposure. If the remaining element is essential, this is the decision that needs to be made and this is the level at which I think it should be taken.”

The legal analysis behind both answers may be identical.

The usefulness of the advice is not.

Our role is not to make every business decision ourselves. Quite the opposite.

It is to make sure that the people who own those decisions understand the relevant constraints, alternatives and consequences well enough to make them.

Find out what happened next

There is one final habit I find particularly useful.

After giving advice, come back.

Did the product launch? Did the alternative solution work? Was the contractual provision operationally manageable? Did the risk materialise? Did the business team find the advice useful?

Legal advice should have a feedback loop.

Without one, we may become very good at producing technically sound answers without ever discovering whether those answers work in practice.

And that feedback gradually improves judgement.

We learn which risks were more theoretical than we thought, which operational concerns mattered more than expected, and which solutions worked well enough to use again.

Commerciality is allocation

We often describe Legal as a “business partner”.

I increasingly think the expression misses something.

Legal is part of the business. Compliance is part of the business too.

That does not make either function less independent when independence matters. And it certainly does not mean saying yes more often.

It means understanding the objective before discussing the constraint.

It means knowing enough about the organisation to distinguish an interesting legal question from an important business problem.

It means knowing when to spend three days and when to spend twenty minutes; when to build expertise internally and when to buy it; when an 80% solution is enough and when the remaining 20% really matters.

Ultimately, I think being commercial is about allocation: putting Legal and Compliance’s time, attention, expertise and money where they create the greatest value.

And perhaps there is a simple test.

When colleagues come to Legal or Compliance, do they expect only an answer to a legal question – or do they expect help making a better business decision?

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