Lawrence Liu: Managing legal risk through systems

There are 23 lawyers at CESEC and in the past year the workload has been overbearing. Given the additional strain on the transactional lawyers, I now have to recruit candidates to be trained so that they can come into the legal team and we can better respond to the ever-changing legal environment.

What are the main areas of focus for CESEC's in-house team?

The main areas are contracts, anti-corruption, project finance, construction and mergers and acquisitions.

To what extent do you outsource work and to which law firms?

CESEC has co-operated with many law firms due to different legal work requirements – for example, Beijing Jing Yue, Shandong Deheng, Beijing Guoganghua, Morrison & Foerster in the US and J&V in Saudi Arabia.

Is the Chinese chapter of the ACC still the fastest growing chapter globally?

ACC-China has developed very fast this year. There have been many ACC applications from all over the country, while I have personally received many lecture invitations from Chinese companies and organisations.

Kroll's recent global fraud report stated that 96% of companies in Greater China had experienced at least one type of fraud in the last three years. As somebody who has advised companies and law firms on legal risk management (LRM), what is your response to that statistic?

Fraud is a global problem. Unfortunately where there is business and people there shall be fraud. The rule of law and legal systems thus play an increasingly important role in today's more complicated social and economic environment. And that's the reason why legal professionals have a place in this world – the best method to avoid fraud is to have capable lawyers to protect business transactions and each legal entity's behaviour and rights.

The financial crisis has resulted in high staff turnover this year, which was cited by 41% of respondents in Kroll's report as the most common factor increasing the vulnerability of companies in Greater China. To what extent are there different warning signs with LRM these days?

Labour contract issues have recently come to the desk of general counsel with many companies now cleaning up illegal contract clauses.

Legal risk in mergers and acquisitions is increasing, especially involving state-owned enterprises (SOEs). And legal risk in other areas such as lawsuits, disputes and arbitration matters is also increasing.

Chinese companies such as Air China and China Airlines lost a lot of money on oil derivatives in the last year. To what extent do you think this was avoidable, and a failure of LRM on the part of the in-house legal teams?

All risks inside companies can be completely avoided if a risk management system is set up and executed by the right people. General counsel should review their LRM systems so as to define and recognise where and how LRM can play some fateful or determining role in some key sectors and processes.

You predicted that Chinese corporate counsel would utilise legal technology more in 2009 (in part to improve LRM). Did this happen, and what is your prediction for corporate counsel in China in 2010?

In the last year, Chinese companies have been establishing more internationalised legal systems. For example, 80% of SOEs' legal departments have web-based contract management systems. Legal directors are consulting me about their compliance systems, knowledge pool and intelligence systems, in order to help them manage legal affairs and control legal risks for their employers. I forecast that this situation will continue over the next few years and I am very happy to be involved in this process.