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The GC in a Professional Services Setting

CEEIHM Issue 1.1.
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Marianna Erdei, Country Legal Director at EY Hungary, shares the unique challenges of managing the legal matters of a professional services company – with a legal services arm.

CEEIHM: For our readers to get a bit of background, can you clarify for us your role with EY and how, if at all, you interact with the EY Law side of things?

Marianna: EY, as a large international company network, has a centralized legal function to ensure the enforcement of firm-wide compliance and other internal rules and principles of a legal nature. The General Counsel’s Office is headed by a local law leader in most EY countries. Each local GCO is integrated into a regional and a global organization, which is a platform of a valuable knowledge share inside the company. The GCO is the guardian of the lawful and compliant operation of all EY service lines, including Assurance, Advisory, Transaction Advisory, Tax, and EY Law.

There is an interesting interaction for the GCO with the Vamosi-Nagy Ernst & Young Law Office in Hungary, as the “clients” of the GC are lawyers themselves. However, there is a clear line to their responsibilities: the GC is consulted on and oversees legal matters affecting the firm and its contractual obligations, whereas providing legal advice to external clients is the sole responsibility of the law firm’s attorneys. 

CEEIHM: What would you say are the main differences between acting as a GC for a professional services company and other in-house roles?

Marianna: Certain areas of law the GC practices in, such as employment law, contract law, and so on. are the same as in any other company, although, due to the strictly regulated background of certain services (such as assurance services), there is a big emphasis on related legislation and certain compliance rules. To ensure a compliant operation, there are other internal functions as well, such as the Independence and the Quality and the Risk Management functions, which work closely with the legal function. I believe these functions and their interactions with the GCO is particular to professional services companies.

When I first joined EY, it was also interesting to see how certain in-house legal issues are similar to those on which EY provides services itself to its clients, such as the GDPR. Accordingly, the EY GC has a large knowledge database available internally and has the chance to work around a legal problem with its subject-matter-expert colleagues. At this stage, it is mutually beneficial to learn from each other’s experiences. This, inter alia, makes it special to work in a BIG4 environment.     

CEEIHM: What does a regular day in the office look like for you – what types of legal matters tend to take up most of your time?

Marianna: Every day is different – it’s challenging. As the advisory market is a fast-changing environment, we have to keep up with the new business demands and work on new legal solutions and contract structures to meet market expectations.

The GCO’s main goal is to support the service lines and their business, while protecting the company’s long term interests by observing internal compliance rules and policies. Tasks usually include contract reviews, meetings or conference calls internally or with clients, regional subject matter calls, and professional interactions with other GCOs and the regional or global legal function, policy writing, and enforcement … and that list is far from exhaustive.

CEEIHM: Let’s take a second to talk about compliance matters. How do they differ in your case? Are there any tensions between that function and your own compliance hat? How do you juggle them if needed?

Marianna: Compliance matters are a hot topic these days. It is a very complicated system of how a company shall conduct itself and what principles it wishes to follow. Internal policies (on either a global, regional, or local level) intend to steer the daily operation and professional service provision in a unified way to ensure a similarly high quality of services in every EY office. GCs have a big role in creating such policies, but they also work closely together with the Risk, or Independence, or Quality functions, and it varies which function drives the process. Compliance tasks are currently divided among the above-mentioned functions, but it is more and more desirable to have a separate compliance function – which is also justified by the potential conflict of interest between compliance and other support function responsibilities and the heavy workload.   

CEEIHM: Can you give us an example or two of such potential conflicts of interest?

Marianna: Here’s a simple example – or at least, as simple as it gets:

If I were to receive a query that relates to a limitation of liability clause, in theory, that would be a straight-up legal question (maybe, arguably, with a business-side consideration factored in as to whether or not making concessions on that contract makes sense or not). But, because we, as a company, have our own approach to it, giving an answer on the matter also becomes a compliance issue. Between the two, if I, as a Head of Legal, give some input, I’d then need to ensure that the input is in line with our own internal policies – i.e., a compliance matter. It is, naturally, problematic from a process perspective to have the same person wearing both hats, assessing the level of compliance, and giving the advice. The internally accepted solution is to push this up to a regional reporting line under the form of a compliance question and have them give a green light or raise issues from a compliance angle. Aside from it being cumbersome, this approach also creates a level of fractioning at the level of compliance tasks. Furthermore, such a situation can create a strain on my own work where I have to decide at what point I need to push something up to that second layer of a compliance review when it comes to my own work/advice.

CEEIHM: Would you then say it is this fractioning that gives you most headaches in your role?

Marianna: Yes. In the special environment of a BIG4, I find the division of scope among supporting functions most challenging, as every issue has a legal and risk and quality, etc., angle to it and it is hard to define which function should drive the resolution process. Overlap in scope is an everyday challenge. Personal meetings among functions to clarify the nature of the given compliance matter and to identify the different principles of each function are very helpful, but time-consuming. Asking the right questions to understand the matter is key to the right solution and the experience in this respect which I have collected over the years is essential.

CEEIHM: If you could wave a magic wand and change one legislative/regulatory element affecting your job, what would it be and why?

Marianna: At the moment, I find the local Anti-Money Laundering rules less coherent and integrated than could be desired. Clear legislative requirements would be essential to be able to ensure full compliance. However, in this respect, I see many uncertainties in the market.

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