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LAW DEPARTMENT MANAGEMENT By Jeremy Hainsworth BMO Financial's novel approach to risk management has external counsel praising the bank's double-check of internal systems. risk-management A novel PLAN With the Canadian financial and banking sector now working in an increasingly complex legislative and reg- ulatory environment, corporate counsel find themselves moving past the tradi- tional role of trusted adviser and into the position of risk managers. Indeed, says BMO Financial Group general counsel Simon A. Fish, managing risk is a core part of his bank's business model. "We make money out of managing risk," he says. But he adds the imposition of additional duties by lawmakers and requirements of boards of directors have led his company to develop a unique approach. It means involving external law firms when the bank engages in risk-management situations. "What's new is that risk manage- ment is very much hitherto seen as an internal exercise," says Fish. "What we're doing here is extending that to a service provider. We're bringing in our law firms as partners as part of that process." He says the response to the creation of formal relationships in the situation has been positive but adds many firms have not seen such an approach before. "They've all come on as willing partners. In represent- ing BMO, the firms are required to be mindful of the legal, regulatory, and reputational risks involved in any transaction or matter, and involve the senior members of the legal group in the assessment and management of such risks," Fish says. Dale Ponder, managing partner and CEO at Osler Hoskin & Harcourt LLP, says while she can't speak to the practices of other financial institutions, the move by BMO's in-house team to include greater involvement from out- side counsel seemed like the right one. "With everything that's going on in the financial services sector, they're taking it to the logical next step," Ponder says. "They're taking it to the next level. The shareholders want to know it's well managed. The board of directors wants to know it's well managed." Fish says in working with BMO lawyers, outside firms are expected to familiarize themselves with certain risk factors identified by the company's legal group as the existence of such factors may give rise to significant risks to BMO. "It's more troops. It's more resources. It brings more expertise and specialist knowledge to an area," Fish says. It's an analogy Ponder accepts. She says given the complexity of the business, institu- tions such as BMO must be certain of their service providers. "These are good people to enlist as a double-check to their systems." INHOUSE OCTOBER 2010 • 37