CLOC Academy: Finance 201

I enjoyed joining the CLOC Academy NYC day, sponsored by Brightflag, to co-teach Finance 201 with Siobhán Keenan at Cooley LLP’s Hudson Yards offices.

Although ours was the final session of the day, the room was filled with substantial experience and sharp questions—a true reflection of the legal operations community. We ended the program on a high note.

What struck me most was how many legal departments still absorb outside counsel costs rather than allocating them back to business lines. Legal is tasked with cutting spend, yet it doesn’t generate the demand for services—the business does.

Silicon Valley’s motto, “move fast and break things,” illustrates the dual nature of legal costs:

+ Expansion in pursuit of growth

- Defense when crossing—or crashing through—the guardrails

But how can business leaders make sound P&L decisions when the “loss” sits on someone else’s budget? Expecting legal to dissuade business leaders from risk-taking, while shouldering the financial burden for their choices, creates a perverse incentive.

When legal aligns with corporate objectives and business leaders bear the true cost of their decisions, incentives shift: leaders weigh risks with eyes wide open, and legal becomes a growth partner, not a cost center. In rare cases, if bold action is strategically warranted, the CEO can authorize exceptions.

Allocating outside spend to the business is straightforward. When a matter is opened, the requesting business unit is assigned along with a budget estimate. With limited access to the matter management system, finance teams can track their own spend and budgets directly, while the CLO receives consolidated reporting.

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Note: Even without the external spend factor if your internal law department is the A team, they can save a business from bad decisions. For this reason, I think there is a good argument to be made for allocating internal costs back to the business for repetitive problems.