Sullivan and Cromwell Q&A: Don’t Underestimate Foreign Regulatory Scrutiny

The increasing complexity of the international regulatory environment translates to an intricate web of scrutiny for U.S. companies.Sharon Nelles, a partner atSullivan & Cromwellwho has represented numerous corporate and financial clients, shared her views on what companies should focus on.

Hear more from Nelles at the 2018 Bloomberg Law Leadership Forum on May 23 in New York, where corporate counsel from Fortune 500 businesses and leaders from top law firms will gather to discuss trends in trade, regulation, and technology.

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What is the most critical issue international companies face in today’s regulatory environment?

From the perspective of a legal advisor, I would encourage international companies not to underestimate the potential impact of non-U.S. and emerging regulators’ scrutiny of their actions at home or abroad. In many arenas, regulators are coordinating and cooperating, and businesses need to plan accordingly, including making sure legal and compliance does not have a siloed perspective.

Many companies anticipate that U.S. regulators will examine activities outside of the U.S.—now U.S. actions, even for domiciliaries, are increasingly subject to regulatory scrutiny from beyond their borders. We are seeing regulators worldwide involved in corruption investigations, merger clearance reviews, and privacy concerns, among others. This can lead to business disruption.

Consider, for example, an M&A transaction that’s delayed as a result of multiple regulators with differing views choosing to engage in the approval process. At the same time, regulators in the U.S. are expanding their reach, partnering with plaintiffs where issues are high-profile, as well as in high-stakes private litigation.

What are your primary concerns about the impact of cybersecurity and the threat of data breaches on your clients’ organizations?

Envision a significant cybersecurity incident as inevitable and have your response team and response plan ready.‎ Such incidents are happening, threatening business disruption and significant reputational damage, especially if the client is entrusted with private, personal data.

And, as technology has diversified, especially through the proliferation of electronic markets, cyber threats have likewise diversified. Criminals (and this is criminal activity) now target all types of data and systems, making it harder to anticipate where the risk is most acute. But while cybersecurity threats are evolving, preparing for a breach is not unlike preparing a response plan for any crisis.

What opportunities or challenges does the changing regulatory matrix present to your clients in the areas where they operate?

Certain recent regulatory changes are likely to make the U.S. an attractive base for global expansion and spur innovation. For example, new tax regulations may have left clients with additional capital, which in turn can be a catalyst for interesting opportunities such as the development of new products, strategic acquisitions, and joint ventures. Technology companies will be better able to respond to the rapid pace of digital innovation.

Where domestic and global policy is inconsistent, unclear, or developing, however, new opportunities can create new uncertainties for businesses and business sectors. Consider the EU’s General Data Protection Regulation law, which harmonizes the export of personal data outside the EU. While this eases burdens for global companies by having a single EU regime, at the same time the law expands both penalties and the sanctions risk, changing the risk/reward calculus when considering new opportunities.

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For the 4th year, theBloomberg Law Leadership Forumis the premier event for legal industry leaders to gain insights and discuss how global economic and regulatory changes impact their business.

The 2018 Forum features an update on current regulatory priorities, a look at where corporate risk is rising, and an exploration of the technology and management tools legal counsel need to respond effectively.

Click here to request an invitation to the 2018 Bloomberg Law Leadership Forum.

Leadership Forum Speakers Include:

• Chairman Jay Clayton , U.S. Securities and Exchange Commission

• Deputy Attorney General Rod Rosenstein , U.S. Department of Justice

• Marcy Cohen , Managing Director and Chief Legal Officer, ING Americas

• Noah Perlman , ‎Global Head of Financial Crimes, Morgan Stanley

• Katherine Choo , Chief Investigative & Anti-Corruption Counsel, GE