Risk Within Reason

Bob Biggart shares the lessons he's learned and how he’s applying them to his work at Fortune Brands

Since becoming Fortune Brands Home & Security’s senior vice president, general counsel, and corporate secretary in 2013, Bob Biggart has been a risk-taker—within reason. He credits his measured adventurousness to the time he spent at PepsiCo, where, for twenty-nine years, he was a senior vice president and general counsel of its beverage business, both in the United States and internationally.

While at PepsiCo, Biggart spent more than ten years working exclusively for Pepsi-Cola International with businesses in more than 200 countries. He developed his philosophy on taking risks in large part based on the time he spent overseas learning how lawyers operate in other countries.

How do you think a company’s law department should view taking risks?
I believe that any law department can be a competitive advantage if it adopts a positive philosophy and attitude about risk. Lawyers often play a key part in deciding what risks should be taken. Lawyers are, by training, fairly conservative, and it is almost always easier for a lawyer to say that something is too risky. In-house lawyers understand that their jobs are safer by giving conservative advice with less chance of mistake. This kind of conservative advice can create even more risks for the company, however, than the risks the lawyers are trying to avoid.

I believe that for any company to be successful, it must take risks in order to grow and beat the competition. If the law department is willing to accept this need for risk and give accurate risk assessments rather than conservative assessments, it can really help our businesses grow and create a true competitive advantage. I ask all of my lawyers to accept this need for risk and be willing to lean in and give accurate risk assessments, considering only the interest of the business, and not worry about their jobs. I ask them to give advice as if they owned the company themselves. That also means that our lawyers will make occasional mistakes, and I assure them that it’s okay. I explain to my lawyers that if they are not making any mistakes, then they probably are not leaning in and giving the best legal advice for our businesses.

How long did it take you to create this philosophy?
While I was at PepsiCo, I was fortunate enough to get the opportunity to work overseas for many years and saw how different the legal practice is. [The] US litigation process is unique. Courts in most countries do not allow extremely expensive discovery processes with endless and expensive depositions and document production. Also, if you are negotiating agreements overseas, it is often a more simple business contract; not 200-page contracts like we have in the US. I found my overseas experience extremely liberating, allowing me to question everything I did on daily basis, and embrace this risk philosophy.

Does this philosophy on risk reduce the effectiveness of Fortune Brands’ compliance function?
It does not affect our compliance function or our compliance with Fortune Brands’ code of conduct. Our company will not take actions that violate the law or our code of conduct under any circumstances. In these instances, there is no risk analysis since the integrity and reputation of Fortune Brands is at stake.

“I believe that for any company to be successful, it must take risks in order to grow and beat the competition. If the law department is willing to accept this need for risk and give accurate risk assessments rather than conservative assessments, it can really help our businesses grow and create a true competitive advantage.”

What is your strategy for evaluating risk? Do you have any best practices?
I believe that each lawyer at Fortune Brands needs to accept responsibility to help the company grow and accept the need for risk. We have risk committees at Fortune Brands, but we expect the lawyers to take personal responsibility. Also, I feel strongly that our lawyers need to know the businesses of Fortune Brands. They need to understand how our businesses produce, sell, and distribute our products, and have a basic understanding of the P&L and competitive advantages of each of our four business units. I believe that lawyers who understand our businesses can have a much bigger impact and provide better risk assessments. Business lawyers who go beyond technical legal advice and make judgment calls can create significantly more value for our company. The management of our operating companies is also more willing to treat our lawyers as part of their business teams and involve them earlier when we spend the time to understand the basics of their businesses.

How does risk management vary when it comes to company size?
I think company size does make a difference. In order for a law department to fully embrace this risk philosophy, it needs the full buy-in and support from senior management. This kind of support can be harder to get at larger companies, where there are often many different voices and a focus on protecting their market position. I think it is easier for a mid-size company to be more agile and aligned in decision-making.

Why is evaluating risk particularly important for a growing business?
When you are in a high-growth industry, you need to take advantage of the opportunities the market is giving you. Your competitors are not sitting still. [You] need to get out in front of them, and this means taking smart risks. Fortune Brands is in a growth industry—the US housing market. Three of our four operating companies are tied directly to the US real estate market where we are planning for organic growth. We are also looking at M&A as part of our business growth model. The law department is a key part of our M&A effort. We handle our deals in-house and keep our purchase agreements middle-of-the-road and as simple as possible, with minimal legalese. The law department is trying to give Fortune Brands a competitive advantage in bidding processes by improving our chances of getting deals done faster and more effectively.