Risk Management on the Cutting Edge
You hear a lot about the gig or freelance economy these days. Some organizations that facilitate this growing trend have a reputation for playing fast and loose with compliance and regulations.
Upwork Inc. takes the opposite approach, thanks partially to strong leadership and communication from its Legal and Finance divisions. Brian Levey, General Counsel (GC) and CFO of Upwork, believes that the two departments share many similarities and can add value to a company by acting as “periscopes” to anticipate risk and allocate resources.
Cutting edge innovators
Upwork, the world’s largest freelancing website, is the product of a merger of two pioneers in the freelance-platform space, Elance and oDesk, which occurred in 2014. Levey was instrumental in the negotiation and execution of the merger. Prior to taking on his roles at Upwork, Levey served for 13 years at eBay Inc., most recently as Vice President, Deputy General Counsel & Assistant Secretary. He says the two companies are not dissimilar: “eBay is a marketplace for goods, and Upwork is a marketplace for work.”
Levey says, “Upwork helps businesses and independent professionals find each other and work together anytime, anywhere. Our website reduces friction in the labor market by enabling human capital to be deployed more efficiently than ever before.”
Thanks to the rapid development of third-party technology offerings that promote communication and facilitate the formation of virtual teams (such as Slack, Zendesk, and Google Drive), he says that it has been predicted that online talent platforms like Upwork have the potential to add $2.7 trillion to the global GDP by 2025.
“A lot of folks may group us with gig economy companies. Unlike many of those companies, however, Upwork is a true marketplace where users set their own pricing, choose their own projects and are free to work when, where, how, and with whom they want.”
Legal and Finance: two sides of the same coin?
In 2015, Levey guided Elance-oDesk through its rebrand to Upwork, which required “a lot of cross-functional work” to migrate the existing platforms to a brand new one. He says that the organization “really rallied behind it,” and that Legal and Finance both contributed significantly to that initiative by anticipating risk and helping to properly allocate resources. They used that same strategy to navigate recent changes to their website fee structure.
Acting as both GC and CFO at Upwork has helped Levey understand the ways Legal and Finance can work together to manage risk and facilitate collaboration. One similarity between the two roles is that neither “has a horse in the race. GCs and CFOs bring an objective point of view to the table and connect the dots across the company, providing a 360-degree view of the business, which can have a positive impact on corporate strategy.”
Both Legal and Finance act as the aforementioned “periscopes of the company.” Levey says, “If we’re doing our jobs well, we can see around the corners and into blind spots to better anticipate problems and risk.” Levey says that he operates under the philosophy that there are “known-unknowns and unknown-unknowns” and that one advantage Legal and Finance have in working together is their common internal language to best identify and classify these matters.
He believes that Legal and Finance can act as “tools for changing behavior in the organization” by influencing everything from the business model to company values. “We want to be problem-solvers, not police officers,” Levey says. In other words, these functions at Upwork don’t simply say “no.” Instead, they come up with solutions, which is “what earns you the trust of your peers and provides an incentive for others to include Finance and Legal in the next discussion.”
Problem-solving is one way in which Levey’s departments add value. “Ultimately, it comes down to effective communication,” he says. “Know your audience and how to persuade them.” The two functions of Legal and Finance need to speak to a wide range of individuals, such as “investors, regulators, politicians, employees, and board members.”
Collectively, all of the parallels between the two functions of Legal and Finance result in effective risk management, “better decision-making—especially when dealing with new issues, which often happens” in an innovative company—and boosted productivity. They also help to promote recruitment and retention. “The best, most talented people want to work for high-performing companies that have a systematic, analytical way of managing risk,” Levey says.
Compliance as a competitive advantage
Levey says that companies need to shift their thinking: “Make compliance a competitive advantage rather than looking at it as a nuisance.” Even more concisely, he says, “Just do the right thing.” One competitive advantage that Upwork has is that a licensed escrow agent is available to all website users for secure payments.
Upwork is also the first work-based marketplace to implement a reporting process with the European Union’s Value Added Tax (VAT) laws, for example. It implemented a VAT reporting system that “allows us to charge and remit VAT,” which “not everyone can do because not everyone has the scale needed to invest in compliance at that level,” he says.
Changing the way that “peers, employees, and colleagues” approach thinking about compliance is important, Levey says. “We want to give them an ‘a-ha moment’ where they understand the implications of doing things the right way versus the wrong way.” This requires finesse and superior communication from the Legal department: “We help people see that we’re providing insights and actionable advice rather than just coming at them with a stick.”
A mindset of compliance is an intrinsic part of the culture at Upwork, and they also work externally to develop that mindset among their users by providing resources on their website. “We have a unique resource center, [which includes] articles about business structuring and taxes to help both freelancer and client users be compliant and meet legal standards.” Supported by the Legal and Finance teams, Upwork also offers worker classification compliance services with Upwork Enterprise, a comprehensive freelancer engagement solution for large enterprises.
Fostering a collaborative atmosphere and working proactively to embrace compliance has earned Upwork’s Legal department kudos. In 2014, Financial Times named the Upwork [then Elance-oDesk] legal team as one of the Top 25 Most Innovative In-House Legal Teams in North America. “I work with the best and the brightest; the team teaches me something every day,” Levey says. That kind of collaborative spirit sets Upwork’s team apart and allows them to navigate in a cutting-edge environment.