The role of the Compliance Officer in private equity is evolving. No longer gatekeepers at the edge of dealmaking, COs are now strategic partners embedded throughout the investment lifecycle. They minimize legal risk while helping firms meet rising expectations from LPs, regulators, and the public.
How exactly is their role evolving, and why can we no longer consider them as exclusive operational players?
The Expanding Compliance Mandate
Traditionally, compliance functions in private equity centered on fund-level regulation,
anti-money laundering (AML), and regulatory filings. Now, the GC and CO are increasingly tasked with overseeing portfolio-wide governance and ESG (Environmental, Social, and Governance) obligations. According to the EY Global Institutional Investor Survey 2024, 99% of investors use ESG disclosures in decision-making, with 74% using a rigorous approach.
This expanded mandate means:
- Monitoring and reporting obligations across multiple jurisdictions
- Aligning with frameworks like SFDR, TCFD, and CSRD
- Supporting board-level ESG and diversity commitments
- Ensuring portfolio company compliance readiness pre- and post-deal
Why Legacy Tools Are Holding Teams Back
Many compliance teams still rely on spreadsheets, email threads, and siloed document repositories to track obligations. These legacy workflows are risky, outdated and inefficient, causing daily problems to all legal experts involved. Luckily, there are ways to avoid missed deadlines, document confusion, and audit gaps. As you might expect, digitalization and a robust LegalTech solution can be game changers.
Governance and ESG Are Top Priorities for Boards
The General Counsel is increasingly expected to present governance frameworks to the board and investment committee. This includes not only legal risks but also ESG readiness, cyber governance, and compliance controls at the portfolio level.
For firms looking to fundraise, LPs now routinely ask for:
- Evidence of ESG risk assessments across holdings
- Proof of standardized governance practices
- Transparent compliance workflows and documentation
Without a central governance system, these requests become fire drills that consume valuable legal and operational bandwidth.
From Reactive Oversight to Proactive Enablement
To meet these demands, forward-looking GCs and COs are shifting toward a structured, proactive governance model. This involves:
- Centralizing Legal and Compliance Data: Creating a single source of truth across funds and portfolio companies.
- Automating ESG and Regulatory Tracking: Using digital workflows to monitor milestones, flag risks, and ensure on-time reporting.
- Standardizing Policies Across Entities: Ensuring every portfolio company operates under a harmonized compliance framework.
- Enhancing Board Collaboration: Giving directors, deal leads, and external counsel secure access to live compliance dashboards.
A New Era of Strategic Influence
As private equity adjusts to an era defined by transparency and accountability, the General Counsel and Compliance Officer are no longer just guardians of legal integrity. They are architects of trust. Their ability to embed governance across the portfolio directly impacts deal velocity, fundraising outcomes, and regulatory resilience.
By embracing automation and structure, GCs and COs can embed clarity, consistency, and control across the entire private equity operation. The mandate is clear: lead with smarter governance workflows now to build a more agile, resilient, and trusted firm for the future.
