Legal and Risk Plan
As General Counsel (CG) of a small business, you make risk management and mitigation one of your core values. Your business relies on you to protect it from unpredictable and uncontrollable situations and significant legal implications. Over the past few years, securing the business has been a top priority for most legal departments. Different people and companies may view the above legal risks very differently. Some people, for example, don`t fear the prospect of personal bankruptcy, and some businesses are structured to take significant risks. Others see the prospect of being prosecuted with trepidation. In other words, different people and companies have different attitudes towards the risk-return trade-off. People are reluctant to take risks when avoiding risks and prefer to have as much safety and security as is reasonably affordable to reduce their discomfort. They would be willing to pay extra to make sure they knew that the unpleasant risks would be eliminated from their lives. Economists and risk management professionals consider that most people are risk-averse. So why do people invest in the stock market where they face the possibility of losing everything? They may also seek the highest possible value from their pensions and savings, believing that losses may not be ever-present – unlike the 2008 financial crisis. More than 80% of legal and compliance officers did not identify third-party risks until after initial integration and due diligence. To better manage these risks, move from an ad hoc approach to an iterative approach.
Now that you and your team have created a comprehensive list of legal risks, it`s time to prioritize those risks. This process involves assessing the likelihood of the event occurring and the magnitude of the consequences when the event occurs. Learn more about our legal and compliance research and advisory services designed to accelerate your execution speed and ensure the quality of your decisions. Not addressing legal risks before they become real problems can be devastating in the business world. From breaches of contract to compliance breaches, companies that fail to take steps to identify and manage their legal risk can face damages, fines and penalties, as well as reputational damage. The most important thing you need to know about reducing legal risk is that it requires a plan. While you may be lucky and all the risks inherent in your contracts never materialize, there are better ways to reduce your company`s exposure than wishing and hoping (everyone`s happiness will eventually run out too). Instead, think of legal risk management as something that companies need to plan for and strategize. This should be done both at the macro level – with a process of reviewing and integrating all new contracts – and at the micro level, how you approach each individual contract. Your overall legal risk management plan is essentially a step-by-step framework that provides the tools and considerations needed to manage specific risks under a new contract. Finally, a company is said to be risk neutral if its risk preference falls between these two extremes.
Risk neutral people don`t pay extra to transfer risk to someone else, nor do they pay for a risky business. For them, money is money. Economists believe that most of the most widely used or publicly traded companies make risk-free decisions because their shareholders have the opportunity to diversify risk – to take actions that seem unrelated or have opposite effects, or to invest in many possible unrelated products or companies so that the impact of an event reduces overall risk. The risks that the company may wish to transfer continue to serve diversification. In order to establish prevention and remediation strategies, developing a legal risk management plan will help you understand the laws, relevant compliance requirements and potential legal responsibilities that affect you. With the analysis in hand, you can refine the risk register with more definitive areas. Risk analysis is an iterative process. Some risks are removed from the list; some will merge with others; After the analysis, new risks will appear. Adapt your risk management strategies to the ever-changing business environment with this information.
When it comes to potential legal liability, whether your business is large or small, you owe it to yourself to identify the legal risks associated with certain activities, behaviors, events, or scenarios early on. As the manager of your business, you are the expert in day-to-day operations and therefore need to understand the legal risk associated with day-to-day business decisions. 2. Rank each legal risk starting with the most serious It is essential to recognize the key challenges for GC in the new risk management landscape. The key to managing common pain points – such as the following ones – is to identify aids.
