Developing Your Legal Risk Management Plan
When it comes to potential legal liabilities, whether your business is big or small, you owe it to yourself to identify the legal risks associated with certain activities, conduct, events, or scenarios early on. Being the manager of your business, you’re the expert in the day-to-day activities, and must therefore, understand the legal risk associated with the everyday business decisions you make.
In an effort to set in place preventive and remedial strategies, developing a legal risk management plan will help you understand the laws, the relevant compliance requirements, and the potential legal liabilities that affect you.
Below are five crucial steps to follow in order to develop a legal risk management plan that continuously reflects both your business’s development, and that of the law itself.
1. Identify potential legal risks
As a manager, before you can understand the advice you receive from a lawyer, you must first know what it is exactly you need to ask. Identifying potential legal risks requires that every area, action, and interaction of your business is examined in order to identify potential legal liability and compliance risks. Through a legal audit of your activities, those most familiar with the functional areas of your operation will collaborate in determining the principles of legal liability most relevant to your business.
2. Rank each legal risk starting from the most serious
After you and your team develop 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 if the event occurs.
3. Develop proactive and reactive strategies for each risk
With every legal dispute, there’s time, money, and energy being wasted, and often bad publicity too. This stage involves setting in place a plan to prevent the risk from occurring, and in the event that it does occur, a plan to minimizes the consequences of said risk.
4. Plan implementation
Following the announcement of the new plan, implementation involves educating and training employees, as well as conducting tests and monitoring the results. It’s absolutely crucial for employees to comply with the plan, and for management to regular monitor its progress.
5. Regularly review and update the plan
To ensure that the plan is being implemented correctly, feel free to revise accordingly. As new laws are introduced and cases are decided, legal risks are always changing. Thus, revisions are necessary in order to reflect the new legal risks.
Furthermore, as businesses expand to new jurisdictions, new products and processes are introduced, and organizational structures change, these too bring new risks that must be reflected in your legal risk management plan, as failure to do so may prevent your employees from performing their duties and responsibilities to the best of their abilities.
Taking precautions sooner rather than later, and having a legal risk management plan in place is vital to managing one’s business effectively. By taking proactive and reactive measures, not only are you developing effective strategies to deal with each risk, but you’ll gain a greater understanding of the risks that have the greatest potential impact.
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