Give an Example of Legal Risk
By the time management meets with the lawyer to discuss the question of “what are the chances that we will lose this case and what the likely damages are”, it is too late for risk management. Before entering into litigation, we need to identify areas where there are uncertainties that impact our objectives. Risk management is not a matter of fortune-telling. Instead, we want to reduce the possible outcomes of certain events. Lawsuits and legal claims from employees are on the rise, according to the Equal Employment Opportunity Commission (EEOC). Employees and applicants are protected from unfair treatment or harassment based on race, colour, religion, sex, pregnancy, national origin, age (40 years or older), disability or genetic information. It is also illegal to take revenge on an employee who complained of unfair treatment or participated in an investigation or prosecution. Another type of legal risk that the Advocate General must understand is asset risk. The value of tangible assets such as buildings and intangible assets such as human capital and intellectual property must be protected. Costs and income foregone caused by legal uncertainty multiplied by the possibility of the individual event or the legal environment as a whole.
 One of the most obvious legal risks in the conduct of business, which is not mentioned in the definitions above, is the risk of arrest and prosecution. The low cost of high-quality legal advice is a wise investment against legal problems in the future. For example, these ads are promoted in the U.S. because they can be beneficial to consumers (as long as the claims are true and accurate). In Canada, the mere use of another company`s trademark in certain types of advertising can lead to prosecution. If you can get your message across without tearing down another brand or person, it`s safer. Another benefit requirement: Workers and their families who lose their health benefits are entitled, in certain circumstances, to continue to receive health benefits from their group health insurance plan for limited periods of time. Each organization must ensure that it complies with all possible rules and regulations of the government and the legal bodies that regulate them. It should comply with the laws and statutes of the country in order to minimize the possibility of legal risks.
For example, a lawsuit in an influential state invalidates fees charged to consumers as undisclosed interest charges, which are subject to damages and punitive damages. Our organization charges similar fees. However, the fees are charged a number of times and in known states. The law in question contains well-known penalties. We have the building blocks to measure and manage legal risks arising from similar litigation. Some types of risks are accepted as part of the business, others related to legal issues, such as contracts, businesses, assets, intellectual property and compliance, can have serious negative effects on a business. Regulatory legal risks are a bigger day-to-day issue for most business owners. A good business lawyer cannot measure the risk to you with mathematical precision. Risk management is an information challenge. The more you know and understand the risk you are exposed to, the easier it will be to manage it.
Let`s use this definition for the type of risk a business owner faces: Risk is the probability of loss on a particular stock or event. As you can see, businesses are exposed to a variety of legal risks and laws that can change. The eight risks listed above only scratch the surface. You may face complex issues related to real estate, intellectual property, shareholder agreements, investors, business creation, environmental regulations, licensing, mergers and acquisitions, internet, zoning, insurance, joint ventures, and more. Effectively managing the legal risks your business faces can give you more time to grow your business successfully. Contact your lawyer for more information on how to minimize legal risk in your situation. Exposure to structural legal risks changes the landscape in unexpected ways. Automated processes and contract management software can help standardize the contracting process and allow managers to design contract terms using templates, reducing the company`s contractual risk. The role of legal counsel and legal services is evolving.
Not only do legal departments need to understand the law, draft legal documents, and conduct litigation, but general counsel must increasingly take on strategic legal risk management to protect a company`s value and assets. This does not mean that only lawyers can perform a legal risk analysis or that lawyers are sufficient for legal risk analysis. One of the most powerful and intangible benefits of this legal risk management course is that it can bridge the gap between lawyers and their peers across the organization. After putting in place an appropriate structure, it is necessary to identify threats that may pose a legal risk in the organization. Therefore, cases and loopholes that may allow fraud, theft, illegal and unethical activities must be examined in the best possible way. Measures such as internal audits and controls, awareness-raising programmes, etc. can help monitor these activities. The video rental industry, for example, was created by technological change, but disappeared after only three decades due to the evolution of technology. Contracts create business relationships that funnel money into an organization in the form of revenue and out of an organization in the form of expenses. Contracts may relate to assets and liabilities. Contract risk quietly and chronically threatens the health of the organization.
As mentioned above, any risk can have legal implications, but typical legal risks that fall within the purview of the legal department are: Traditionally, procurement has been seen primarily as a cost center for the business. However, contracts play a crucial strategic role in your business and should have the time and resources to adapt them. Regulatory risk is the risk that your company`s licence to operate will be “revoked by a regulator or that conditions (retroactive or forward-looking) will be applied that undermine the economic value of a business” (PwC). Compliance risk includes the risk arising from non-compliance with laws, internal policies and best practices applied to a business organization. This can result in financial losses and legal sanctions. For example, the annual compliance of a company and an LLP is required. Failure to file annual reports by LLP may result in a penalty of Rs 100 per day and, in the case of companies, at least Rs 50,000, which may be up to Rs 5,000,000. This can lead to shaken legs of the company. However, when looking at contract risk, it`s just as important to look at the contract management process to fully understand your company`s risk exposure. Poor contracting processes, such as manual errors, non-compliant conditions, and/or the inability to complete a contract on time, can put your business at risk.
Structural changes in the market are usually the result of far-reaching legal changes. In financial services in the United States, for example, the Dodd-Frank Act1 revised the rules applicable to investment firms and banks. With that in mind, having a trusted legal advisor will be one of your best assets. Risk is anything that makes the outcome of an event uncertain and detrimental. Legal risks are the risks to which a commercial organization is exposed and which are related to legal issues. This type of risk is usually the result of non-compliance with laws, rules, and regulations of the government and other legal entities that control companies. Various issues that may give rise to legal risks include contracts and business agreements, assets and related litigation, issues relating to intellectual property rights, patents, copyright infringement, etc. Legal risks can cause monetary and non-monetary losses to a business. Monetary losses include business losses due to the cancellation of orders or the payment of damages to external third parties. Non-monetary losses include loss of reputation, goodwill, or damage to the company`s brand value.
The four main categories of legal risks are contractual risk, structural risk, regulatory risk and litigation risk. Contractual risk is perhaps the most difficult type of legal risk to predict or quantify. As General Counsel, your role is to help the company take the right types of risks with positive consequences such as profits or increased market share, while reducing the potential for negative consequences such as litigation or fines. To fulfill this role, you need not only a structured method to identify, assess, and mitigate risks, but also to collect legal data to identify, track, and report on those risks. Here are some basic tips to protect your business from legal risks: Companies invest large sums of money to prevent litigation. It is useful to weigh the costs of risk management against the possible outcomes. Legal risk management starts with identifying potential threats that could lead to the loss or disruption of your business and allows you to implement processes to minimize or cancel them. For example, it is imperative that a business comply with the filing of tax returns, income and expense statements, balance sheets, etc. Prior to filing, the company may also need to have its books checked. Violations may result in the imposition of penalties. It can also lead to legal action against the company, which can cause it serious losses.
It may be illegal to say something false about another person, brand, or company that negatively affects them.