Whether you`re an independent lawyer or a 50-person firm, the first step to creating a high-quality law firm risk management plan is to understand the type of risks your law firm might face to reduce liability risk. To assess potential risks within your organization, Ropes & Gray interviews key stakeholders in your global operations and creates a comprehensive report on your risks in different areas. We then make recommendations by area of activity and support their implementation, monitoring and reporting. If the financial consequences are severe enough, the company could risk bankruptcy. The insolvency law governs the rights of insolvent creditors and debtors who are unable to pay their debts. In the broadest sense, bankruptcy concerns the seizure of the debtor`s assets and their distribution among the debtor`s various creditors. In the event of bankruptcy, the company can be liquidated or reorganized. As we will see later in the text, bankruptcy offers debtors a fresh start, but for many companies, the consequences of bankruptcy are severe enough to avoid actions that could lead to bankruptcy. While the content of this chapter is intended to provide you with useful templates for assessing legal risks, it should not be construed as encouraging illegal or unethical behavior. Companies are required to comply with the law and behave ethically. The model presented in this chapter is particularly useful when the law is not clear or when the question for the manager is what steps to take and what costs to avoid legal risks. Immediately following a general introduction to the law in Chapter 2, we will devote the whole of Chapter 3 to the principles of ethical business conduct.
A company`s attitude towards legal risks must also be influenced according to these principles. The results reinforce our view that, as the legal function transforms, so does the way it contributes to the organization`s risk management. In-house legal teams are expected to do more to identify, manage and mitigate legal risks. There is growing regulatory interest in the financial services sector, particularly in how the law fits into the broader context of organisational risks. This pressure leads companies to more effectively identify and manage overlaps and gaps between the legal department and other parts of the business. In the context of communication, another big part of your law firm`s risk management process should be assessing the working relationships you have with your clients and other lawyers you may need to work with along the way. When it comes to clients, it is extremely important that lawyers stay in their areas of expertise and not take on cases related to areas of law in which they are not experts. In order to manage the day-to-day risks for lawyers, it is first important to be able to identify them. The first step should be a proactive approach and educate all employees in the company so that they know what risks are imminent and how they can protect themselves from those risks. For more information, check out our comprehensive guide to data security for law firms.
In addition to technological risks, your law firm should investigate risks that occur in people such as clients and employees, when sharing information, etc. Read on to learn about risk management techniques for law firms elsewhere in your firm. When looking at technology risk management in law firms, you need to understand exactly what technology is and what technology risk management entails. While technology has made life easier for many people, it has also created a number of legal risks that need to be considered to avoid lawsuits if the technology fails. Costs and income foregone caused by legal uncertainty multiplied by the possibility of the individual event or the legal environment as a whole. [10] 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. This section combines ideas from previous sections to implement a simple, non-mathematical legal risk assessment model. A “model” is a simplified framework for assessing a real situation. It will never capture all the nuances associated with a particular choice, but it can be useful to decision-makers. In particular, the model presented here is non-mathematical. It is based on a simple categorization of the probability of an event, the consequences of that event, and the decision-maker`s approach to risk assessment. We will use this template throughout the exercises in the text.
Danger is inherent in any business, and good risk management is a fundamental part of maintaining a successful business. The leadership of an organization has varying degrees of control over hazards. Some hazards can simply be overlooked; Various hazards go far beyond the ability to control organizational management. All an organization can manage is anticipate potential threats, monitor the potential impact on the organization`s business, and be prepared to respond to adverse events. [5] Document everything: Of course, it must be a priority to ensure that every relationship and professional effort is accompanied by a clear and binding contract. Plus, keeping detailed notes and documenting as many of your legal processes as possible is another step you can take to protect yourself from a variety of potential risks.