Though most companies do not have the luxury of time that certain organizations ( such as my university as shown in the picture to the left ) might have when looking at potential areas of risk, Legal Risk Management processes and procedures must be properly applied in a corporate setting to be effective. Effective and efficient application of LRM will provide risk management expertise and shall prevent losses due to claims, litigation and investigations. LRM, when properly applied in a corporate setting should cover such general areas as:
- Conducting periodic risk assessment of the company’s operating divisions and departments
- Developing solutions to risk management issues
- Overseeing the company’s defense of product safety litigation and claims
- Analyzing legal issues regarding provision of services whether internally or externally
- Overseeing the company’s information and document retention program
- Training to the company’s employees regarding risk management, product safety, and important legal issues
These are but a few LRM procedures and processes that should be applied in a corporate or organizational setting. However, in order to apply LRM in a company or corporate setting, legal and management must take an active role in applying the above areas of responsibility through processes or systems implemented within the company. Normally, a risk management department (RMD) will be established in legal or compliance or in other divisions that will have certain risk management functions, responsibilities or mandates across the company.
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The issues facing many companies when dealing with legal risk management whether through a standalone department – RMD, or with Legal or Compliance is that divisions and/or departments within a corporation often fail to effectively partner with risk management , which leads to improper handling of major legal and sensitive issues. Has HR effectively partnered with RMD or Legal? What about Contract Management? Failure to properly apply risk management processes can lead to liabilities, legal claims, fines, etc. Legal missteps can lead to potential liabilities. Therefore, those divisions or departments charged with risk management duties must partner with the RMD, Compliance or Legal ( or all three) and effectively implement LRM obligations across the organization. The sooner this happens, the better off the company will be.
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