Applying Legal Risk Management in a Corporate Setting

Entrance to Sejong University
Entrance to Sejong University

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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