As 2020 comes to a close, it is time for many organizations to analyze its risk management processes and how well the processes managed the risk events that has recently occurred. For many companies, Covid-19 was a catastrophic or near catastrophic event. Those companies that were prepared to handle the pandemic (such as those that had business continuity plans in place, etc.) were able to handle the risks presented by Covid 19. Those that were not prepared had a harder time. What successful companies know is that in order for a company to succeed it not only has to a sustainable business model but it has to constantly review its risk processes. After all, what happens when the current business model does not work anymore? What happens when the risks outweigh the benefits of continued standard corporate operations? So, maybe it’s time to re-examine your risk management processes. Do they really work?

When talking to your staff or to other departments, how often have you heard the phrase “That the way we have always done things.” Just because corporate processes have been done one way doesn’t mean that the best way or even in todays’ fast changing world- the right way. Even after 2008 many companies continued to use the failed metrics that got them into trouble in the first place. Even the credit markets haven’t changed as much as you would think after 2008. And of course, some companies have not changed processes during Covid. But why?
I truly believe that once processes are created in a corporate or bureaucratic environment, it is as if the processes have been set in stone. They are very hard to change. Even if the world around the company has changed. It is human nature to accept what has been done in the past. Few people want to “rock the boat” even if the proverbial boat is actually sinking. Companies get into real trouble because of this. What happens if the company’s business model is out of date or its business plan is no longer viable? Just because it worked in the past doesn’t mean it will work in the future.

I therefore caution everyone not to blindly accept the current risk management processes in place. Risk managers as well as in house counsel and other managers should be challenging risk management metrics on a regular basis. Counsel should be auditing departments on a regular basis. Does that compliance program really work? Does the business continuity plan really work? Maybe it did 5 years ago. But what about today?

What about re-examining the areas of risk management responsibility? The areas should include the purpose and policy of the RMD in the organization, the functions and execution points of the RMD (who does what, when, how, reporting lines, etc.) as well as a detailed outline of the procedures and processes of the RMD. Procedures and processes can include:

-conducting risk assessments of the organizations’ divisions and departments
-developing solutions for the various risk management issues
-developing business continuity plans
-coordination with various departments to assist with compliance issues
-oversee loss control concerns
-develop training for the organization’s employees covering various risk related areas of concern such as product safety, etc.

Remember, if local or national laws have changed maybe the current processes are out of date. If your organization was not prepared for the Covid 19 pandemic, maybe the current processes are out of date. If the products that your company manufactures or the services it provides have changed maybe the internal processes surrounding the review of those products and services are out of date. What about the current geo-political environment? When reviewing your current product liability review processes have you factored in the new risks created by the Internet of all Things? These risks are real. Are you ready for them? Does your current business model still work or is it outdated? What about data privacy laws? What about business continuity plans?

It is a fundamental truth that all things change. Of course, some things change faster than others. Regardless, don’t rely on your old or standard risk management processes to continue to provide the same level of comfort they did in the past. Continue to review and to modify them if necessary. And don’t think that just because “that the way things are done” your company should continue to operate as usual.

So if you haven’t re-examined your risk management processes- now is the time to do so.

In the past I have commented on crisis management and the tools needed to handle crisis in today’s business environment. It is clear however, that an international crisis, such as the COVID 19 virus or even a geo-political crisis is harder to deal with than a domestic crisis. Because of international considerations, an international crisis is normally harder to manage than a domestic crisis. As it is more complex, companies caught up in an international crisis have to pay more attention to international, cultural, and communication issues than they would in a purely domestic scenario.

Crisis communications has become very important. Therefore, an international crisis requires a number of steps, including:

• Planning for an international crisis
• Appointing a crisis manager
• Establishment of a Crisis Management Team
• Establishment of a Media Crisis Team to handle international communications

The principle focus of any crisis management strategy, especially in an international contest, is communications. All crisis management plans call for effective crisis communications, which many times are not always executed. Inadequate or failed communications lead to bad publicity, unhappy stakeholders, and potential disaster. An effective crisis communication strategy is necessary for any international crisis. A number of companies and even governments have failed to defuse international crisis because of poor communications.
An effective crisis communication strategy is necessary when dealing with an international crisis. It also requires the establishment of an effective Media Crisis Team that can respond to potential media issues. Who should be on the team? At least 6 people from the following areas or departments:

1. Legal- someone from the GC’s or CLO’s Office
2. HR- HR should designate a staff member capable of handling crisis related issues
3. Outside legal- in the case of most companies, the primary outside law firm should also be on the team
4. PR- if the company has a PR department, someone from PR should be on the team
5. Outside PR- it is a good idea for most companies to retain an outside PR firm if possible
6. QA or Service, etc.- depending on the product or services the company provides, perhaps someone from the Service Department of Quality Control Department should also be on the media crisis team.

A number of processes need to implemented and issues addresses to create an effective Media Crisis Team. Such processes and issues include the following:

• Creation of the Media Crisis Team.

• Identify a key spokesperson or spokespersons on the Media Crisis Team who will speak for the organization. Who are they? What are their roles?

• Training on cultural issues, if the crisis involves other cultures.

• Establishment of communication procedures and protocols for the Media Crisis Team. Who communicates to whom and why? Can the Media Crisis Team members communicate to each other directly?

• The main messages that should be communicated to key stakeholders should be thought through.

• A budget for the Media Crisis Team, should be approved and set up.

• The facts surrounding the crisis should be established as well as the major talking points.

• How will the Media Crisis Team handle the Press? Processes?

• Has a communications war room been set up for the Media Crisis Team in order to meet and handle communications?

• Has a hotline been set up?

Though companies try and resolve the crisis at hand and spend significant sums of money to do so, if they fail to properly communicate to the media and the public, they in effect have lost and can expect outrage and consumer dissatisfaction to such an extent that the very existence of the company can be threatened. So remember, a company doing business internationally has to plan for eventual crisis. If it fails to handle communications properly during a crisis, it faces not only a potential loss of business but a negative impact on its brand. Therefore, I recommend to all companies that now is the best time to create a Media Crisis Team.

At the beginning of litigation and selection of the law firm that will handle the case, the in-house lawyer must assess the case—the strengths, weaknesses, costs, etc., involved. Case evaluation is very important. Evaluation can be made through an early evaluation by outside counsel, knowledge of potential costs, use of employee interviews, and formulation of a plan/budget. When a company has a good idea of the chances of winning, as well as the potential costs, it is in a better position to determine whether to proceed to trial. Therefore, at the beginning of litigation, the company or organization should obtain a thorough evaluation of the case and use internal risk management tools to assess the cost of a trial. Is the cost of litigation worth it?

Risk analysis of litigation can be a useful tool in evaluating a case. One such tool that is often utilized is the decision tree. A decision tree analysis can be used to evaluate the probability of outcome of certain events during trial. Each event can then be analyzed in the context of the probability of the entire outcome. A decision tree risk analysis provides a systematic method of analyzing cases from the beginning

Besides the use of a decision tree, a properly formatted litigation budget should address the fees and costs of going to trial. Using a budget helps to establish a realistic framework for litigation as it should cover expected fees and costs. Remember however, a law firm’s fees at trial could skyrocket for a number of reasons, including:

-The number of lawyers involved.

-Time: Most trial lawyers will work long hours during a trial, so fees will add up.
This especially true if the trial is a complex one involving patent disputes or
Competition/ Anti-trust claims.

-The cost of expert witnesses.

One of the major issues facing in-house counsel is justification of the legal function. In-house lawyers in fact are like a small to medium size law firm depending on the size of the company and therefore are not cheap. On the other hand, in-house lawyers play a vital function within an organization as they manage legal issues and risks on behalf of the company. Litigation management as well as legal risk management are very important functions of a company's law department. However, most organizations are profit driven. Investors look at the bottom line. Hence, management for the most part normally looks at its divisions in one of two ways- is it a profit center or is it a cost center? Profit centers get resources of course. Cost centers may not. Therefore, in order to obtain the resources needed to function in a corporate setting- Legal must justify itself. One way to justify the existence of the Law Department, is for Legal to quantify the company’s legal exposure. Once quantified, Legal can then justify its existence to Management.

Quantifying potential legal exposure is fairly easy. One can look at historical legal costs, expenses, and related jury verdicts, fines, etc., to determine a base line for future legal costs and expenses. If an historical record of legal costs does not exist, numerous reports and surveys exist on how to average legal costs and expenses via a particular industry. Your insurance broker may have summaries of legal costs for your industry. At least it should have a historical summary of insurance related claims.

Once one has enough empirical data to show potential exposure, it is easy to show potential legal costs. In fact, a number of companies in the legal industry have issues benchmarking reports breaking down the average legal costs and expenses in particular industries. This can be a great tool to use when showing management what costs and expenses are normally incurred by companies of a similar size and in a similar industry.

The CFO of any organization is numbers driven. If you can provide, in effect, “the bottom line” to the CFO, he will be inclined to approve a budget for Legal. Be prepared to have all the facts and figures ready.

Management of litigation, like management of most business processes, begins with a business plan and a budget. In this case, prior to trial, when a company seeks an appropriate law firm to represent it, it needs a realistic litigation plan and budget. Of course, some law firms may try to push back on the request of a budget, claiming legal costs are hard to predict. This, usually is not the case. Experienced lawyers, whether in the United States, Europe, or Asia, are very familiar with the legal costs in their own geographic region as well as costs and expenses associated with the particular issue, such as patent litigation or class actions.

Certain costs may be hard to quantify, such as defense litigation costs (which may depend on how aggressive a plaintiff is in trial), but for the most part, law firms can provide a litigation plan and budget using approximate or ballpark figures. Many of the larger law firms are experienced in providing budgets upon request. Don't be afraid to ask.

Effective management of litigation will depend on a well-prepared litigation plan and budget. This, in turn, depends on the proper identification of potential litigation issues and a plan for potentially adversarial proceedings.

Questions that should be asked when discussing the plan and budget with outside counsel include:

• Is this matter an actual or potentially adversarial proceeding?
• Will this matter result in potential commercial litigation?
• Will this matter result in potential regulatory litigation?
• Will this matter lead to governmental litigation?

Asking the right questions will help in preparing a realistic and effective litigation plan and budget.

To properly manage civil litigation, especially in the United States, companies need to implement LRM strategies and processes by use of an in-house Law Department that is capable of overseeing or managing outside litigation. Depending on the legal exposure of a company, it can be a full-time job. This management function will be key in properly coordinating litigation to avoid excessive costs, duplication of effort, and minimization of disruptions to a company’s business, as well as setting an effective trial strategy.

What many foreign companies doing business in the United States fail to appreciate is that an outside litigation lawyer does not necessarily have the company’s best interests in mind during litigation. Litigators want to win. Sometimes the desire to win is not in the best interests of the company. Many companies have paid a great deal of money to litigate a case when a resolution to the dispute was available had the parties tried to actively settle the matter. Remember, a trial lawyer’s business and primary goal is to win- not to settle.

An in-house legal manager, representing the company’s best interests, can help facilitate settlement once a legal risk assessment as to the validity, cost, and expense of litigation is made. In fact, during trial, a settlement is still possible and can be facilitated by in-house counsel. Therefore, the Law Department should maintain control and oversight of any litigation. A LRM program can be very helpful in managing the legal risk process as well as providing litigation oversight. Remember, litigation can result in a variety of negative issues such as:

• Loss of time.
• Expense.
• Potential interruption of business.
• The cost and expense of business interruption.
• Potential bad or negative publicity.
• Negative impact on the company’s brand image
• Potential loss of reputation.

As companies facing U.S. litigation are often exposed to excessive fees and costs, massive business disruption, lengthy litigation, and the unpredictability of the jury system, efficient management of the litigation process is necessary. Though, obviously, outside litigation counsel is necessary in most cases, an in-house Law Department can save the company great sums of money by managing the litigation process. Such management involves the assessment, management, and potential transfer of risk through various LRM strategies, including:

-Effective coordination of legal defense efforts in order for the company to avoid duplication of costs and effort from case to case
-Coordination of witnesses, answers and interrogatory responses, documents, and depositions
-Acting as the central site for all facts, positions, decisions on legal issues, and motions
-Development, implementation, and coordination of a defense plan

As part of an overall LRM program, a company’s Law Department must implement processes to control, reduce, and manage outside legal fees and costs. By utilizing legal risk management tools, a Law Department can proactively reduce legal fees and costs.