Most organizations know it is hard to see what is coming around the bend. In today’s complex society, organizations face a myriad of obstacles including regulatory issues, government fines and investigations, scandals,crisis and lawsuits. How do companies prepare for whats coming around the bend before it hits them in the face.How can they tell what is potentially waiting around the corner?
In order to identify the risks waiting around the bend so as to minimize or control them, organizations need to implement a legal risk management system. Such a risk management system if properly implemented will use various tools, processes and procedures, such as a legal risk management audit to identify, categorize, control, minimize and if possible -transfer legal risks that, yes, are waiting around the bend. Such an investigation or audit, should be conducted in each and every major department of a company, especially those departments that come into contact with the public and potentially create the greatest exposure to legal risk.
Risk management itself has become a major area of study in some major MBA programs as the concept of legal risk management has become a topic of serious discussion. A few law schools even address areas of corporate risk and corporate governance, though most do not. In the business world, some companies, though not all, have either created risk management departments headed by a risk manager or have created an in house counsel function headed by a senior lawyer, or even both. Many companies or organizations have not implemented such departments but rely on the advice and services of third party consultants, including law firms and accounting firms. Some also use the services of independent risk management companies and crisis management PR firms. In some cases, risk averse companies use both in house and third party consultants, especially if the risks are serious enough to require additional resources to properly manage and contain them.
If a company wants to identify and prepare for what obstacle is waiting around the bend, it needs to implement a risk management program. Regardless whether a company uses a risk manager or in house counsel or whether it uses a third party consultant, the implementation or a risk management program which utilizes a legal risk management audit is vital. Audits can pinpoint major areas of risk and can event help categorize them in terms of the seriousness and nature of the risk. By controlling and managing legal risk, an organization is able to control its future. Without managing risk, a company is exposed to problems it may not have time to identify, minimize and control.
It boils down to whether or not you want to prepare for risks you face or not. In other words, do you or don’t you want to know what is waiting around the bend.