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“While the impact of the current pandemic has left many businesses feeling uncertain about their future, from an operational and financial perspective it is certain that there is more opportunity for legal risk.”
From an operational and financial perspective, risk and uncertainty are not the same thing. Uncertainty arises when we are unsure about future outcomes usually due to a lack of knowledge or insight. Businesses that operate in a climate of uncertainty are likely to find over time that operational and financial objectives will be severely impacted and the outcomes may be unpredictable. On the other hand, risk focuses on the good or bad outcomes of our actions or inactivity which means that the outcomes can be managed and controlled to achieve better results.
Replace uncertainty with risk management
There are many different types of threats which could damage your business from financial uncertainty created by the economic outlook, an IT security attack which could take the business down for days to an expensive and time consuming legal challenge by a client who is unhappy with a product or service or an employment tribunal claim by an employee who alleges they have been harassed by a colleague.
Awareness of the threats means a business is in a stronger position to respond to the negative impact the business may experience.
“There are five basic elements to a successful risk management process that will help develop a plan to mitigate against your biggest threats.”
In very simple terms, risk management is the process of:
Build resilience
Instead of having no idea whether your business objectives can be achieved or what might get in the way of their delivery, a systematic approach to risk management based on these five simple steps forces you to face up to the risks and enables you to make the right decision to make your business more resilient.
Prioritise legal risk
Any business that has not come out the right side of a legal dispute will want to avoid being in such a situation in the future. Therefore, any risk management plan should incorporate a section which considers legal risk.
“The nature of the business and the industry sector will determine those areas that create the most threat.”
Common legal risks are likely to arise from factors such as contractual relationships with third parties, changes in the law, technology and data security, intellectual property, competitors and employees.
Have you for example examined the potential legal risks that are involved in employing people in your business or are you prepared to leave things to chance? A workplace that is reliant upon out of date contracts of employment, has no clear policies and procedures and is not operating in line with current employment laws and regulations is likely to be faced with outcomes that are unpredictable when it comes to legal disputes in the employment tribunal.
However, the five-step approach to risk management will assist in identifying and managing legal risks with the aim of preventing these risks becoming costly legal liabilities and creating more certainty about operational and financial outcomes. This will mean having legally compliant contracts of employment and up to date policies and procedures underpinned by appropriate legal compliance training for managers and supervisors.
A more confident future
Overall, businesses that prefer to operate in a culture where it is unsure about what happens next will have an uncertain future. Those who want a more confident future will have a strong risk management culture that recognises the need to identify and manage legal risks.
FG Solicitors are experts in helping its clients safeguard their businesses from legal risks, so they have greater certainty over their financial and operational outcomes.
If you require further guidance on how to manage legal risks within your business, please feel free to call us on 0808 172 9322 for a no obligation discussion.
For further details about the legal services and assistance we provide to businesses, please click here.
This publication is for general guidance only. Advice should be taken in relation to a particular set of circumstances.