Chapter 3.docx

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Department
Marketing and Consumer Studies
Course
MCS 3040
Professor
Joseph Radocchia
Semester
Winter

Description
• to meet its goal of producing a product or delivering a service at a profit, the business enterprise must have a set of functions and system in place, including finance, marketing and human resources • there are two basic approaches that companies can take, preventive and reactive • the preventive approach requires thorough evaluation of the risks associated with business’ activities in order to minimize their impact • the reactive approach recognizes that legal problems may still materialize, so the firm needs a strategy in place to deal with such developments legal risks – a business risk with legal implications legal risk management plan – a comprehensive action plan for dealing with the legal risks involved in operating a business • legal risk management attempts to identify and then manage threats that could generate negative legal consequences such as fines, penalties, compliance orders, license suspensions, and liability for the payment of money • risk management is not a task for any one individual since no single person within an organization has complete knowledge • creating a legal risk management plan is a four step process; identify the legal risks, evaluate the risks, devise a risk management plan and to implement the plan • identifying the risks is the most critical step • major risks arise from operating procedures and systems relating to the production and delivery of power • the purpose of step one, however is to provide a realistic assessment of the potential legal dangers of doing business, with a view toward minimizing loss • subjective evaluation to a complex, statistical approach involving actuaries and other professionals • these techniques involve assessing both the probability and the severity of loss • most organizations have a wealth of information to assist in preforming such assessments, including the organization’s loss history, industry statistics on losses, and expert opinion from both within and outside the organization • the point in evaluating risk is to recognize not all risks are alike nor should they ne treated alike • a business can use an assessment to determine priorities for risk management and as guidance in choosing how to manage a particular risk in step three • a business can follow a number of methods to manage its legal risk, including risk avoidance, risk reduction, risk transference, and risk retention • risk avoidance is appropriate when the risk is simply to great or when the undesirable result of the activity, product, or service is greater than the advantages
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