Textbook Note - Chapter 3.pdf

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Philip King

Managing Legal Risks Assessing the Legal Environment Two Basic Approaches Preventive Emphasis on compliance with legal requirements and anticipation of changes in the legal environment. Reactive A strategy in place to deal with legal problems that may materialize. These two approaches combined reduce the impact of Legal Risks. Legal Risks: A business risk with legal implications. Legal Risk Management Legal Risk Management Plan: A comprehensive action plan for dealing with the legal risks involved in operating a business. Four step process: 1. Identify the legal risks 2. Evaluate the risks 3. Devise a risk management plan 4. Implement the plan Applying the Four-Step Process Identify the Legal Risks Assess Functional Areas Some possible risks that are in functional areas Marketing Production Human Resources Information Technology Review Business Decisions How are finances handled? How are the contracts worded? Ownership and use of Land. Decisions affecting personnel Examine Business Relationships Employees may create difficulties Suppliers or lenders may complain Regulators may press charges Evaluate the Risks Assess the probability of loss Assess the severity of loss Important to recognize that not all risks are alike, nor should they be treated alike. Devise a Risk Management Plan Avoid or eliminate the risk Risk Avoidance: the decision to cease a business activity because the legal risk is too great. Risk reduction Risk Reduction: Implementation of practices in a business to lower the probability of loss and its severity.
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