Law Chapter 3 Notes.docx

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

Chapter 3: Managing Legal Risks Assessing the Legal Environment  Balance between managing the present and planning for the future  Legal mistakes are costly, distracting and harmful  Preventative approach requires a thorough evaluation of risks  Emphasis is on compliance with requirements and anticipation of changes  Reactive approach needs a strategy to deal with such developments  Legal Risk  business risk with legal implications  Legal Risk Management Plan - May have its own department or may be done by CEO or someone outside the organization - Internal/External lawyers are involved - Managers at every level - 4 step process 1. Identify 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 the organizations functional areas - Accounting, finance, marketing, production, HR, info systems - Useful starting point for risk analysis - Some possible risks: misleading advertising; inferior products; harassment; downsizing; wrongful dismissal; inadequately maintained records - Employees can help identify risks - Review the organizations business decisions - Examine the organizations business relationship and assess those relationships  Review Business Decisions - Asses risk in decisions concerning financial arrangements (credit terms and sales) - How contracts are worded; may involve standard form contracts - Do employees understand contracts? - Review land occupied to ensure safety; look for hazards before purchasing land - Plan for hiring, firing and dismissing employees  Examine Business Relationships - Internal and external - Employee difficulty, injury, discrimination - Payment/delivery to/from suppliers - Regulators monitoring regulations that that business needs to obey - Customers may fail to pay on time/ claim they have not received what was promised - Professionals may fail to provide services  This step seeks to identify everything that could go wrong Evaluate the Risks  Assess the probability of loss  Assess the severity of loss  Look at history, statistics and expert opinion  High probability can be offset with low level of loss  Low probability can be offset by high level of loss  Used to determine priorities for risk management Devise a Risk Management Plan  Risk Avoidance - When risk is too great - Negative
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