Management and Organizational Studies 2275A/B Chapter Notes - Chapter 3: Enterprise Risk Management, Debt Management Plan, Step One

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Business Law
Textbook Readings – Ch. 3 Notes
Managing Legal Risks
Assessing the Legal Environment
Analyze and evaluate its activities, forecast changes in the business environment, and
react effectively to unexpected developments.
Balance between managing the present and planning for the future
Reduce the likelihood and impact of mistakes that are:
ocostly of the expense of legal service and damage claims
oDistracting in terms of time and effort
oHarmful in terms of relationships and reputation in the industry
Preventive approach requires a thorough evaluation of the risks associated with the
business’s activities in order to minimize their impact
The reactive approach recognizes that legal problems that may still materialize, so the
firm needs a strategy in place to deal with such developments
Legal Risk
oA business risk with legal implications
Legal Risk Management Plan
oThe process is often part of a broader exercise in which all risks within an
organization including those with legal implications, are assessed and managed
oEnterprise Risk Management
The process of identifying and managing all business risks
oRequires an understanding of what could happen, how it could happen, and how
its impact could be most effectively managed
oLarge businesses have a department headed by a senior manager with a title
such as risk officer or compliance officer.
oSmaller organizations, the risk management function may be performed by the
chief executive or delegate or even someone outside the organization
oRisk management involves the cooperation of managers and employees at every
oCreating a legal risk management plan is a four step process
Identify the legal risks
Evaluate the risk
Devise a risk management plan
Implement the plan
Applying the Four Step Process
Identify the Legal Risks
oThe most critical step in the development of a legal risk management plan is the
identification of risk
oGoal is to be reasonably certain that no significant risks have been overlook
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