The Calm Before The Storm

If you consider all the ways in which companies have to run a business, it is no wonder legal support is so critical. Markets today are highly competitive. The internet has made global competition a reality that years ago we could not have even dreamed possible. With the increased opportunity also comes increased risk. Businesses must have the right information, at the right time to make strategic, operational, and tactical decisions about their business.

Although there are a number of areas within every company that need special attention, two of the most critical are finance and legal. Without surprise, these areas are also the source of potential business risk. Risk is a cost of doing business but for each risk event, a business will need to decide whether they will avoid it, mitigate it or transfer the risk. As it pertains to legal issues some risk issues can be handled within the company, while others will require the support of an attorney. In order to reduce or avoid risk, your attorney must not only be competent in their field but have a firm understanding of your strategic business objectives.

The role of risk in business received even greater attention with the events which led to the creation of the Sarbanes-Oxley Act. The federal regulations around corporate governance coupled with the increase of white-collar crime such as identity theft, computer hacking, and embezzlement have made companies take risk management very seriously. Corporate compliance issues can become overwhelming and complex, which is why a reputable law firm is important. A law firm invested in your success can guide you through processes so you are able to efficiently assess and address risk issues.

As the amount of information we produce increases, data management and security also becomes more important. Your law firm can assist you with becoming better organized around data security issues, and hence implementing risk reduction measures. Data not only needs to be organized but securely stored with appropriate access controls. In response to this risk event, many corporations have began utilizing the services of internet data centers, which house the brain of the company in a secured, temperature controlled, clean, and monitored environment.

Financial risks are always a concern for companies, and can impact all facets of the organization operations, insurance, liabilities, etc. In addition to the traditional concerns of collecting, managing and presenting financial data, companies are also exposed to financial risks in business development. A business cannot grow without undertaking some amount of risk. For this reason risk cannot be managed in a silo by Legal, or Risk Management. An effective risk management plan will align with the overall strategic objectives of the business. Your inside and outside counsel must be partners in this process. While counsel will seek to institute the necessary protections against risk, they must also understand critical business objectives and help the organization to realize them.

Each company will have a risk profile based on their business goals and tolerance for risk. A companys risk aversion or acceptance will vary depending on a number of factors, including industry, size, competitive landscape and level of regulatory oversight. In example a financial institution may be much more risk averse than a printing company. For global organizations, the risks may also vary by location.

Risk management truly requires a partnership approach. Legal, Sales, Operation and The Executive Team must communicate and understand the critical business objectives and work together to make them happen. The legal team should understand not only how to identify risks in practices, operations, processes, technologies, and techniques but also how the risk fits with the overall business plan. Risks are inevitable, but with teamwork and skillful execution, you can successfully navigate the often choppy waters of doing business.

Richard A. Hall is founder and President/CEO of LexTech, Inc., a legal information consulting company. Mr. Hall has a unique breadth of experience which has enabled him to meld technology and sophisticated statistical analysis to produce a technology driven analytical model of the practice of law. As a busy civil trial attorney, he was responsible for the design and implementation of a LAN based litigation database and fully automated document production system for a mid-sized civil defense firm. He developed a task based billing model built on extensive statistical analysis of hundreds of litigated civil matters. In 1994, Mr. Hall invented linguistic modeling software which automatically reads, applies budget codes, budget codes and analyzes legal bill content. He also served as California Director and lecturer for a nationwide bar review. Mr. Hall continues to practice law and perform pro bono services for several Northern California judicial districts.Brietta Blog59492
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