INTRODUCTION

Legal risk analysis is all about controlling risks, seeking to avert them from arising, or attenuating their impact through processes of assessment, decision-making and predominance. Process-driven risk assessment necessitates that significant risks are expounded and measured with some clarity. Such risks are then acknowledged as tolerable. Some regulators and corporate governance standards either directly or indirectly encourage legal risk analysis, sporadically they provide recommendations on what is meant by legal risk. Legal risk analysis seeks to expose hidden risks, including those mutually affecting or mutually accumulating risks that could probably evolve into a hindrance, even if those risks have been manageable if they had been detected sooner.

IMPORTANCE OF LEGAL RISK ANALYSIS

Legal risk analysis is requisite to any business as it can eliminate any uncertainties in relation to the business operation of an organization, thereby precluding legal liability in the future. An efficacious legal risk analysis program will ensure that the business can circumvent costs analogous to any financial risks.[1]

ADVANTAGES

• Circulate legal knowledge;
• Identifying legal threats;
• Establishing legal risk controls stratagem; and
• Coming up with favorable outcomes in prevention.

With strong risk analysis progress in place, businesses have the predisposition to decrease their legal and financial exposures and are in a superior position to bring comprehensible and well informed business decisions.[2]

TYPES OF LEGAL RISKS

The six major categories of legal risk are:-

1. Regulatory risks
2. Compliance risk
3. Contractual risk
4. Non-contractual obligation
5. Dispute risk
6. Reputational risk[3]

CASE LAWS UNDER LEGAL RISKS

• London whale case
• Satyam Computers case
• Facebook analytics data breach case
• Cadbury case

STEPS IN THE LEGAL RISK ANALYSIS PROCESS

There are six overall steps in the legal risk analysis process

• SELECT FRAMEWORK- A risk analysis framework for legal risk and compliance should meet four objectives:
• Adaptable but with clear guidelines
• Scalable but not tyrannical
• Simple but not simplistic
• Pragmatic but not regimented

• OBTAIN ORGANIZATIONAL COMMITMENT- There are four key questions to procure organizational commitment:

1. What is the scope of the legal risk analysis resourcefulness (for instance: divisions, departments, or enterprise)?
2. What kinds of legal risk will get tracked with the resourcefulness (litigation, regulations, contracts, etc.)?
3. Who is the audience for legal risk functioning (analysis layer, corporate functions, etc.)?
4. How much budget is accessible to track and alleviate legal risk in terms of time, money, and staff?

• IDENTIFY LEGAL RISKS- Risk identification is an issue spotting accomplishment. The objective is to compile an extensive list of risks.

• ANALYZE LEGAL RISKS- Risk analysis is about apprehending the risk. To analyze legal risks, one must start with an assessment of controls. Risk controls can diversified depending upon the risk, the organization, and the industry.

• EVALUATE LEGAL RISKS- To evaluate a legal risk is to prioritize the maneuvers on the risk. Legal risks that are top of the line or intolerable require risk treatment. The concept behind risk treatment is uncomplicated : modify the risk so that it is tolerable.

• IMPLEMENTATION, COMMUNICATION and ANCHORING- Once legal risks are inventoried and analyzed in the risk register, it is mandatory to communicate the results to the broader enterprise.  When implementing new procedures and security measures, it is significant that one must make sure to communicate the new initiatives and risk control strategy.[4]

CONCLUSION

Without propitious legal risk analysis, firms can face organisation-threatening exposures and liabilities as well as overlook major opportunities to manage or mitigate risk and incur reprehensible expenses. Ensuring a constructive system requires the amalgamation of legal advice and perspective into the aspects of decision-making. In conclusion, with careful integration of legal support it will be manageable to optimize a firm’s response for the sake and of minimizing risk while ensuring compliance.

[1] Kafrouni J, ‘The Importance Of Legal Risk Managment – Kafrouni Lawyers’ (Kafrouni Lawyers, 2020) <https://www.klaw.com.au/legal-risk-managment/> accessed 13 June 2020

[2] (Imanet.org, 2020) <https://www.imanet.org/-/media/d01c97aeb8eb4d25a9db3dbe628a38be.ashx> accessed 13 June 2020

[3] ‘Legal Risk For Businesses – (What Are Some Examples?)’ (Lankfordlawfirm.com, 2020) <https://www.lankfordlawfirm.com/blog/what-are-the-four-types-of-legal-risk/> accessed 13 June 2020

[4] Bezzubov D, ‘Aviation Legal Risk Management: The Concept, Structure, And Categories’ (2020) 12 Journal of Advanced Research in Dynamical and Control Systems