In our perpetually evolving and increasingly litigious modern business environment, it is more important than ever that you are aware of potential legal risks.
With legal implications for every transaction and commercial activity, compliance and risk management is crucial to the success of any business.
Some degree of risk exists in every contract or transaction, every project or dealing undertaken and even each document that you sign.
Endless cautionary tales exist of businesses and sole traders who have leapt into contracts and developments before appropriately assessing their legal risk; though ignorance is bliss in the interim, the legal consequences may lie dormant, waiting to be exposed and used to your detriment.
Although many businesses have traditionally preferred to seek legal assistance only after legal vulnerabilities are exposed, this can be costly and potentially fatal to your business. The only way to avoid legal difficulties is to identify and address legal risks in a systematic manner before they make themselves known.
There are a number of potential threats to contemporary businesses, from insolvency, succession issues and supplier failures to partnership disputes, owner incapacity and marriage breakdowns.
Risks are broad-ranging and unique to each business or individual and are best addressed through an all-inclusive risk assessment that is tailored to your needs.
Legal risks can be assessed internally or externally through a specialist law firm. Either way, it is strongly recommended that risks are assessed by a legal professional prior to entry into a contract or project commencement.
If your current legal representation is not sufficiently assessing and monitoring your risk, the consequences could be dire and will almost certainly fall upon your business.
Common risks within business transactions can arise at the inception of a project, through poor choice of suppliers or partners, overcomplicated or hastily drafted agreements and unclear contract terms.
By proactively considering potential difficulties and developing a structured and comprehensive risk management plan, you can avoid future problems and costs.
As risks do not end at business establishment, they should be managed throughout all projects and activities. Risks often evolve over the course of the businesses cycle.
The low to medium risk levels assessed when the business is in its growth phase are likely to expand once a businessmatures, as each new venture potentially poses a new and unprecedented risk.
Unfortunately many legal service providers in the market are reactive rather than proactive. It is important for businesses to ensure their legal advisers are willing and able to provide on-going risk assessment.
This article first appeared as a column in the Newcastle Herald, 6 April 2015.
