With new and intense challenges seen in Corporate America, more and more companies are turning to the assistance of lawyers to create a risk profile and provide guidance on response. In fact, this issue has become so serious that in the past few years, governmental expectations for better governance have been strongly encouraged, specifically in the area of planning and delivery.
The development of a risk profile is one of the first steps a company should consider, examining both strategy and operational factors. Having a systematic plan in place for managing operational, strategic, and project risk is essential to the success of any business, regardless of size or industry. While using legal support for the creation of a risk profile offers a number of benefits, the primary objectives include achieving corporate objectives, enhancing performance, and reducing risk.
Although company executives could take a stab at creating a risk profile and appropriate response, a legal team can help by establishing definitive and precise action specific to the company and current laws. Federal, local and even industry regulations and laws change frequently making it difficult and cumbersome for a non-legal person to identify all the potential risks. A professional team will have the ability to take a high-level view of the company to identify potential problem areas that might not otherwise be considered.
Typically, if using outside counsel, the firm would start by working with internal personnel to gain a better understanding of the company, as well as its processes, technologies, and techniques. From there, a legal aspect would be considered to define a framework for a comprehensive, risk profile. The focus of the profile would depend on a number of things although areas such as risk management, finances, and legal are at the top of the list. Then, the company would need to have a dedicated team in place internally to implement and manage the risk profile and response.
You could think of a risk profile as a snapshot of the key areas and risks of an organization, coupled with broader areas such as business development, operations, and overall strategic goals. It is critical to understand not only the specific risk factors but the response associated with those risks and how they impact the organization. Using a legal team to help manage risk does not happen in a vacuum without the input of key stakeholders. The executive team and other stakeholders have a responsibility to ensure that the risk response is aligned with the overall objectives of the company. Legal must be kept apprised of the key business objectives to ensure that the risk profile and response reflect what is critical to the organization.
For instance, some companies will get themselves into trouble by missing time-sensitive responses and/or actions, which might include late delivery, tax penalties, going over budget, or a number of things pertaining to the business. Using a risk profile gives management a heads up on the most critical areas to watch for so nothing is missed. In addition, an attorney can assist management in response, teaching them and providing legal advice on the right way to respond should a problem or concern arise.
The legal team should have the capability of working with internal personnel to identify and successfully manage key risks, develop a solid risk profile, and integrate this profile with the overall business plan. Risk management requires comprehensive communication, internal support from the top down and a combined commitment to achieving results. In this way Legal truly becomes a key part of the overall support team that helps your business obtain the desired results.