How to manage legal risks

Risk management means identifying, analyzing, and managing the legal risks an organization may face. Legal risks may be related to contracts, procedures, products, technologies, or intellectual property. Legal risk management generally involves reviewing contracts, identifying risks, and taking steps to reduce them. The legal department can also provide advice on complex legal issues and ensure that the organization complies with applicable laws and regulations.

Improve legal risk management in order to avoid litigation

For businesses, as well as for local and public authorities, this topic is more relevant than ever. By the time businesses get into litigation, it's too late. Many conflicts could have been avoided if legal risks had been properly anticipated and prevented. Poorly-written contracts are still too often the source of a majority of disputes, leaving room for many possible interpretations, as well as a poor identification of responsibilities. In our written law civilizations, there are multiple regulations. The question is: who should enforce them and how?

It is therefore important for companies to become fully aware of the challenges that these risks pose to their business. Recourse to litigation is long and tedious.

How to manage legal risks

Good control of these risks, which are easily identifiable, requires above all prevention and contractual preparation. It is easier to get out of a dispute when a clear and precise framework has been provided where negotiation be used. You have to start with a new contract and give yourself time to reflect on the risks each time before signing, between the various stakeholders. A phase of reflection is therefore necessary to avoid conflicts.

Analyzing the previous years' disputes is instructive, and the case law quite extensive. Legal risks can be classified into several main groups that represent just as many situations experienced in all types of projects.

• The breakup of the talks. Many preliminary projects start with a simple agreement without a formal contract. In the event of a faulty break, the company is poorly prepared.
• The inevitable debate between the obligation of result and the obligation of means. If the first is unambiguous (whether the result is achieved or not), the second requires the company to prove that all the necessary means have not been provided.
• Failure to provide advice. There is a great disparity in the nature of the provider's advisory obligations, with a concept of predictability being taken into account.
• The validity of “limitation of liability clauses”. These are currently the subject of significant litigation. Legal monitoring is necessary on this point to ensure the full effectiveness of the negotiated clauses.

Corporate lawyers, assisted by adapted information systems, have a driving role in participating in this essential prevention, verifying that projects comply with rules and ethics.

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