In fact, legal risk occurs in all of a company`s activities, as the law underpins almost every relationship, product, contract, property, and behavior involved in a financial institution`s business. The involvement of legal expertise is therefore necessary to reduce risks, at least as a general business task and also in accordance with Basel rules. For any bank, its assets and liabilities are legal constructs. They owe their existence, their essence and their essence to the law. These include: Companies use a variety of programs, including Six Sigma, lean management, or other processes, to address risks and inefficiencies discovered at this stage of their risk management program. Again, it is clear that a lot of resources are being devoted to putting programs in place to address this second dimension of risk for businesses that have come this far. Many compliance officers have a legal background, although they are not practicing lawyers, and are able to grapple with essentially legal issues. Legal risk management is best used when it serves to identify, analyze and manage legal risks affecting a particular business in an organized and consistent manner. An example of legal risk is the circumstances that may arise when concluding supply contracts when the company uses services or products to be provided by an external third party. Although the Italian legislator has paid little attention to risk management in the area of economic entities, in recent years many laws and regulations require companies and entrepreneurs to create appropriate structures for risk management, including criminal sanctions in case of infringement. Basel II classified legal risk as a subset of operational risk in 2003. This design is based on a business perspective and recognizes that there are threats in the business environment. The idea is that companies don`t operate in silos and tend to be subject to legal obligations when they take advantage of opportunities and engage with other companies.

[1] The compliance function has become much more important than the legal function, with a significant need for internal management in many non-legal areas, a function that is not necessarily performed by lawyers. [2] Three-dimensional organizations have strategically aligned front-office goals with middle and back office capabilities. Three-dimensional strategic alignment means that high performance standards are set and expected based on the ethical implementation of these objectives and in partnership with the respective support functions. These companies are constantly calibrating the speed at which they operate, taking the appropriate risks in the process. Rapid changes and developments in all areas of people`s lives force different types of business activities that work harder. Modern businesses must not only evolve with the times, but also be able to anticipate future uncertainties and manage potential risks in order to avoid future challenges and minimize far-reaching consequences (Hoyt, Dumm & McCulloughLouh, 2010). The main reason for the need to anticipate risks in today`s competitive environment is a mutual correlation between business operations and quality of service, relationship with customers (Patil, Grantham & Steele, 2012). It is difficult to identify regulatory risks, but uncertainty about impact is measurable.

Regulations confer powers on law enforcement and regulatory agencies. Penalties range from fines to administrative orders. When it comes to legal risks, many organizations implicitly follow a “zero tolerance” policy. Unfortunately, “zero tolerance” does not create zero risk. The zero-tolerance preference is counterproductive because it leads to misallocation of valuable risk management resources. This article describes how to establish a risk tolerance policy in the context of your organization so that we can better measure and manage legal risk. Legal risk is one of the most difficult types of risk for companies to measure and manage. This article explains how legal risks are defined and classified so that companies can develop an effective risk management strategy. This section combines ideas from previous sections to implement a simple, non-mathematical legal risk assessment model. A “model” is a simplified framework for assessing a real situation.

It will never capture all the nuances associated with a particular choice, but it can be useful to decision-makers. In particular, the model presented here is non-mathematical. It is based on a simple categorization of the probability of an event, the consequences of that event, and the decision-maker`s approach to risk assessment. We will use this template throughout the exercises in the text. In most cases, however, individual contracts often do not have the gravity of a legal dispute. The significant, common and difficult to understand risk is the uncertainty resulting from the existence of the contract as a whole. Systemic undermanagement of contracts results in lost costs and missed revenue opportunities. One can be good at interpreting, conceiving, and negotiating, although one`s success rate as a lawyer can prove to be a differentiating factor in one`s role as a legal framework. These exceptional qualities would certainly open up opportunities to take on the leadership role in the company, but one introspection to do before accepting such a position is to ask yourself if you are ready for a leadership role. The answer would probably be “no” because management is another new ball game that requires different skills, potentials and expertise that can only be acquired through an appropriate combination of training that not only enhances and enhances your skills as lawyers, but also installs business acumen in one.