5 tips on assessing legal risks in your business

Call me a legal risk and insurance nerd …

But I love nothing more than helping inhouse teams, insureds and brokers with legal risk profiling

Why?

Because this process really gets to the root of the legal risk problem

It allows a consideration of the most SEVERE and LIKELY legal risks in the business.

AND

1. EXPOSES gaps in liability and indemnity insruance cover

AND

2. IDENTIFIES opportunities for legal risk management

Let me explain 5 tips to undertake this process -

1. The Risk Review - I usually start by obtaining risk registers, whether they are from within the legal, risk and compliance or the front line.

Dig deep to make sure you get the best detailed information that exists.

2. The Insurable Risk Register - I like to use an Excel based document to record the various risks in the insurable risk register. Hit me up if you need a basic template at blair@indemnitypro.com.au

I start by arranging one risk per row and categorise various risks by reference to director and officer liability, professional and E&O liability, public liability, cyber liability, employment liability and third party liability.

Remember it’s a draft only to be discussed and narrowed in the workshop.

3. The Workshop - Whilst a workshop is not absolutely necessary - it is a very helpful tool to observe discussions between different stakeholders in the business (eg. Department heads) with varying perspectives and expertise.

For efficiency, I like to send a description of each risk event to the personnel prior to the workshop to get them thinking.

4. The Insurance Gap Analysis - After completing the workshop I begin to apply the scenarios to the specific insurance policies as if they were an actual claim.

This process is amazingly effective at identifying where gaps exist…

You can then liaise with insurers or draft new clauses as need be to close gaps. I record these proposed actions in the spreadsheet as well.

And

The real value is identifying exclusions and definitions which are problematic OR maybe it is discovering uninsured extensions or policies that should be taken out. But the real key is working out an action to address an issue.

5. Other Actions beyond insurance - The process of substantiating legal risk scenarios and recording same also helps to identify other legal risk management that can be applied.

For example, this may include redrafting contract terms or internal processes. The list is endless.

The real benefit is legal risk management beingapplied around a likelihood and severity tool and therefore where it is needed!

If your organisation is not undertaking insurable risk profiling and legal risk gap analysis - why don’t you start at your next policy renewal?

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• litigation