It is an unfortunate fact of life that business activity generates disputes that may result in litigation or regulatory action.
Companies need to identify and proactively address litigation risk. This is not simply because there is a positive obligation on listed companies to do so, but because this will reduce the company's exposure to the downside consequences of disputes, legal claims and regulatory action.
Litigation is justifiably recognised as costly, unpredictable and inefficient — the antithesis of profitable business activity. However, litigation risk is not simply about legal expense. It is a broader issue which involves diversion of valuable management resources, reputational risk, brand damage and potential personal liability.
So, what can be done to manage and reduce those risks from being realised?
Preventing disputes from arising
An important strategy for managing litigation risk is to take steps that reduce the risk of a dispute arising in the first place. After all, prevention is better than cure.
Let's focus on some of the key danger areas.
Acting with undue haste
Problems often emerge where commitments are made on behalf of businesses before proper due diligence and contract review has been completed.