How to measure and manage legal risk

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This overview of measuring and managing legal risk breaks down elements of legal risk and places them in a risk framework. The presentation also discusses risk tolerance and valuing risk for the organization. Contract managers, lawyers, risk managers and compliance officers all benefit from analyzing legal risk in quantitative terms.

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How to measure and manage legal risk

  1. 1. 0 How to Measure & Manage Legal Risk
  2. 2. 1 Mark Little President & CEO mark.little@contractanalyst.com www.ContractAnalyst.com 855-517-2193 Copyright Contract Analyst, 2013 All rights reserved
  3. 3. 2 Risk Definition Copyright Contract Analyst, 2013 All rights reserved
  4. 4. 3 Risk R = p * LGE Copyright Contract Analyst, 2013 All rights reserved
  5. 5. 4 Risk risk is the likelihood (probability) of consequences (loss given event) Copyright Contract Analyst, 2013 All rights reserved
  6. 6. 5 Risk “effect of uncertainty on objectives” - ISO 31000 Copyright Contract Analyst, 2013 All rights reserved
  7. 7. 6 Risk Legal Copyright Contract Analyst, 2013 All rights reserved
  8. 8. 7 Legal structural regulatory contractual litigation Copyright Contract Analyst, 2013 All rights reserved
  9. 9. 8 Fundamental industry norm Scope is general Alters competitive landscape Copyright Contract Analyst, 2013 All rights reserved
  10. 10. 9 New or modified regulations Scope is general or specific Civil, criminal, directive Copyright Contract Analyst, 2013 All rights reserved
  11. 11. 10 Lawsuit based on conduct Scope is specific Civil penalty; equitable relief Copyright Contract Analyst, 2013 All rights reserved
  12. 12. 11 Breach, not enforceable, … Scope is specific Financial performance Copyright Contract Analyst, 2013 All rights reserved
  13. 13. 12 Risk Tolerance Copyright Contract Analyst, 2013 All rights reserved
  14. 14. 13 Company A $(152.78) Copyright Contract Analyst, 2013 All rights reserved
  15. 15. 14 Company B $(211.68) Copyright Contract Analyst, 2013 All rights reserved
  16. 16. 15 Company C $(756.08) Copyright Contract Analyst, 2013 All rights reserved
  17. 17. 16 Best? context matters capacity to absorb risk cost of risk management Copyright Contract Analyst, 2013 All rights reserved
  18. 18. 17 Risk Assessment Copyright Contract Analyst, 2013 All rights reserved
  19. 19. 18Copyright Contract Analyst, 2013 All rights reserved
  20. 20. 19 Risk Identification Copyright Contract Analyst, 2013 All rights reserved
  21. 21. 20Copyright Contract Analyst, 2013 All rights reserved
  22. 22. 21 Risk Analysis Copyright Contract Analyst, 2013 All rights reserved
  23. 23. 22Copyright Contract Analyst, 2013 All rights reserved
  24. 24. 23Copyright Contract Analyst, 2013 All rights reserved
  25. 25. 24Copyright Contract Analyst, 2013 All rights reserved
  26. 26. 25Copyright Contract Analyst, 2013 All rights reserved
  27. 27. 26Copyright Contract Analyst, 2013 All rights reserved
  28. 28. 27
  29. 29. 28 Risk Evaluation Copyright Contract Analyst, 2013 All rights reserved
  30. 30. 29 % Very likely Likely Possible Unlikely Very unlikely or Copyright Contract Analyst, 2013 All rights reserved
  31. 31. 30 $ Critical Major Moderate Minor Insignificant or Copyright Contract Analyst, 2013 All rights reserved
  32. 32. 31 Rating v. Ranking Copyright Contract Analyst, 2013 All rights reserved
  33. 33. 32 Risk Treatment Copyright Contract Analyst, 2013 All rights reserved
  34. 34. 33 Necessity? Priority? Options? Decision? Copyright Contract Analyst, 2013 All rights reserved
  35. 35. 34 Risk Context Copyright Contract Analyst, 2013 All rights reserved
  36. 36. 35 4% growth in sales 4% decline in expenses Copyright Contract Analyst, 2013 All rights reserved
  37. 37. 36 Random 0 - 5% increase in expenses Copyright Contract Analyst, 2013 All rights reserved
  38. 38. 37 Random 0 - 5% lost revenue Copyright Contract Analyst, 2013 All rights reserved
  39. 39. 38Copyright Contract Analyst, 2013 All rights reserved
  40. 40. 39 Ready Copyright Contract Analyst, 2013 All rights reserved
  41. 41. 40 Mark Little President & CEO mark.little@contractanalyst.com www.ContractAnalyst.com 855-517-2193 Copyright Contract Analyst, 2013 All rights reserved

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