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The Business Of Risk

Apr 20th 2008boybermLegal

Today, we see a number of risks associated with businesses of all sizes, ranging from identity theft, embezzlement, natural disasters, personal injury, fraud, vendor failure, taxes, finances, and more. Because of the increasing number and type of business risks, companies have had to make some major adjustments in overall operations, management, and strategy. When you couple risks with competition, you can see that it is imperative every company have a solid plan in place for protection and success.

One of the most important aspects of strategy is ensuring a solid risk management team is in place. These individuals would hold the responsibility of not just identifying potential risk but also creating and implementing sound processes, techniques, or technologies for prevention and/or correction. The risk management team however will not work in isolation but in tandem with other key stakeholders, such as department heads and the Executive team. Having a winning risk strategy is going to give your business the foundation on which to build a strong, competitive company but also a business that employees and clients trust.

What is the key to creating such a risk strategy? For one thing, you want to be productive but not make quick decisions. Unfortunately, we have seen many larger corporations that have put “quick fixes” into place, only to find they end up with a laundry list of new problems. Yes, it is essential that a good plan be developed as quickly as possible but make sure the plans being considered are not just short term fixes but will be beneficial long-term. While a risk management team can identify potential risk events, the team must work in conjunction with the organization so that strategies are aligned with the business goals. In essence, the best risk strategy is one component of the overall business strategy.

In addition, you need to review your company inside and out, top to bottom, to determine where risks lie. For example, missing payment on taxes can be an extremely costly mistake, sometimes upwards of $10,000 or more. In this instance, there would be a number of things to consider. Is the individual heading up the tax department qualified? What type of tracking system is being used? Is the department short-handed? Is the person in the mailroom delivering mail on time? These and other possibilities exist, which is where a risk management team would help. Once the problem area or potential risk is isolated, then changes could be made accordingly.

Another factor that unfortunately, is sometimes overlooked is the client. Obviously, if you are going to run a profitable business, you need satisfied customers. Perhaps there are areas of service or product where customers are not happy but because no means of communication or input is in place, you have no idea. Therefore, you might think about sending out customer surveys, trying to find any weaknesses that need to be strengthened. It is imperative that you know your customers and that those customers are so satisfied with what you offer so they will not look elsewhere.

Things happen in businesses and sadly, many great companies have gone under because of lack of risk management and/or strategy. Enron, is only one of many examples in which a failure to manage risk or even identify risk ruined a company. Another often cited example is Barings Bank which was one of the most respected merchant banks in the United Kingdom. The company which held $900 million in capital was bankrupted due the actions of one trader. The losses and subsequent bankruptcy could have been avoided if internal controls had been in place. There are countless other global examples of the consequences of not identifying risk events.

While federal regulations such as Sarbanes-Oxley have mandated corporate governance and controls, managing risk is simply good business. Identifying risk events and formulating response strategies enable the organization to successfully execute its objectives.

Richard A. Hall is founder and President/CEO of LexTech, Inc., a legal information consulting company. Mr. Hall has a unique breadth of experience which has enabled him to meld technology and sophisticated statistical analysis to produce a technology driven analytical model of the practice of law. As a busy civil trial attorney, he was responsible for the design and implementation of a LAN based litigation database and fully automated document production system for a mid-sized civil defense firm. He developed a task based billing model built on extensive statistical analysis of hundreds of litigated civil matters. In 1994, Mr. Hall invented linguistic modeling software which automatically reads, applies budget codes, budget codes and analyzes legal bill content. He also served as California Director and lecturer for a nationwide bar review. Mr. Hall continues to practice law and perform pro bono services for several Northern California judicial districts.

Protecting Your Company’s Privacy

Mar 31st 2008boybermLegal

Today more than any other time in history, protecting company privacy is essential. Unfortunately, the number of cases associated with identify theft have not only risen but also moved from personal to business. Over the past few years, a number of large companies and even government agencies have been in the news for having laptop computers and vital information on employees and the organization itself stolen. What makes this so uncomfortable is that usually, the privacy is being threatened from within the very organization that is supposed to secure it.

Keep in mind that while some organizations are at greater risk for thefts, such as credit card companies, banks, or government agencies, even the small mom and pop shops are at risk. Remember, it would only take one instance of information leaking out to put a company completely out of business. The problem is that not only is data being stolen, but often sold to criminals that know exactly how to extract what they want to make a profit - at your expense.

More than ever, it is crucial to do all you can to protect your organization and employees. In today’s flat work force, many employees use laptops rather than desktops. A laptop enables employees to work from any location eliminating downtime for the field employee and increasing the efficiency of communication. However, every time an employee takes the computer out of the office, the potential risk of privacy is increased. Let us say an employee had a laptop with no logon protection. This employee worked in the financial sector of the business and after going to dinner while on a business venture, he returns to the hotel room only to find the laptop gone. Now, without the computer having any type of password protection, anyone can gain access. However, professional criminals can hack anything with or without protection.

In addition to accidents such as this, other situations could arise putting your organization in danger. For instance, if there were a disgruntled employee, perhaps someone passed over for a promotion, or someone who knows his or her job were ending, this individual may feel there is nothing to lose by leaking out or taking vital information. If this person were unstable or just angry, he or she could cause damage to the company through the sharing of trade secrets, personal data or other sensitive information. Then of course, you have people who go to work for companies specifically for the sake of stealing private data. Although this is not as common, it does exist and this practice is growing.

Yet even with Identity Theft and Privacy being spotlighted in the media, companies remain surprisingly vulnerable. Organizations around the globe have no clue to the quantity of sensitive information being leaked out but even worse, no tracking system is in place to find out or to correct the problem. While we often focus on the computer as a source of theft, private data can be taken out of a company in many other ways. For instance, iPods, USB sticks, or any portable device makes downloading information easy and covert. What happens is that in addition to the company and employees being at risk, customer relations could be severely damaged as well due to lack of trust and confidence.

To give you an idea of just how data is being taken out of organizations, 75% is with the use of a portable device, 63% via email attachments, and 59% from content within emails. Sadly, a number of companies were recently surveyed and of those, just 50% stated they had any concern. If you are working hard to build your organization, you need to take this risk seriously. With so many possibilities for privacy to be robbed, it is crucial that you understand the risks and then take appropriate action to correct them. If major data leaks can occur within tightly secured companies such as AT&T, National Audit Office, Veterans Affairs, and Google, then surely you too can potentially be at risk.

Take steps to protect your trade secrets and sensitive private data. This is an area worth making an investment. With the sheer volume of information that is produced daily within a company, it is challenging to ensure security. However, taking time to understand who has access to important data and how to best protect it is well worth the investment of time and money. After all, what would it cost you if your valuable data was lost or stolen?

Tags: attorney, business protection, company privacy, corporate theft, identity theft, lawyer, legal

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