Bismillahi’rohmannirohim..
It’s start from the anxiety based on the author’s experience in resolving legal issues. On this basis the author through the dialectical process tries to examine the coherent conditions of corporate failures in managing legal risk.
The initial research was carried out in response to the massive behavior of business owners in ignoring both the reluctance and/or inability of business owners to understand legal risk, so that it is necessary to understand that settlement through court processes is the beginning of potential losses (hazard) which has a probability high level exposure of risk and will more hardly to measure.
Therefore my best view is to make efforts to mitigate (prevent)legal risks to minimize the efforts and/or threats of litigation (response/recovery) that generally have an impact on the costs, time and quality produced by a risk. Reconstruction; paradigm shift in the approach to solving legal problems.
The concept of Legal Risk Management (LRM) is part of the results of the development of Enterprise Risk Management (ERM). Risk management is today used in many different disciplines as a structured approach for dealing with risk. When enterprise risk management focuses on risks to an enterprise, while financial risk management deals with risks (ie. in an investment portfolio). Then the characteristic element in legal risk management is the focus on legal issues in the context of risk. This legal perspective on risk becomes visible in the management of legal risk, a perspective which in itself is not new (practicing lawyers already deal with risks on a daily basis).
According to the ISO 31000:2009, the term “risk management” refers to “coordinated activities to direct and control an organization with regard to risk”.[1] By relating legal risk management to another risk management approaches, we may lead to the use of a applicable theory of proactive legal practice, which today is rather undeveloped. There is an profusion of theory about how to restate the law, formerly when a problem arises. But legal theory has relatively slight focusing on how to prevent problems. Apprehension and denoting some of lawyers tasks as risk management tasks provides with a set of risk-related concepts and analyses, which may turn out to be useful also for the analysis of legal risks.
Through a mitigation approach (prevention) that is organized into a legal risk management instrument, which is a mechanism of a comprehensive verification of legal entities and their activities from a legal perspective, carried out in an objective and systematic based on the applicable legal system.
Nowadays, general legal services developments only responds to do recovery risk events that happen. It is understood as a consequence of a weak control environment maturity. In these conditions legal risk owners is not pushing business owner to avoid litigation efforts that have dimensions of material impact on financial risk loss such as the cost of the litigation process, the cost of assisting the law, the cost of damages material/immaterial, fines, interest, asset freezing, and some other impacts such as negative reputation, operations obstructed, business license revocation, as well as the legal ramifications of the court ruling/regulations against business continuity (i.e Telkomsel bankruptcy lawsuit)[2].
Based on this aspect, legal counsels must do rationalization to minify their overall expend and yet at the same time transform to become preferable at managing legal risk within the business. In short, the importance of effective legal risk management has risen to the top of the priorities of some legal counsels.
In identifying and mitigating legal risks, risk owners (legal risk committee)[3] have a key role to play. In particular, the following suggest might be observed:
Direct understanding of the organisation and its objectives as a whole:
A distinctive expertise and holistic view which enables to challenge best practices on the basis of clearly-articulated legal principles; and
The independence and detachment which come both from a membership of an independent profession and from the recognition ability to bring to bear detachment, as well as commitment.
So the role as legal counsels is changing. The law itself is a changing discipline. As legal risk owners, they are at the center of that change because of roles inside organisations and ability to look at their risks as a whole. There is no doubt that meeting these new challenges will require some new skills. This change is exciting, but, as we embrace it, we need to keep hold too of our traditional strengths of expertise, judgment and common sense. The great thing about the change are now undergoing is that the better we respond to it, the more rewarding our work will become and the better the outcomes for the organisations.

Hopefully observations and ideas from this over view to be helpful and thought-provoking for managing the legal risks faced by your own business.



[1] Susilo, Leo, dkk, Manajemen Risiko berbasis ISO 31000: Appendix B: ISO 73: 2009
[2] The case of a bankruptcy lawsuit against Telkomsel for a debt of IDR 5.3 billion (although in the end the suit was not granted) but the lawsuit had an impact and polemic over the stipulation of a curator fee of IDR 148.806 billion that Telkomsel had to pay.
[3] Legal Dept/in house lawyers, ERM Dept, Human Resources  Dept, Internal Auditor Dept.

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