Azernews.Az

Friday March 29 2024

Legal risk assessment can help business become more effective

16 February 2022 12:47 (UTC+04:00)
Legal risk assessment can help business become more effective

Legal audit can protect your business from potential risks

Legal audit is the process of examination of documents of a company to identify whether those documents adhere to the statutory requirements of law and whether they protect the interests of the company against any potential risks.

Legal audit helps a company to identify its hidden risks and assists to check the “legal health” of the company. There may be financial exposures/risks (such as penalty, lost profit, compensation etc.) which can be identified/mitigated during the legal audit.

The legal audit can be general or specific. In general legal audit, the risks of the company are assessed from several perspectives, such as corporate issues, contracts, intellectual property, real estate, compliance, dispute resolution and so on. In specific legal audit one area of the company is deeply analyzed (for instance, labor safety) and risks are assessed in relation thereto.

The legal audit process consists of 4 phases as described herein below:

Assessment

After the engagement and/or non-disclosure agreement are signed between the external lawyers and the company, the lawyers submit the checklist to collect necessary information and documents to examine to identify gaps and assess the risks. For example, in general legal audit the checklist requires information about the shareholders of the company, whether there is a shareholders’ agreement between them, how the authorities are divided between the executive and supervisory board pursuant to the articles of association (if applicable), whether the trademarks of the company are duly registered, whether the company concludes agreements on full financial liability with its employees and so on.

Planning

Once the external lawyers review and analyze the documents and information related to the company, they prepare action plan with specific actions, timelines etc. to carry out to mitigate/minimize the identified legal risks and eliminate gaps. For instance, if a company has dozens of contractual claims against its debtors and the limitation period is about to expire in one month then it can be written in the action plan to file the claims within 15 days.

Implementation

Deficiencies identified during the legal audit are being resolved in accordance with the action plan. As an example, it can be identified that a company leases the premises together with the land plot for a period of ten years, but the lease agreement has never been registered with the State Registry Service of Immovable Property. In this phase, the necessary documents are submitted to duly register the lease right of the company with the State Registry.

Completion

At this phase, final discussions are held with the company's management, the deliverables (documents described in the action plan) are submitted to the company.

If any risk is addressed at the early stage it takes less resources and time, but if it is addressed after that risky event occurs it requires more resources and time to resolve the issue. Therefore, having proactive approach makes a business more effective. The legal audit always helps businesspeople to minimize/mitigate risks, if required, to take calculated risks and make informed business decisions.

Are there any hidden risks in your company?

About the author: Fuad Gashamov is a professional lawyer with over 12 years of experience in consulting industry. He mainly specializes in dispute resolution, real estate, contracts, regulatory, intellectual property and compliance. He is the founding partner at Legalize Law Firm. He is the member of the Bar Association since 2014. For more information about the author please see the following link: https://legalize.az/en/team/fuadgashamov

---

Follow us on Twitter @AzerNewsAz

Slider Image 1
Legal risk assessment can help business become more effective - Gallery Image
Loading...
Latest See more