Clues to seven koans on “legal risk”

A few days ago I unveiled seven koans about legal risk (See my post of July 29, 2010: seven paradoxes about risk.). For those of you who have not reached enlightenment, my sketched explanations may spur you on.

“Risk flirts with dollars but marries reputation.” Some risks put money at issue, others put the company’s reputation on the line. The former call a business executive can make, perhaps with legal input. The latter, decisions that jeopardize corporate ethics or reputation, are much more crucial and ought to have more significant legal input.

“Up the line can mean end of the line.” A material risk, one that might be taken improperly by an executive, brings in the specter of reporting up the line to comply with Sarbanes-Oxley. An in-house lawyer who “tells” may lose a job.

“After too many ‘No’s’ the wise client ‘Knows’” If an in-house lawyer puts the kibosh on too many ideas of a client because of legal threats, the client will take decisions elsewhere or forego legal advice.

“No one can minimize the unmeasurable.” If you cannot measure risk, how can you pretend to minimize it? Since the future is unknown, the payoff on risk management can never be proved.

“Legal risk is in the wallet of the beholder.” Everyone in business assesses legal risk from the standpoint of their own job, their bonus, the effect on the stock price. Other factors enter in, but generally cherchez les francs.

“Risk, the law’s chameleon.” Change the facts slightly (the background color) and the legal risk calculus changes. Everything about legal risk is context and possibility.

“Learn from the rainbow about legal risk.” You never find the pot of gold that means you have eliminated legal risk. Second, there is a spectrum of risk in any situation. Third, no matter how close you get, the concept remains gossamer and ephemeral. Finally, legal risks, like rainbows, are beautiful topics to write about but very hard to wrestle to the ground.

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