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Another view that the term “legal risk” has little useful meaning

Antoine Henry de Frahan comes right out and says it: “I believe that the concept of “legal risk” is meaningless and useless.” Below are some quotes extracted from his longer post (See my posts of Nov. 15, 2005 and references cited which grapple with definitions of “legal risk”; Jan. 10, 2006 on enterprise risk management; Jan. 13, 2006 on uncertainty vs. risk; and March 1, 2007 on compartmentalization and legal risk.). Frahan subscribes to the same view that I do. I will let his words speak for me.

“Major risks are not either legal, or financial, or strategic, or reputation, or whatever else. They are legal AND financial AND strategic AND reputation.”

“The real question is, in the presence of a major risk for the company, whatever its nature, “What can lawyers do about it”? Legal risk management should be understood as a shortcut for “lawyers’ contribution to risk management”. So, the better lawyers are, the more they become familiar with and involved in dealing with risks that are not primarily branded as legal. Good lawyers have a deep understanding of financial tools, strategic options, business process, operations of the company, and the evolution of the business environment.”

”Because important risks are multidimensional, managing them requires a multidisciplinary approach. … People of different departments must talk to each other. Cross-teams must be formed. Lawyers who want to play a significant role in risk management must be able to understand the non-legal dimensions of the risks they are contributing to manage.”

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