MOS 2275 > Chapter 3 > Flashcards

Chapter 3 Flashcards

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1
Q

What is the goal of a business?

A

Produce product/deliver service at a profit

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2
Q

What are the two basic approaches to managing legal interactions?

A
  • Preventive
  • Reactive
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3
Q

What does a preventive approach to legal risk management emphasize?

A

Compliance with legal requirements and anticipation of changes in the legal environment

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4
Q

What is a legal risk?

A

A business risk with legal implications

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5
Q

What is the first step in creating a legal risk management plan?

A

Identify the legal risks

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6
Q

What is enterprise risk management?

A

The process of identifying and managing all business risks

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7
Q

What are examples of legal risks?

A
  • Damage to the environment
  • Liability for the payment of money
  • Changes to legislation
  • Inability to meet financial obligations
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8
Q

True or False: Risk management is a task for any one individual within an organization.

A

False

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9
Q

What is the purpose of identifying legal risks in a business?

A

To provide a realistic assessment of potential legal dangers of doing business with a view toward minimizing loss

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10
Q

What is the average cost of investigating and remediating a cyberattack?

A

$6.35 million

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11
Q

What should be assessed when evaluating risks?

A
  • Probability of loss
  • Severity of loss
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12
Q

What is risk avoidance?

A

Ceasing a business activity because the legal risk is too great

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13
Q

Fill in the blank: The process of managing the intersection of law with an organization’s activities requires completing a comprehensive assessment of _______.

A

[legal risk exposure]

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14
Q

What organization typically heads a risk management department in large businesses?

A

Senior manager with a title such as risk officer or compliance officer

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15
Q

What might be a consequence of a successful cyberattack on a business?

A

Disruption/cessation of operations and loss of customer and employee data

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16
Q

What are the four steps in creating a legal risk management plan?

A
  • Identify the legal risks
  • Evaluate the risks
  • Devise a risk management plan
  • Implement the plan
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17
Q

What can be a method for identifying potential exposure to legal risks?

A

Assess the organization’s functional areas

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18
Q

What is one example of a legal risk related to environmental issues?

A

Liability triggered by improper closure or remediation of mines

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19
Q

What is the purpose of a cost-benefit analysis in risk management?

A

To evaluate the risk matched with the organization’s resources

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20
Q

What does risk reduction involve?

A

Implementing practices to lower the probability of loss and its severity

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21
Q

What is a common risk related to extending credit to customers?

A

Risk that some customers won’t pay their accounts

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22
Q

What is an example of a risk that can be eliminated?

A

Discontinuing a product line associated with high legal risk

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23
Q

True or False: All legal risks can be managed individually without considering their interconnections.

A

False

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24
Q

What should organizations focus on when evaluating legal risks?

A

The corporation’s entire risk profile rather than risks emerging from individual departments

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25
What could trigger liability under Canadian law when operating in foreign countries?
Inability to meet local laws and regulations
26
What was the outcome of Nevsun Resources Ltd v Araya?
Canadian courts may assess the conduct of a foreign state
27
What procedures should a company have in place to evaluate and reassess the creditworthiness of customers?
Regular credit checks and taking collateral ## Footnote This helps minimize risk.
28
How can an organization reduce potential liability under environmental legislation?
By improving its environmental performance ## Footnote Example: installing/upgrading equipment to voluntarily reduce emissions.
29
What measures can be taken to improve air quality?
Install and upgrade equipment to reduce emissions ## Footnote This can include facilities to treat mine water.
30
What system can be introduced to address employee health and safety?
A system that includes reporting and auditing of workplace accidents ## Footnote Encourages a culture of safety.
31
What is Risk Transference?
Shifting the risk to someone else through a contract ## Footnote Example: purchasing insurance.
32
What types of insurance cover injuries to members of the public?
Commercial general liability policy ## Footnote This is part of most risk management plans.
33
What is Risk Retention?
Absorbing the loss if the legal risk materializes ## Footnote Appropriate when costs of avoiding or transferring risk exceed potential impact.
34
What can a company do to manage the risk of vehicle damage?
Insure subject to a deductible ## Footnote Example: accepting the first $2000 in risk of damage to vehicles.
35
What ethical consideration arose from the #StopHateForProfit campaign?
A boycott of advertising on Facebook due to insufficient action against harmful content ## Footnote Over 1000 companies participated, including major brands.
36
What changes did Facebook make in response to the advertising boycott?
Hired a civil rights executive and agreed to crack down on extremism ## Footnote Despite limited impact on revenue.
37
What are the steps involved in implementing a risk management plan?
Carry out the plan, monitor, and revise the plan ## Footnote Responsibility for implementation must be clearly assigned.
38
What is the first step in the Legal Risk Management Model?
Identify the legal risks ## Footnote This includes assessing functional areas and reviewing business decisions.
39
What are the four steps in the risk management plan?
1. Identify the risk 2. Evaluate the risk 3. Devise a risk management plan 4. Implement the plan ## Footnote Each step builds on the previous one.
40
What can be done to reduce environmental risks?
Introduce practices to minimize operational impact ## Footnote Example: upgrade waste water filtration systems.
41
What is one way to transfer operational risks?
Purchase commercial general liability insurance for injuries to third parties ## Footnote This helps mitigate potential losses.
42
What is a common response to regulatory risks?
Monitor the political environment for potential changes to regulations ## Footnote Companies can also lobby for input on changes.
43
What should a company do to manage technological risks?
Hire an IT firm to install security firewalls ## Footnote Also store data off-site regularly.
44
What impact did COVID-19 have on businesses?
Interruption of business activities and new legal disputes ## Footnote Examples include compliance with masking requirements and contractual obligations.
45
What is the value of a risk management plan when a risk materializes?
It provides an effective way to address the issue and assess legal advice needs ## Footnote This is crucial for crisis management.
46
What lessons can be learned from crisis management examples like the Tylenol tampering incident?
React quickly and positively, use a prominent spokesperson, and explain the corrective actions taken ## Footnote Effective communication is key.
47
What should guidelines in a risk management plan include?
How to treat injured employees, investigation procedures, and incident record-keeping ## Footnote Follow-up actions to prevent recurrence are also essential.
48
What is the first lesson from events involving company representatives and their impact on share market?
React quickly and in a positive fashion ## Footnote Companies like Toyota, Maple Leaf Foods, and J&J recalled products immediately.
49
What should companies use to communicate their side of the story during a crisis?
A prominent spokesperson ## Footnote Presidents of Toyota and Maple Leaf Foods publicly apologized for the situation.
50
What measures did J&J take to address product tampering?
Introduced tamper resistant bottles
51
How did Maple Leaf Foods improve its operations after a crisis?
Improved cleaning processes and inspection systems
52
What types of media should companies use to communicate during a crisis?
Traditional media and social media ## Footnote Companies expressed concern for victims without arguing responsibility.
53
What is a key aspect of acknowledging a problem during a crisis?
Be open and consistent in acknowledging the problem and the company’s role
54
What is involved in managing legal services during a crisis?
Development and operationalization of a risk management plan and crisis management
55
When should companies consult legal advice?
At appropriate times to avoid waiting for problems to develop
56
What is a potential consequence of consulting lawyers too often?
It can be expensive and cumbersome
57
What legal advice is necessary when expanding into foreign countries?
Assessing the legal risks associated with operating in a foreign jurisdiction
58
What should be clarified within an organization regarding legal advice?
Who should decide when matters require legal advice
59
What are the first steps in choosing a lawyer for a business?
Find a lawyer/law firm appropriate to business needs in terms of: * Expertise * Approach to clients * Cost
60
What sources can be used to identify potential lawyers?
Friends, relatives, business associates, local bar association, The Canadian Law List
61
What should clients expect in terms of billing from their lawyers?
Itemized billing on a schedule that suits the business’s financial cycle
62
What is the objective of developing a relationship with a legal advisor?
Develop a productive, long-term relationship
63
What is legal risk management?
Identification and management of risks that have or could have legal consequences for an organization
64
What is a traditional role of outside counsel?
Reactive role providing advice on known events/transactions
65
How is the role of in-house counsel changing?
In-house counsel is increasingly seen as part of the management team
66
What is a key aspect of in-house counsel's job?
Awareness of risks
67
What is a trend in the way organizations manage legal risks?
Bringing in outside counsel as part of the risk management process
68
What is essential for in-house counsel to ensure?
That legal risks are recognized and managed as part of the organization’s overall strategy
MOS 2275
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