Risk Management: Contractual Agreements, Liability Insurance Policy, Standard Operating Procedures

Risk management connotes a structured approach used to manage uncertainty. Certain legal doctrines caused for the purpose of identifying, assessing, monitoring and reducing the impact that risk has on a business. Some of the legal doctrines include:

Contractual Agreements

A contact is an agreement which creates obligations that are enforceable by law. It is a promise that the law is bound to enforce. A contract arises in the event that it comes into existence owing to an agreement reached by a business and its clients. In order for a contract to be legally binding, a promise ought to be exchanged between the parties for adequate consideration. A contract's contents are referred to as clauses or terms. In general, the main terms are the contract's subject matter, for instance the services or goods provided, and the price paid. Businesses generally have standard written terms that may be quite lengthy. Businesses are not obligated to write terms in simple contracts. However, certain types of contracts such as those covering mortgages, consumer credit agreements and the sale of land warrant written terms. Contract terms result in a contractual obligation. The signatories of a contract are bound by law to adhere to the clauses stated therein. The risk that would emerge in the event that this legal doctrine was ignored is that breach of any term in contract can lead to litigation. A business can use terms in contract to legally binding the parties with which it enters business in order to avert the potential risk of agreement breaches. Whether a business is getting into a relationship with a vendor, an independent contractor or a customer, terms in contract emerge as a legal doctrine of business. They are purposed to serve as agreements that are legally valid in a bid to protect the interests of each party.

Liability Insurance Policy

Despite the fact that an organization might have taken the best possible steps to stay within the bounds of the law, operate within boundaries that are safe and manage its risks, certain circumstances may emerge and make the firm liable for losses that another organization or person may have suffered. In the event that an organization is liable for damages ascribed to another party, be it injury, death, or financial loss, resulting from its inaction or action, it make a claim base on a liability policy. The liability policy covers the risk of liability for damages caused to a second party. The particular policy's specific terms will intimate what is not covered and what is covered. It will also indicate the extent to which the insured firm has a responsibility to lower the risk that ascribed to a claim. Managers can make use of this legal doctrine to avert potential damage risks that occur inadvertently. Such risks may be unavoidable, and insuring the organization against the possibility that they may occur may ultimately save the organization colossal sums of money.

Standard Operating Procedures

Standard operating procedures afford comprehensible standards declared by the employer and describe in detail the expectations of the organization. They clearly outline the manner in which employees are expected to carry out their functions within the organization, for instance the code of ethics and occupational health and safety requirements. An organization's daily operations always emerge as the most fertile ground that can warrant legal input. It is essential for an organization's legal department to have a defined role in ensuring the compliance of standard operating procedures. This legal tool can be used to avert the risk of compensation claim by employees in the event that they are injured at work and did not follow the proper operation procedures. It can also avert the risk of claims by other organizations in the event that they feel aggrieved by an organization's modus operandi. Managers can utilize standard operating procedures for several reasons; analyzing their operations from a strategic point of view, recording desired changes, highlighting regulatory compliance, as well as training, measuring and improving performance. Standard operating procedures form the basis for most regular management processes. They communicate administrative and legal mandates ascribed to the organization.

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