Question 1

Legal risk management is an optional practice businesses undertake only if there are adequate resources to allocate in-house legal staff to carry out the task.

Accepted Answer

Legal risk management is not an optional practice and should be undertaken by businesses regardless of their size. It involves identifying potential legal risks and finding ways to minimize or mitigate them. While having in-house legal staff can be helpful, businesses can also utilize outside counsel or consultants for legal risk management.

Question 2

The fact that an organization's human resource department is typically exposed to potentially serious risks supports the need for a legal risk management plan.

Accepted Answer

The human resource department deals with sensitive employee-related issues such as discrimination, harassment, and wrongful termination, which can result in legal disputes and liabilities. Therefore, it is crucial to develop a legal risk management plan to mitigate these risks.

Question 3

Having a legal risk management plan is unnecessary for a small business entity.

Accepted Answer

Even small business entities may face legal risks and liabilities. Having a legal risk management plan can help mitigate these risks and protect the business from potential legal issues.

Question 4

Rahim's decision to increase the amount of the deductible on his business liability insurance policy will result in the business having to absorb the loss resulting from a future materialization of a legal risk.

Accepted Answer

Increasing the deductible means that the company will be responsible for a larger portion of any potential insurance claim, therefore absorbing more of the financial loss in the event of a legal risk.

Question 5

The point in evaluating risks is to recognize that not all risks are alike,nor should they be treated alike.

Accepted Answer

Evaluating risks is important because it allows us to differentiate between different types and levels of risk and determine appropriate responses for each. It helps us prioritize which risks require more attention and resources, and which can be managed with relatively low impact.

Question 6

Risk managers should have ample knowledge of the business,its activities,and the industry it operates in.

Accepted Answer

Risk management involves identifying, analyzing, and managing risks that may impact a business. In order to effectively carry out these responsibilities, risk managers should have a comprehensive understanding of the business, its operations, and the industry it operates in. This allows them to identify potential risks and implement strategies to mitigate them.

Question 7

Insurance policies covering business risks will provide coverage for all losses as part of their standard terms,so there is no need for the legal risk management team to review the policies.

Accepted Answer

While insurance policies do provide coverage for losses, it is important for the legal risk management team to review the policies and ensure that the coverage is adequate and appropriate for the specific risks faced by the business. They may also negotiate additional coverage or exclusions as necessary.

Question 8

Most lawyers can be expected to have the expertise necessary to head up a risk management department.

Accepted Answer

While lawyers may have skills that are relevant to risk management, the role typically requires specific training and experience, and may involve a range of functions beyond legal expertise.

Question 9

In-house legal counsel are highly trained commercial law specialists,capable of handling all of the business's litigation matters.

Accepted Answer

In-house legal counsel often have a broad knowledge base but may not specialize in all areas of law, including complex litigation matters, which might require the expertise of external specialists.

Question 10

A legal risk management plan must be continually reviewed,reassessed,and revised.

Accepted Answer

This is because legal risks can evolve and change over time, and therefore, a legal risk management plan needs to be regularly monitored and adapted to ensure its effectiveness in mitigating legal risks.

Question 11

The best mix of approaches to risk management is rooted in cost-benefit analysis.

Accepted Answer

Cost-benefit analysis involves weighing the potential costs and benefits of different risk management approaches. This allows for a more informed decision to be made about the most effective and efficient way to manage risks. By conducting a cost-benefit analysis, organizations can identify the most appropriate mix of approaches to risk management based on their specific priorities, resources, and risk tolerance levels.

Question 12

Identification of loss is the primary goal of a risk management plan.

Accepted Answer

The answer of Identification of loss is the primary goal...

Question 13

Law firms typically comprise a group of lawyers practising as sole practitioners.

Accepted Answer

Law firms are composed of a group of lawyers who work together to provide legal services to clients. They may have different titles such as partners, associates, or counsel but they do not practice as sole practitioners within the same law firm.

Question 14

A business can transfer specific types of risk by choosing professionals based on their reputation and proven performance.

Accepted Answer

The answer of A business can transfer specific types of...

Question 15

The most common way to transfer risk is by buying insurance.

Accepted Answer

This statement is true. Insurance is a risk transfer mechanism where an individual or group pays a premium to an insurance company to transfer the risk of financial losses in case an unexpected event occurs.

Question 16

Employees are generally considered to be an unreliable source for identifying risks in an organization's functional areas.

Accepted Answer

Employees can provide valuable insight into the functional areas of an organization and can identify potential risks that may not be apparent to higher-level management. While their perspective may be limited to their specific role or department, they can still offer valuable contributions to overall risk identification and management.

Question 17

Anders will be able to support his recommendation that the business undertake development of a legal risk management plan by performing a subjective evaluation involving an assessment of both the probability and the severity of loss.

Accepted Answer

Anders can assess the probability and severity of potential legal risks to support his recommendation for a legal risk management plan.

Question 18

Law societies govern the activities of their lawyer members and certify the legal competence of each particular lawyer in their areas of specialization.

Accepted Answer

This statement is true. Law societies, also known as bar associations, are responsible for regulating the conduct and practice of lawyers within their jurisdiction. They also set standards for legal education and professional development, monitor complaints and disciplinary actions, and manage the certification process for lawyers in their areas of practice.

Question 19

Risk avoidance is always the best policy.

Accepted Answer

Risk avoidance is not always the best policy as it can lead to missed opportunities and lack of growth. Depending on the situation, risk mitigation or risk acceptance may be more appropriate approaches.

Question 20

Identification of potential exposure to legal risks involves assessing the organization's functional areas and reviewing its business decisions and business relationships.

Accepted Answer

This statement is true. Identifying potential legal risks involves looking at different aspects of an organization such as its operations, decisions, and relationships to determine where legal liabilities may exist.

Quiz 3: Managing Legal Risks