2. Legal Risk Management


Legal risks related to business are often costly, time consuming, and challenging in ways that are difficult to overcome (reputational risk is one example). Understanding the nature of potential risks and developing procedures to avoid or attenuate the effects is fundamentally important for most, if not all, businesses.

Litigation may be necessary to resolve certain issues or clarify ambiguous contracts, but is very often an unpredictable and expensive way to deal with disputes. Negotiation, mediation, and arbitration are often described and considered together as alternative dispute resolution (ADR) processes. While negotiation occurs across all forms of ADR, mediation and arbitration typically involve independent, experienced professionals who are enlisted to assist in managing contentious disagreements. Mediators and arbitrators apply different tools and practices but both approaches are focused on assisting parties to arrive at an understanding that avoids court proceedings.

Arbitration is a form of private dispute resolution where an impartial third party (the arbitrator) considers all sides of a dispute and renders a binding decision. In mediation, a neutral third party (the mediator) assists the parties involved in a dispute to communicate more effectively with a view towards exploring and accessing resolution options. In both cases, the parties involved in the dispute have more control over the outcome, as compared to litigation.

Arbitration and mediation are often faster, less expensive, and more private than litigation. Additionally, the use of ADR can help businesses protect their reputations, maintain good relationships with other parties and avoid the unpredictability of court decisions. Staying current with federal and provincial laws associated with negotiation and ADR proceedings is essential for businesses looking to minimize exposure to legal risks and maximize their relational and outcome goals.


Icon for the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

Business Law and Ethics Canadian Edition Copyright © 2023 by Craig Ervine is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

Share This Book