It’s well known that the business world faces ever increasing regulatory and litigation risk – the real question is how to manage that risk effectively.

It is important for in-house counsel and other decision-makers to adopt a structured approach to litigation risk management and there are three key areas of focus to help to minimise the existence and impact of disputes:

  1. Avoidance
  2. Document and data management
  3. Response Planning


Demonstrate to the business that risk creates opportunities – Addressing risks improves the business, which enhances shareholder value.

Ensure that the business has a “Litigation Risk Map” to help prioritise initiatives that can be deployed to minimise litigation and regulatory risks.

Ensure your business arrangements are in writing – This may sound obvious but, as lawyers, we regularly see litigation arising out of poorly documented business deals. Clarity of terms benefits all parties to a contract - a further potential benefit to you of being on top of this is that contractual risk can often be transferred to counter-parties through clever negotiation and drafting.

Agree variations in advance – Often the requirements/expectations on either side to an agreement change. Whilst it is understandable that business dealings move at a fast pace, with often little time to consider the wider commercial considerations/risks, it is important to ensure that variations are agreed and formalised before work commences/continues.  

Long standing relationships – It is usual for businesses to have built up relationships with key customers and suppliers and do repeat business with them. If you consistently trade with another party over a period of time on the same terms it may lead to such terms being incorporated into your agreements, even when it has not been expressly agreed between you.  It is therefore important to remember that if you deal informally with a long standing third party, you may still be subject to some more onerous terms or those that you have traded pursuant to in the past.  Be very clear about the basis on which you are trading with third parties.

Practical tips – Be transparent with counterparts, keep them up to date, don’t ignore emails/phone calls, trade/operate in good faith, take complaints seriously and deal with them quickly. Equally, raise complaints in a timely manner with an open mind about potential resolutions.

Document and data management

Ensure you have a document and data management policy - A simple policy will enable you to understand where your documents and data are located, how long you need to keep them for and how you’ll locate them quickly and efficiently if a litigation or regulatory situation arises.

Preservation of documents – It is good practice to have an efficient document management system in place which allows the sharing of information and preservation of documents. This not only helps to manage matters and avoid disputes, but the Court rules specify that where a dispute is contemplated, there is a duty on parties to preserve documents from being destroyed or deleted.  This obligation also extends to instructing employees and former employees of such requirements.

The scope of what is considered a document – The Court considers the meaning of ‘document’ to be very broad.  This includes all paper and electronic documents and communications and databases, but also text messages, social media communications and metadata (or other embedded data). 

Response planning

Speed of response is essential – Whatever the situation, be it early signs of a contract dispute or threat of regulatory enforcement action, early planning is key. To plan a resolution strategy from the outset dramatically increases your chances of pro-actively steering the situation to a controlled resolution.

Speak to a lawyer – If a dispute is contemplated, encourage members of staff to speak to the in-house legal counsel at the earliest possible stage to ensure that disputes are handled effectively and that the position is not prejudiced by actions or omissions of members of staff. However, bear in mind that internal correspondence (even with an in-house lawyer) may not be covered by privilege and therefore it could be disclosable in proceedings.

Beware of internal email exchanges – Steps can be taken to ensure that internal communications about a dispute that is brewing don’t ultimately have to be disclosed to the opponent, as they can often be inadvertently damaging to the case.

Take a note of deadlines – Often it can take some time for a disputed matter to come to the attention of the in-house legal team. Ensure that staff are briefed on the importance of meeting contractual time limits and court deadlines and seeking advice quickly to preserve the position.

Avoid making admissions – Regardless of your views on the merits of the case, it is important not to make admissions about the disputed matters.

Costs benefit analysis – At the outset of a dispute or threatened dispute, it is very important to take into account the associated risks and costs involved in taking a particular course of action.  For example, defending a relatively small claim could prove disproportionately expensive should the matter proceed to trial and settling the dispute at the earliest stage could be the most cost effective solution, irrespective of the merits. 

Resolving the dispute at an early stage / making offers – Parties should attempt to resolve disputes or at least narrow the issues on a commercial basis by engaging in dialogue with their opponent, without making admissions. Ensure such dialogue is held on a ‘without prejudice’ basis, and correspondence is marked as such, so that your own case is not prejudiced if it did end up in Court. If you are considering making an offer to dispose of the dispute, remember to make these offers on a ‘without prejudice save as to costs’ basis - this means that you can rely on this reasonable conduct if and when it comes to a Court determining the costs that the parties should pay. 

In summary, awareness within the business of the value of proactive Litigation Risk Management can pay dividends. Training to key staff will help to manage risk and, in the event of a dispute or regulatory situation arising, the steps discussed above will help senior management plan ahead and to gain control over situations when they arise.