Why is Litigation, Disputes, & Complaints important for business today?
To the extent the business has been involved in legal disputes, keeping a record of these disputes helps the ongoing running of the business in the following ways:
- Provides a central place for staff to refer to for information on disputes
- It reduces the risk of staff departures impacting on the management of disputes going forward
- Facilitates an easy exercise to summarize the position on legal disputes to senior management
- Allows external counsel to be briefed more efficiently with all of the information stored in one place
- Allows any increase in the number of similar disputes to be tracked
Why is Litigation, Disputes, & Complaints important for an event tomorrow?
Legal disputes and litigation can represent a significant risk to incoming investors and is therefore an important aspect of any thorough due diligence exercise. Investors are particularly interested in addressing 3 key risks:
- An existing dispute creates a large future financial cost to the business
- Historic disputes indicate a pattern that future disputes and associated costs are likely
- Management is not very adept at managing these disputes which could create risk to the business in the future
Having the status of legal disputes well documented provides the following benefits in a deal situation:
- Reduces the cost to bidders of locating and distilling the information about current and historic legal disputes
- Increases investor comfort level given the information is provided in a transparent way
- Demonstrates clearly to bidders that these issues are being well managed by the management team
Pros of addressing Litigation, Disputes, & Complaints
- Provides a central place for legal dispute information
- Reduces impact of staff departures
- Facilitates summaries for senior staff
- Easier briefing of external lawyers
Cons of not addressing this topic
- Greater cost to the business in getting up to speed on a dispute if key staff leave
- An increase in the frequency of a particular type of dispute may not be reported to senior management in a timely manner