Why global legal risks have increased

Why global legal risks have increased

RISK CRITERIA

Risk criteria allow the organization to evaluate and compare risks. The cost of risk treatment is measured against the level of the risk with the risk criteria. Risk criteria impose consistency on how an organization identifies and measures each element of a risk. In the examples here, there are only three risk criteria:

1.    Likelihood is measured as a percentage probability,

2.    Consequence is exclusively a financial loss (not a profit), and

3.    Risk is the product of the two with no other considerations.

Reason for increase in risk

Over recent decades legal risks have intensified around the world. The following are the main reasons:

·         The volume of law is now out of control internationally and is unmanageable.

·         A large part of this increase of risk results from the intensification of regulatory regimes, notably in the West. These regulatory regimes, of which there are a great many, typically criminalise the ordinary law and are sometimes aggressive. In some cases, particularly large parts of financial regulation, their usefulness is questionable.

·         Almost all jurisdictions are now part of the world economy in the sense that they have businesses, banks and corporations which do business with other countries. Few countries are hermetically sealed off. Out of the just under 200 countries, there are about 320 jurisdictions and almost all of these now participate in world markets.

·         The law is much more volatile than it has ever been and changes rapidly, sometimes with no apparent reason, arbitrarily, just because somebody wants to fiddle with the law, or has a flash of anger.

·         In developed countries, domestic financial and corporate law is breaking up into tiers or layers internally, with different protections for different sectors of the population, usually politically driven.

·         There is great diversity around the world as to how the law is actually applied and the rule of law. For example the basic law in Congo-Kinshasa and Belgium derives from the same roots but the application is very different. One therefore has to cope with a double layer – the written law, or the law on the books, and then how it is applied.