Background
In 2021, a multinational corporation discovered a costly flaw in its contracting process when a vendor dispute escalated into litigation. The problem? A critical indemnity clause had been removed during negotiations and was never flagged by legal before execution. The clause sat buried in a redlined version that bypassed review due to a rushed approval process. The resulting exposure cost the company over $3 million in settlement fees and forced a full overhaul of its risk protocols.
This scenario underscores a broader issue faced by many legal departments today. As the complexity of business operations increases, so too does the range and severity of legal risks—contractual, regulatory, reputational, cybersecurity, and more. Yet risk management in many legal functions remains reactive, ad hoc, or overly siloed.
Risk management within legal operations is viewed as a dynamic and integrated function—one that must move in lockstep with business goals and operational change. This report outlines the most common pitfalls that weaken legal risk posture, followed by best-in-class strategies to build resilience and strategic value.
Pain Points Frequently Seen
1 - Risk Management Treated as a Standalone Legal Exercise
The challenge: Legal departments are often expected to "own" risk while being excluded from upstream decisions or operational planning. Risk conversations happen after key deals, partnerships, or launches are already underway.
Why this is a problem: Legal becomes the cleanup crew instead of a strategic partner. Without early involvement, counsel may be left mitigating risks that could have been prevented altogether.
The business impact: Decisions made in silos lead to exposure in areas like data privacy, third-party contracts, or noncompliant business practices. According to a 2023 ACC benchmarking report, 52 percent of in-house teams said legal was not brought in early enough to influence high-risk decisions (ACC 2023).
2 - Lack of Centralized Risk Visibility Across Systems
The challenge: Risk-related information is often spread across spreadsheets, inboxes, and departments. Contract terms, litigation data, compliance reports, and vendor risks are not linked.
Why this is a problem: Without a unified view, legal teams struggle to prioritize, assess exposure, or allocate resources effectively. Risks go undetected or receive disproportionate attention.
The business impact: Missed renewal deadlines, audit gaps, or unmonitored litigation matters can snowball. Gartner notes that organizations lacking integrated risk data are 40 percent more likely to experience costly compliance failures (Gartner, 2022).
3 - Reactive Over Proactive Risk Management
The challenge: Risk is assessed after incidents occur, not before. Teams focus on firefighting rather than forward planning.
Why this is a problem: Organizations are left vulnerable to repeating mistakes or failing to prepare for emerging threats such as AI ethics, ESG regulations, or supply chain volatility.
The business impact: Legal functions remain tactical rather than strategic. A BCG and WEF report found that companies with proactive risk programs outperform peers by 20 percent in crisis recovery time (World Economic Forum, 2021).
