Legal Analysis of Risks of Business Projects
Legal analysis of possible legal risks in the implementation of a business project
Business activity is a significant component of the economy of almost any country, because not all areas can be provided by the state. At the same time, as a rule, business begins with the preparation of a project, some kind of action plan to achieve some entrepreneurial goal. Assessing the possible risks that may arise during the implementation of a business project, relying only on intuition or life experience, is not only dangerous, but often financially unprofitable. At the same time, when developing a business project, it is important to take into account not only the entrepreneurial and financial components of the future action plan, but also assess the possible risks that may arise during the implementation of such a project, including legal ones. The legal analysis of the risks of a business project should be comprehensive, which will allow taking into account not only the general requirements of the current legislation, but also industry-specific ones.
Legal or legal risks are considered to be:
- Violation or non-compliance with existing legal norms, including by-laws.
- Tax risks.
- Criminal law risks.
- Changes in legislation that fundamentally change the course of action for a particular industry or the behavior of entrepreneurs in general.
- Risks of corporate takeover of business.
- Inconsistency of legislation.
- Unformed legal relationship between business partners.
- The presence of the organization and its branches under the jurisdiction of different states, etc.
It is quite simple for a qualified specialist to assess the legal risk “Violation or non-compliance with the existing rules of law”, in this he is helped by the accumulated experience and knowledge of the current rules of law. At the same time, the assessment of the risk “Change in legislation” is ambiguous. Often, it will not be difficult for a practicing lawyer to trace and predict a possible change in legislation, however, there are sharp changes in the rules of law that are quite difficult to predict. As a rule, a rapid change in legislation is not related to business processes and depends on the economic, political situation in the country and the world.
The inconsistency of legislation is also considered a legal risk, which is quite difficult to assess, especially for a novice entrepreneur. Legislative inconsistency can occur for various reasons, such as a newly introduced rule of law and its inconsistency with other already existing laws and by-laws. Also, inconsistency may arise due to the adoption of legal norms by state structures and the lack of coordination of the adopted documents among themselves. At the same time, it is important to note that there are situations when the requirements of one regulatory body may conflict with the requirements of another state body, which can also adversely affect entrepreneurial activity, it is important to know and take this into account when forming a business project.
The absence of formalized legal relations between business partners can adversely affect their further interaction, and in unfavorable situations, completely destroy such a business alliance. In this regard, at the start of a business project, it is important to regulate the relationship between business partners and reflect them, for example, in a mutual cooperation agreement.
The presence of an organization and its branches under the jurisdiction of different states also refers to legal risks that need to be assessed. This is due to the fact that the rules of law in force in the territory of one state may not coincide with the rules of law of the state where the representative office of the company will be located. It is also important to understand that the law may differ for residents and non-residents and that a special legal regime may apply to non-residents.
Regardless of the type of possible legal risk, it is important to conduct its legal analysis at the stage of forming a business project, however, taking into account the dynamically changing legislation, it is also important to analyze the occurrence of such legal risks in an already existing and ongoing business project.
When analyzing legal risks, the entrepreneur receives a qualified opinion from experienced lawyers who will warn against possible violations of the law and allow the entrepreneur to manage the possible risks himself. As a rule, legal risk management can be divided into several main stages:
- Identification of legal risks of the business project.
- Formation of a decision to reduce the possible impact on business activities.
- Implementation of the adopted decision.
- Caution that a similar legal risk may arise in the future.
To assess the legal risk and analyze it, qualified lawyers conduct, in fact, research work that reveals the possibility of a legal risk, determines the consequences of such a risk, and also provides options for the entrepreneur to avoid the occurrence of legal risk or options for action, if the legal risk has already occurred.
At the same time, it is important to entrust the analysis of legal risks to an experienced and qualified lawyer; all further business activities may depend on this. Knowing about the possibility of legal risk and the rules for managing it allows an entrepreneur to minimize the possible impact of legal risks on his business project, and also reduces possible financial costs.
- Advising a client on legal issues of entrepreneurial activity
- Legal analysis of business projects
- Assessment of possible risks in the implementation of a business project
- Legal advice for preventing the occurrence of legal risks at the start of a business project
- Preparation of a legal justification for the implementation of a business project