In today's increasingly complex business environment, legal risk management has become an integral part of any organization's overall risk management. Organizations need to ensure that their legal and compliance functions are aligned with their business strategy, goals, and objectives. This is where the concept of a legal scorecard comes in.
A legal scorecard is a tool that helps organizations measure, monitor, and manage their legal and compliance performance. It provides a framework for assessing the effectiveness of the legal function in supporting the organization's business objectives and mitigating legal and compliance risks.
But how do you go about balancing your legal scorecard? In this two-part article series, we will explore some key steps you can take to ensure that your legal scorecard is balanced and aligned with your organization's goals and objectives.
1. Define Your Objectives and Metrics
The first step in balancing your legal scorecard is to define your objectives and metrics. This means identifying what you want to achieve with your legal scorecard and how you will measure your progress towards those objectives.
Your objectives should be aligned with your organization's overall goals and strategic objectives. For example, if your organization's goal is to increase revenue, your legal scorecard objectives could include reducing legal costs or increasing the speed of contract negotiations.
Once you have identified your objectives, you need to define the metrics you will use to measure your progress towards those objectives. Your metrics should be specific, measurable, achievable, relevant, and time-bound (SMART). For example, if your objective is to reduce legal costs, your metric could be the percentage decrease in legal spending in a given period.
2. Align Your Legal Scorecard with Your Organization's Goals and Objectives
The next step in balancing your legal scorecard is to ensure that it is aligned with your organization's goals and objectives. This means identifying the legal risks that are most relevant to your organization and ensuring that your legal scorecard focuses on those risks.
To achieve this alignment, you need to work closely with other departments, such as finance, operations, and compliance, to understand their objectives and how they relate to legal risks. You also need to identify the key stakeholders within your organization who will be impacted by legal risks and ensure that your legal scorecard takes their needs into account.
For example, if your organization operates in a highly regulated industry, such as healthcare or financial services, you need to ensure that your legal scorecard focuses on regulatory compliance issues. Similarly, if your organization is expanding into new markets, your legal scorecard should focus on the legal risks associated with entering those markets.
3. Develop a Balanced Set of Metrics
The third step in balancing your legal scorecard is to develop a balanced set of metrics. This means ensuring that your legal scorecard measures both the performance of your legal function and the impact of legal risks on your organization.
Your legal scorecard should include metrics that measure the effectiveness of your legal function in supporting the organization's goals and objectives, such as the percentage of legal disputes resolved without litigation or the number of contracts negotiated within a specified time frame. It should also include metrics that measure the impact of legal risks on the organization, such as the number of regulatory fines or the amount of legal settlements paid out in a given period.
To ensure a balanced set of metrics, you need to take a comprehensive view of legal risk management and consider both proactive and reactive measures. Proactive measures may include training programs or compliance audits, while reactive measures may include litigation management or crisis response.
Final Thoughts
Balancing your legal scorecard is a critical step in ensuring that your organization's legal and compliance functions are aligned with its overall goals and objectives. By defining your objectives and metrics, aligning your legal scorecard with your organization's goals, and developing a balanced set of metrics, you can effectively manage legal risks and support your organization's growth and success.
In part two of this article series, we will explore some additional steps you can take to balance your legal scorecard, including leveraging technology and engaging your stakeholders.