When a business goes through the unpleasant mess of litigation, it will cost them a great deal in legal fees to their lawyers as well as what they have to pay the person who sues them – always supposing they win. However there are other costs that are largely hidden and often cannot be recovered, let alone even worked out because of their very nature.
The cost to the reputation of the company can bring it to its knees because such things can drag on for years. During this time the media will make a big fuss and the public tend to think, Where there’s smoke, there’s fire. In other words, they convict the company in their minds and this usually translates into not dealing with them anymore.
The CEO and other management have to spend a great deal of time with their lawyers and external stakeholders – they may even bring in external risk and reputational management professionals with whom they will have to spend time. This means they are not focussed on managing their business to the extent that they should be. Under such stress, they may make poor business decision, or lose a client due to neglect. This too, has a great cost that can never be worked out.
So here are 5 ways a business can manage the cost of litigation
- Be conscious of the costs in time and resources that are spent on litigation related issues and try to minimise them.
- Make sure lawyers are aware of all the issues at stake from commercial drivers through to relational and reputational costs and risks. Litigation strategy should include giving special attention to time consuming tasks such as collating documents and dealing with the media or financiers.
- Management should consider other settlement options that can be done more quickly than court proceedings. Try to quantify the cost to your business and don’t let the lawyers’ opinions take over in a settlement discussion. Find out if the life or business of the person who is suing you is being disrupted in any way. If it is, this could become a bargaining tool in your quest for out of court settlement.
- Make sure that internal stakeholders are educated about the disruptions likely to the business before they happen. When people know what to expect the fallout is minimised.
- Realise that litigation can be a long drawn-out process with many twists and changes. Any plans should be reassessed regularly to ensure they are still the best way forward. If it is found that they are lacking, different plans should be instigated.
These days, the States and Federal Government both seek to reduce the costs of litigation by encouraging mediation and dispute resolution before judicial proceedings.