How Fears Create Blind Spots and Undercut Effective Risk Management

Your door suddenly creaks open. A head pops into the fading afternoon shadows.

“Have you got a minute?”

Those are never good words late in the day, especially on Friday. You silently scream “no, not again,” but, something different comes out of your mouth.

“Sure, whaddya got?” You brace yourself.

“We have a problem.” You knew that already. What you want to know is: how bad is it?

“It’s ABC Company. We gave them access to our data and word on the street is they’ve shared it with our competitor, XYZ. They now launched a joint venture and will have at least a six month head start on production which means they could snap up market share before our new product gets out the door. What do you want to do?”

The ABC collaboration was supposed to launch the next generation of your best-selling product line. It was the corner stone of your 5 year plan. This news is a disaster. You secretly want to kill someone. But, you’re determined to remain calm. You take a deep breath.

“I want more information. For starters, I want to look at our contract with ABC.” You get a quizzical look back.

“Contract?”

“We have a written agreement right? A confidentiality agreement? Something?” You ask.

“Oh sure, we have a deal. But, it’s a gentleman’s agreement. You know. A handshake.”

Your stomach sinks to your ankles and your blood pressure spikes. You’re watching your business blow up in slow motion.

“Why don’t we have a written contract? What happened?”

“Well, 'common. You know we’ve been doing business with ABC for years. I didn’t want them to think we don’t trust them. Besides, you wanted to move quickly. The sooner we started talking the faster we could move forward. If we got lawyers involved they’d slow things down, if not shoot it down altogether. You know how they are. It’s their job to blow things out of proportion.”

“Looks like we need to talk to the lawyers now anyway.” You reach for the phone to call them. Fade to black.

WHAT SHOULD HAPPEN

Classic economics teaches us that organizations make rational decisions, ones that maximizes utility (that’s economics speak for what the rest of call maximizing value). Decisions that fail to maximize utility represent lost opportunity and opportunity cost, a cost that in accounting speak is both variable and avoidable. Economists further reason that if maximizing value is rational, then decisions generating high opportunity cost are irrational – at least that’s what economic theory teaches.

WHAT REALLY HAPPENS

Humans are often flawed decision makers. Our fears create blind spots.

The fear of rejection and loss of autonomy, the ability to do what you want whenever you want, is what often keeps executives, managers, and entrepreneurs from seeking timely legal advice. While some lawyers certainly do fit the Dr. No description, there are plenty of others who welcome the opportunity to collaborate and develop solutions to help you achieve your business goals more effectively. It pays to find a lawyer that will be an ethical gateway instead of a devilish gatekeeper. It will save you time and money in the long run.

The wheeler-dealer syndrome and fear of humiliation, or looking stupid, is another popular driver of unnecessary business risk. It motivates people to cut corners. Ironically, when the gamble doesn’t pay off, the sauce hitting the fan and splattering back in your face is more awkward and embarrassing than doing the right thing in the first place.

SOLUTION

Eliminating blind spots is the key to better decision making and effective risk management. It’s a leadership development issue more than a “system” issue because the best systems in the world are useless if decision-makers make excuses to ignore them.

Build bench strength and start the conversation by determining whether you or your team’s leadership style is accidently encouraging more legal liability than you want in your organization.

One easy way to do that is by taking the Legal Literacy Assessment. It’s free. It’s easy. It’s fast and you’ll get feedback to increase your self-knowledge regarding your approach to legal risk and what it means for your business.

It's my gift to you to start getting more control of unwanted risk.

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Other Resources:

Common Risk Management Traps that Hurt Shareholder Value

3 Unpopular Truths About Business Lawsuits Your Lawyer Probably Won't Tell You About

The Seduction of Situational Ethics

Why Business Struggle to Manage Legal Risk

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Hanna Hasl-Kelchner teaches responsible business leaders how to get more control over legal risk in their business so they can stay out of court and build more shareholder value instead by empowering them with the legal literacy advantage.

You benefit from her know-how as a no nonsense lawyer and ivy league trained business expert, as well as her experience as an award-winning consultant, speaker, and author who makes legal literacy approachable and accessible.

• Legal literacy helps your identify, manage, and control problems before they spiral out of control by empowering smarter, more informed decision making.
• Better decisions make your business policies and best practices more robust, strengthening the foundation of your business for sustainable business growth.
• Legal literacy also lets you unlock legal rights you’re entitled to, but may not know about, so you can leverage the law to build more business wealth.

Hanna has been named a Dun and Bradstreet Twitter #BizInfluencer, is a three time winner of the ACQ Global Award in the category of US - Leadership Development Advisory of the Year, and has been quoted in the media and appeared on radio and TV, including ABC, NBC, CBS, and FOX affiliates nationwide.

Her ground-breaking book, "The Business Guide to Legal Literacy," shows organizations how to extract the highest value of both disciplines to ignite better decision making and achieve more business success. It's been cited by Wikipedia to highlight the value of legal literacy in business.

Discover how to make her strategies your own through her on-line learning programs at the Legal Leverage? Academy, through private consultations, inviting her to speak at your business function, and tuning in to Business Confidential, every Thursday at 1 pm.

Contact Hanna and discover a new way to think about controlling risk in your business.