During the last few years, most international companies willingly took unnecessary financial risks, hoping that their risk-taking would pay dividends. When companies fail, they retain lawyers to defend themselves in litigation, arbitration, or otherwise.

To avoid such an outcome, companies and their lawyers must assess how to avoid financial risk, and lawyers should no longer focus on how to defend the financial risk-taking of the companies they represent.

“Instead, lawyers should focus on how to help companies avoid financial risk in the first place by assessing the strategic objectives of the companies they represent and understand the associated risk,” said Alnowaiser. “Lawyers no longer should focus on problem solving, but instead should concentrate on problem avoidance.”

According to Alnowaiser, a lawyer’s role should not be limited to drafting agreements in the event of defaults, but should proactively assess the risks associated with the companies entering into risky transactions in the first place.

“It is time for lawyers to stop blindly accepting instructions from the companies they represent,” he added.

In order to help companies avoid financial risks, lawyers must represent them with a view to long-term goals and financial risk appetite of the companies.

The process of risk assessment and management requires lawyers to understand the legal uncertainties of the conduct of the companies they represent and to examine all the consequences of the conduct, said Alnowaiser.

There are lawyers who fail to protect the companies that they represent because they fear losing business by not expressing their true opinion. “Lawyers often fail in risk assessment and management because they are afraid to deliver their true opinion to the companies they represent,” Alnowaiser said. To avoid this problem, lawyers should provide companies with written risk assessments and supplement their written work product with oral and graphic presentations, he said.

Alnowaiser said adopting this new way of thinking and strong communications between the lawyers and their corporate clients will play an important role in reducing financial risks to the latter’s ultimate benefit.

(Dr. Khalid Alnowaiser is a Saudi lawyer and columnist based in Jeddah. He can be reached at [email protected])