Three Strategies To Help Businesses Minimize Litigation Risk

This morning on, Chris Werner talked about a question he is often asked by small and medium sized business clients, “how do I make sure my business doesn’t get sued?”

As Chris explained, the quick answer is that there is no way to guarantee that your business won’t get sued. If you are in business long enough, and if you are successful enough, there is a good chance that your business will eventually end up in litigation. While you can’t prevent litigation, there are ways to minimize your risks. Below are three strategies that businesses should employ to minimize litigation risk.

Use Written Contracts

One of the best ways to limit commercial litigation risks is by using written contracts. The idea behind a written contract is to clearly set out the obligations and responsibilities of all parties to the contract. Ideally, you will work with your lawyer to make sure all the important terms are included in the agreement. There should be input on both sides, and, when the contract is signed, everyone should be clear about what is going to happen.

A well drafted written contract can go a long way to preventing litigation by avoiding misunderstands. You will know exactly what you are supposed to do, when you are supposed to do it, and how much money will be exchanged. A good contract will also include a specific plan to address any disputes or breaches of the agreement. This means that even if something goes wrong, you will have a much better chance of limiting your litigation risk.

Address Employment Law Issues

Another source of litigation risk is employment issues. Your business should be working with your attorney to discuss, analyze, and address employment issues relating to your business. You should also be developing written policies for employees that cover all relevant employee issues. These policies should address both what is expected from the employees and what is expected from management/ownership with respect to dealing with employees. Although comprehensive employment policies may take some time to develop, and there will be legal fees, this investment will pay dividends by helping your business minimize its litigation risk.

Data Security

In today’s business world, it is essential that you address data security. Your business needs to understand the data is collects, evaluate any relevant law relating to that data (such as HIPAA), have a written plan for securing data, and must follow the plan. You need to think about both internal company data (such as trade secrets, customer lists, etc.) as well as external data your company collects (such as customer information, credit card information, medical information, etc.)

Data breaches and misuse of data are sources of a great deal of litigation. Businesses need to be proactive about their data. You need to understand what data you have and what data you collect. You also need to have appropriate policies for handling data and for dealing with any potential breach. This is not something you should avoid or attempt to do alone, at least if you want to minimize your litigation risk. Again, there will be an investment of time and money to audit your data and develop appropriate policies, but it is a good investment for your business.

Obviously, this is not a complete list of things you can do to minimize litigation risk, but it is a good starting point. Make sure you are working with a business lawyer to address your specific business needs, and list to Chris Werner on

Standard Disclaimer: Vidar provides posts in this blog as general information. This is not meant to be specific advice and your business should always talk directly with a lawyer about your individual business needs.