One of the biggest challenges for companies isn’t just determining their return on investment (ROI) when they deploy a new technology system; it’s easy to run models and show the value, say, per terabyte of properly stored information. Today’s businesses are also about their brand and there’s a large value in that. So determining that value and quantifying financial ramifications in the event that reputation is compromised is imperative.
When legal matters arise, especially, companies need to know their risk—and they want it in quantifiable numbers the same way they would want to know how much money they were saving if they put in new servers.
Types of Litigation Matters that Create Brand and Cost Risks
Let’s take your average pharmaceutical company, for instance. Say they see about 50 litigation matters a year. There are three main types of corporate litigation matters:
- General employment cases: This comes up when an employee leaves the company, and the company wants to know how likely it is the person could share confidential data. It’s a low-level risk, because most ex-employees leave tight-lipped with regard to any proprietary information they would share. How could the company quantify monetarily what damage this person could do to their reputation?
- Patent cases: If a company produced a product or drug that turned out to be defective somehow, there could be a rather large risk to the company’s brand and image. How could the company quantify—in dollars—what the damage to their reputation would cost them?
- Big risk cases: These cases could be a mix between the two. Say a drug, in this case, got a lot of bad publicity or was defective somehow, there could be a rather large risk to the company’s brand and image. Again, how would the company know how big of a financial hit they would take?
The Need for Litigation Response Protocol
It’s difficult enough to conceptualize how to create a model to determine these factors. Companies have to consider how much it would cost to bring the case to trial, if applicable. On the other side, it could be far less negative and create less exposure to settle a case quickly. What would loss revenue amount to as a result of bad press?
More and more companies that used to have maybe one or two “big risk” litigation matters arise over a five-year span are now dealing with three or more that pop up during that same time span. This reinforces the need to have a means in place—otherwise known as “litigation response protocol”—to help companies precisely calculate their financial risks when their brand is on the line.
Organizing a basic litigation response protocol has been useful to create a plan of action between cross-functional employees, identify areas of high risk and deploy metrics for each litigation matter, but more research is needed to expand and improve upon the model and achieve a more accurate financial findings.
Right now, creating a framework and methodology that can pinpoint a company’s financial risk with regard to its brand and devaluation remains a hot issue, one the industry is only beginning to fully understand and respond to. But as more companies struggle with it, you can be sure solutions on are on the horizon.
What framework add-ons will create the solution to finally help companies measure financial risks related to litigation?