Key risks that can affect your bottom line and how to overcome them
Navigating complex legal risks is a constant challenge for SMEs across all sectors.
One short oversight can result in a significant impact to your bottom line. Here, the Moore Blatch commercial team shares insights into key risks that businesses should look out for:
Many businesses think that simply keeping their customer data safe is enough to tick the box of the Data Protection Act. It is not. Just as a logistics company need to prove it has the systems, procedures and training in place to ensure it complies with health and safety policy, so too must all businesses when it comes to data protection.
The risk: Flouting data protection rules can result in costly court cases and even more costly fines if you are found guilty.
The solution: Ensure you tick all the regulatory boxes by having a risk assessment and put a policy in place that is regularly checked and updated. Set up regular monitoring, testing and training to prove that the regulations have been met.
Your staff are your greatest asset; they keep your business running and carry out the work that keeps your clients feeding your turnover.
The risk: It's easy to think that once a new employee has signed a contract your job is done but in reality the work is far from over. Businesses adapt and change and employee contracts need to be regularly reviewed to ensure they are in keeping with your growth ambitions.
If you are looking to sell your business the buyer will undertake due diligence to check staff are on secure contracts. If your paperwork is not in order they can use it as a bargaining tool to negotiate you down to a lower price.
The solution: Ensure your employment contracts are watertight from the outset by having a legal professional draft them for you. A good solicitor will ask you wider questions about your business so they can be reflected in the paperwork. In addition, set up regular reviews to make sure each contract reflects the current position of each member of staff. Many businesses find it useful to do this as part of their annual appraisals process.
Intellectual property (IP)
When companies commission software or systems from a third party they often assume that they are also buying the IP. This is generally not the case and one of the most common blunders that businesses make, which can be very expensive to rectify.
The risk: This problem will rear its head when you decide to take the software in-house, make changes to it or wish to sell the company including software assets and are faced with a costly legal battle with the developer to obtain the rights you thought you already had.
The solution: Overcome the risk by asking a legal advisor who specialises in IP to check as early as possible that the development agreement is clear that the IP rights are yours.
Length of contracts
Technology moves fast and services that you rely on today could become redundant almost overnight. It is important to have this front-of-mind when drawing up supply contracts.
The risk: You could be tied into lengthy contracts that don't provide the best service or value in years to come, with the result that you have to buy yourself out of a contract to switch providers.
The solution: Where possible, look to the future and try to identify the longevity of a product or service you are using before signing up to a lengthy agreement with a supplier. If necessary, have a legal specialist step in to negotiate a shorter term or break clause.