Fifty-seven percent of business leaders see legal disputes as a price worth paying to get ahead of the competition, according to new research from leading international law firm, Allen & Overy. Yet, just one in ten (11%) respondents said their organisations have implemented clear processes to identify and mitigate against potential future disputes. This exposes a clear gap between risk appetite and the preparedness of businesses to face future disputes.
Allen & Overy’s global study into the readiness of businesses to face the challenges that lie ahead surveyed 750 business leaders from around the globe. Although 77% agreed that identifying disputes risks over the next five plus years will enable greater value creation, more than half (52%) said cost was a barrier to investing in horizon scanning. Failure to close this gap could limit businesses’ future growth potential.
“In the coming years businesses will be exposed to a far broader range of disputes than ever before,” said Andrew Denny, Partner at Allen & Overy. “However, future disputes risks are currently a blind spot for most organisations when it comes to strategic business planning and risk management. Horizon scanning to identify future legal pitfalls enables businesses to mitigate or even avoid costly disputes in five- or ten-years’ time.”
Business leaders anticipate that their organisations’ activities relating to climate change, natural disasters, public health, environmental harm and Artificial Intelligence (AI) are the areas where future legal disputes are most likely to arise. Failing to anticipate the wider range of potential disputes that these areas present compared to those arising from ordinary commercial activity has additional potential to derail business operations.
Top five factors/events leading to future disputes risks in 5-10 years’ time
- Climate change (58%)
- Natural disasters (54%)
- Public health (53%)
- Environmental harm (52%)
- Artificial Intelligence (50%)
The ability for a business to avoid legal disputes is frequently measured by the strength of its relationships. Respondents report good relationships with regulators and shareholders but they are less confident in their relationships with certain other groups, notably non-governmental organisations (NGOs). Only 8% of business leaders said they have confidence in their ability to resolve potential disputes with NGOs; organisations that have a louder voice and a growing appetite to litigate to achieve their aims in many of these areas.
Future disputes: the dynamic of risk and growth
Ninety-eight percent of business leaders expect technology and data to pose disputes risks to their organisations in the next five to ten years. More than 80% think they pose the greatest legal risk. Technologies such as AI and Virtual Reality have the scope to disrupt industries and do not fit easily into existing legal regimes. As illustrated on the Allen & Overy Disputes Risk Tide, the risks of disputes are often relatively low in the early stages of development of a new area of business, but this can change rapidly as innovation accelerates. This causes legal uncertainty and an increase of future disputes risks.Click below to share this article