Litigation Risk Assessment (Corporations & Individuals)
With so many businesses forced to close its doors, or have it shut for them, due to an inability to pay its debts, the need for Litigation Risk Assessments have become a necessity. The same applies to the vast amount of sequestrations connected to forced closure of businesses. Litigation Risk Assessments entails examining businesses from top to bottom and tabulating the actual and potential risks the business and those running it faces which may lead to litigation.
Once we have analysed your litigation risk, we provided a report with a workable and realistic solutions to risks alleviation, reduction and management. The assessment is business and / or client specific, and therefore the tools used and solutions provided would be different for every business and individual.
Let us provide an example of how a litigation risk assessment could have limited the risk of the demise of your and your business, there are however many more: Lets say you have a printing business which has R 10 000 - 00 working capital and an overdraft of R 20 000 - 00. You have one supplier (for all your paper, glue ink etc.) who only provides you with R 2 000 - 00 credit. For this credit, like all the other credit of the business, your stood personal surety. Your have two main clients, client A and client B from whom you receive 80% of your business from.
On a cool Monday morning, your business receives a huge order from a first time customer, called client C. The capital required for the order amounts R 50 000 - 00. Your current working capital and overdraft will only provide you with R 30 000 - 00. You therefore require another R 20 000 - 00. You don't want to ask the new client for a deposit to avoid sounding small, nor do you do a credit check on them. You therefore decided to provide an unknown businesses with R 50 000 - 00 credit for which you would personally be liable for. You go to the bank. The banks says they’ll give you the R 20 000 - 00 loan (of course with an unrealistic interests rate) but want you to stand personal surely for that amount. You again don't want to sound unconfident about your business capabilities and sign surety using your house as collateral. You get the money and start working on the new order. While working on the order, you cannot give that personalised attention to client A and they decide to close their account. Now you have completed your work for customer C and delivered the product and submit your invoice. Months go by and he does not pay. You cannot pay the loan and the bank them issues summons against your business and you personally. You are then without a house. Due to having lost client A (40% of you revenue), you are forced to pay your staff and the running expenses from the working capital and bank overdraft. Soon your cannot pay any of your staff and running expenses. You service your existing clients from the credit provided by your supplier which is very limited and you have to turn away a lot of reasonable size work due to a lack of cash flow. You send an invoice to client B and he holds payment back claiming bad product delivery as an excuse and which caused him loss of clients. Your supplier is demanding payment for his outstanding invoice and seize doing any work for you. You are left without a supplier and cannot service any clients. After a month your supplier sues you for his outstanding invoice. The next week, your landlord, telephone provider, and other service providers issues summons against your business and you due to you having signed surely with them. The next week the bank recalls its overdraft and wants settlement of the account. You cannot adhere to their request and they issues summons against your business and you due to you having stood surety for the overdraft. Now all your staff have left are took your to the CCMA. That same week, client B sues you for the loss of business he suffered due to the bad product you provided him with. The next week your business gets served with papers for liquidation and the following week you get served with an application for sequestration. Then you give us a call, but before we do any work, we do a credit check and find out all of the above.
The example might sound extreme, but is a potential reality, and could have been avoided if a proper Litigation Risk Assessment have been made on you and your business and the outcome followed through. You and your business would have been advised of your risks and advised how to minimize them.
Feel free to contact us to discuss this product further and how we can use it for you and your business.