How and why should lawyers distinguish between legal risks and business risks?

One of the most important parts of a lawyer's job is helping clients distinguish between legal risks and business risks. Many lawyers fail to make this distinction, treating all risks as legal risks that require a legal response. This can lead to over-lawyering, unnecessary costs, and poor decision-making.

A legal risk is a risk that arises from the law—such as the risk of a contract being unenforceable, the risk of regulatory non-compliance, or the risk of liability for a breach of duty. Legal risks typically require a legal response, such as revising a contract, obtaining regulatory approval, or taking steps to mitigate liability.

A business risk, on the other hand, is a risk that arises from the commercial context—such as the risk of a competitor entering the market, the risk of a supplier failing to deliver, or the risk of a customer not paying. Business risks typically require a business response, such as developing a competitive strategy, diversifying suppliers, or improving credit management.

Lawyers who fail to distinguish between legal risks and business risks often provide advice that is overly cautious, overly complex, and not aligned with the client's commercial objectives. They may also miss opportunities to help clients manage risks in a more effective way.

At Triage Law, we help our clients distinguish between legal risks and business risks. We provide clear, actionable advice on legal risks and help clients develop strategies to manage business risks. Our goal is to help clients make better decisions, not to avoid all risks.