In my experience advising manufacturers under investigation, one lesson stands out: legal resilience isn’t built in the middle of a crisis: it’s embedded in the way a business operates every day.
As we have explored in this series, manufacturers face a unique set of risks: their products can be part of complex supply chains which they do not know or understand, sometimes being used alongside other products in a way that can introduce unforeseen risks. Further, they often – increasingly – face regulatory scrutiny. They face high-stakes safety obligations. Responding to incidents is critical. But, as we have seen elsewhere in this series of articles, the most successful businesses take a proactive approach: they embed legal risk management into their strategy from the outset.
Why does Legal Resillience Matter?
First, what is legal resilience and what do we mean by it? Legal resilience means having systems, culture, and governance structures that anticipate, eliminate, or mitigate risk before it escalates. For manufacturers, this means not just about compliance, but factors in:
- Protecting reputation in markets which are often increasingly competitive.
- Reducing financial exposure from fines, claims, and product recalls. No-one wants the hassle of product recalls, dealing with claims, or the cost of fines, all factors which detract from a company’s ability to focus on its future growth and success.
- Meeting ESG expectations which increasingly include safety and ethical standards.
- Building trust with regulators, customers, and (if relevant) investors. Customers or potential customers can be deterred by bad publicity. Investors do not like the threat of expensive litigation. At best, it is a distraction to business as usual and a heavy management and financial cost. Further, actual or potential regulatory or criminal charges can complicate or cause problems with obtaining funding.
What are the Key Components of a Legally Resillient Business?
In our view, a legally resilient business has the following key characteristics:
- Board-Level Oversight
- Legal Health Checks
- Supply Chain Due Diligence
- Culture and Training
- Data and Documentation
Board-Level Oversight
The best companies have a Board which prioritises safely, and legal and regulatory risk. They do not just pay lip service to these values, but place them front and centre in their business. In particular, they:
- Make legal and regulatory risk a standing agenda item at board meetings;
- Appoint director-level champions for compliance and safety; and
- Ensure clear accountability for risk management across leadership.
Legal Health Checks
It can be tempting when all is going well, to skimp on the legal or compliance departments, or to focus on other more inviting areas, but the best companies anticipate and head off issues in the following ways:
- Conducting regular audits of health and safety systems, product safety processes, and contractual risk;
- Reviewing policies and procedures against current legislation and enforcement trends; and
- Testing crisis response plans through scenario exercises.
Supply Chain Due Dilligence
Likewise, forward-thinking manufacturers, will:
- Implement robust supplier vetting for safety and compliance standards, trying to antipate and head off any potential risks in their supply chain. Do you know where components come from? Are you sure that they are ethically sourced?
- Include clear contractual obligations for product safety and reporting.
- Monitor third-party performance through audits and certifications.
Culture and Training
Throughout this series, we have seen how central the issue of culture and training can be to manufacturing businesses, in both preventing and managing risks. The best companies:
- Embed a safety-first culture that encourages reporting and accountability, that offers systems for whistleblowing or reporting, and which has clear champions for safety and accountability, prioritising openness and systems for continuous improvement.
- Provide regular, and tailored training for directors and senior managers on legal duties.
- Ensure operational teams understand compliance requirements and escalation pathways. Everyone must have a role to play in ensuring a safe, compliant organisation, and ensuring products are safe for customers.
Data and Documentation
Likewise, it is super important to keep and maintain excellent records in case of any issues. Companies should:
- Maintain clear and accurate records of risk assessments, audits, and corrective actions.
- Use digital tools for compliance tracking and reporting.
- Ensure traceability for products to enable swift recalls if needed. While traceability is standard for certain areas of manufacturing, it can be weaker in certain areas. How easy is it, for example, to track whether a particular component was used in a large-scale construction project.
Turning Compliance into Competitive Advantage
Focusing on legal resilience may sound dull and deeply unsexy. The danger is that it is de-prioritised when all is going well. This can be a mistake: While focusing on this helps manufactures avoid legal issues, it is not just about avoiding penalties: it can be a real differentiator, a brilliant tool for enabling growth. Manufacturers who demonstrate strong governance and safety standards:
- Win more contracts, especially in regulated sectors;
- Attract investment from ESG-conscious stakeholders; and
- Build long-term brand trust with customers and partners.
Conclusions
Legal resilience is not the most exciting of topics. And yes, it is a long-term investment. However, it is an investment that can yield dividends in stability, reputation, and growth. For manufacturers, embedding compliance and governance into the DNA of the business is not optional: it’s essential.
Seeking sensible, trusted advice is key to minimising the impact of any crisis. Involving the right legal professionals at an early point can provide clarity and reassurance, enabling you to explore avenues to early resolution or to minimise the impact of any crisis. Manufacturers who prepare in advance, respond decisively, and act with integrity are best positioned to manage legal risk and emerge stronger.
Please get in touch with Roxanne Selby for more information on how to avoid and manage crises and litigation and protect your business.
Author
Roxanne specialises in resolving commercial disputes, providing straightforward, strategic legal advice to help clients navigate risks, including corporate liability, and find solutions to the challenges of running a business.