Risk sign-off is a formal process of approving and acknowledging the acceptance of identified risks within a project, process, contractual arrangement or proposed engagement with a counterparty. 

It involves obtaining consent from designated individuals or groups to accept the potential impact of certain risks and to proceed with planned risk management (RM) strategies. 

This process ensures that all stakeholders are aware of and agree to the risks and their mitigation strategies before proceeding.

The content of a risk sign-off will ultimately evolve to cover all legal & compliance risk issues over which the legal team has the ability to influence. However, we would expect a risk sign-off to include:

◼️ Risk Identification: identification and assessment of potential risks that could impact the project/business

◼️ Risk Assessment: evaluating the likelihood and potential impact of each risk arising/occurring

◼️ Risk Mitigation: where risks are identified, mitigation strategies are developed to address them

◼️ Mitigation Strategies: strategies to outline how risks will be managed or reduced to acceptable levels

◼️ Formal Approval: risk sign-off involves obtaining formal approval from key stakeholders

◼️ Sign-Off Process: approval indicates that stakeholders acknowledge the risks and agree mitigation plans

◼️ Documentation: risk sign-off process is typically documented, including signatures or formal approvals

◼️ Ownership: by signing off signing off on risks, stakeholders acknowledge their understanding of the risks and their potential impact on the project or business

◼️ Responsibility: the process assigns responsibility for managing each risk to specific individuals or teams

◼️ Ongoing Monitoring: risk sign-off is not a one-time event and should be monitored continuously

◼️ Continuous Review: risks and mitigation strategies should be periodically reviewed for effectiveness

◼️ Adjustments: if new risks emerge or if the situation changes, the risk sign-off may need to be updated

Risk sign-off is a critical part of the contract management lifecycle and represents a crucial aspect of risk management that involves formally approving and acknowledging risks and their mitigation plans. 

It helps ensure stakeholder alignment, formalizes accountability, provides documentation, and enhances overall risk management efforts.

A best practice risk sign-off should ensure the process is efficient, transparent and contributes to overall risk management strategy. Some best practice features of a risk sign-off include: 

◼️ Clear Risk Identification: identify potential risks, their likelihood, impact, and mitigation strategies

◼️ Detailed Risk Register: maintain a register of identified risks and mitigation strategies

◼️ Thorough Analysis: ensuring each risk is thoroughly analysed and understood before sign-off

◼️ Designated Signatories: clearly define who has the authority to sign off on risks

◼️ Assigned Responsibilities: identify who is responsible for managing each identified risk (and how)

◼️ Approval Process: implement a structured sign-off process that involves formal approval

◼️ Structured Approval: consider agile/efficient approval methods e.g. e-signatures 

◼️ Records: keep detailed records of the risk sign-off, including approvals and conditions 

◼️ Risk Mitigation Plans:  document clear risk mitigation plans to outline how risks are to be managed

◼️ Contingency Planning: include contingency plans for major risks that may need immediate action

◼️ Transparency: ensure that the risk sign-off process is transparent and all stakeholders are informed 

◼️ Regular Updates: provide regular updates on risk status and changes to the risk management plan

◼️ Ongoing Monitoring: continuously monitor identified risks and their mitigation strategies

◼️ Approved Adjustment: adjust plans as necessary based on new information or changes to risk 

◼️ Periodic Reviews: conduct periodic reviews of the risk sign-off process to ensure it remains effective 

◼️ Alignment: ensure that the risk sign-off process aligns with the organisation’s overall RM framework

◼️ Consistency: apply consistent standards and procedures across the organization for risk sign-off 

◼️ Audit Trail: auditable trail of the risk sign-off process, including approvals and risk management

◼️ Compliance Checks: Regular checks that the risk sign-off process complies with required standards

◼️ Training: training for individuals involved in the risk sign-off process 

◼️ Awareness Campaigns: increase awareness of the importance of risk management and risk sign-off 

◼️ Feedback Collection: implement mechanisms to collect feedback to identify areas for improvement.

◼️ Continuous Improvement: use feedback to continuously improve the risk sign-off process 

Risk sign-off delivers the following value to the Business: 

◼️ Stakeholder Agreement: risk sign-off ensures that all relevant stakeholders are aligned on the risks

◼️ RM Strategy: risk sign-off ensures that the business has a clear plan to mitigate/manage risks

◼️ Informed Decisions: provides a record that stakeholders are making informed decisions about risk 

◼️ Accountability: risk sign-off formalizes who is responsible for approving and managing specific risks

◼️ Compliance: helps ensure compliance with organizational policies and regulatory requirements 

◼️ Audit Trail: provides an audit trail that can be used for future reference, audits, or reviews 

◼️ Enhances RM: ensures that risks are systematically identified, assessed, and addressed

◼️ Communication: fosters better communication by defining RM roles and responsibilities

◼️ Strategic: a strategic approach to risk management is always better than an unplanned response

Risk sign-off is a crucial aspect of a well-functioning legal department supporting strategic decision-making, and ensuring compliance. Some examples of the value add for the Legal Department are:

◼️ Risk Management Framework: legal department’s involvement in risk sign-off contributes to the development and maintenance of a comprehensive risk management framework

◼️ Enhanced Decision-Making: provides a structured framework for evaluating/managing risks

◼️ Compliance Assurance: contributes to a more compliant culture via consistency of approach

◼️ Reduces Disputes: early identification of legal risks reduces likelihood of disputes

◼️ Standardization: maintain uniformity and ensures risk is identified/managed by the same criteria

◼️ Improve Instructions: delivers a clear and consistent instruction for the legal team to implement

◼️ Documentation: formal risk sign-off provides a clear record of the risk assessment process

◼️ Record-Keeping: provides auditable records of organisational risk identification and management

◼️ Strategic Advantage: enables strategic legal risk management (proactive -v- reactive)

◼️ Reduced Cost: helps prevent value seepage via consistent and qualified instructions

◼️ Less Distraction: reduced disputes mean less distractions and costly (time and money) litigation

Risk sign-off is a critical process and  is essential for:

◼️ All Businesses: every business faces legal risk and needs a risk sign-off to manage the same

◼️ Legal Operations Teams: effective risk management is a critical legal ops mandate 

◼️ In-House Counsels: the legal team need clear instructions around permissible risk scenarios

◼️ Compliance Officers: risk management and risk-sign off is a focal point for compliance teams

◼️ Senior Management: risk sign-off is how management identified and manages business risk

A legal team operating without a risk sign-off will face a wide range of inefficiencies including:

◼️ Inconsistency: inconsistent approach by the legal team to risk management/mitigation

◼️ Increased exposure: increased exposure to unmanaged/unidentified risk

◼️ Cost: the cost (time/money) associated with risks that “manifest” due to no/poor risk sign-off is high

◼️ Regulatory issues: regulatory non-compliances resulting in sanctions and other consequences

◼️ Reputational: reputational damage which is hard to manage and recover

◼️ Resourcing: an impaired ability to resource plan due unclear positions & associated work effort

◼️ Training & Development: an impaired ability to train in relation to required positions 

◼️ Prioritization: impaired resource prioritisation capabilities due to unclear risk priorities 

◼️ Morale: deteriorating team morale due to lack of positional clarity on risk management and mitigation

◼️ Bottlenecking: increased risks of workflow bottlenecking with senior team members 

◼️ Lack of clear instructions: the legal dept. has no clear mandate over permissible risk positions

◼️ Ownership: uncertainty over roles and responsibility for the management of specific risk scenarios

◼️ Housing: the risk sign-off should be housed electronically and subject to user access restrictions (no hard copies)

◼️ Legal Tech Configuration: the risk-sign off may be configured into legal tech applications (e.g. CLMS, MLM, A.I. Contract Review, Document Automation, etc)

◼️ Tech Policies: the risk sign-off should deal with information management, cyber security and Data protection, amongst other tech-enabled/related domains

◼️ Tech Strategy: the above-mentioned policies will impact, to varying degrees, the Business operational approach to ensure associated risks are monitored/maintained 

The GLS Knowledge Centre has a wealth of resources available for learning more about the importance of risk sign-off and how you can effectively implement one - check out a few on the right.

The GLS Legal Operations Centre contains everything you need to effectively implement your own risk sign-off process in a cost-effective and timely manner. Check out the resources linked on the right. 

Also, feel free to contact GLS to book a consult to discuss your Group Legal Policy needs right here.