Safeguarding corporates: Mitigating risks of endless litigation through strategic measures

  • 26 Jun 2023
  • 6 Mins Read
  • 〜 by Brian Otieno

In a recent publication in the Financial Times, “The Money behind the Coming Wave of Climate Change Litigation”, there was a revelation that there are entities, particularly non-profit organisations, that are willing to go to great lengths and provide financial support for litigation against corporations, with the intention of sharing in the resulting proceeds. On the one hand, this arrangement may appear to be in the public interest. However, it raises questions on the fundamental purpose of non-profit organisations, as it seems counterintuitive for them to seek a share in the proceeds.

That notwithstanding, this revelation is a blessing in disguise and typically shows that there is more than meets the eye in suits involving corporations and multinational entities. Fundamentally, this exemplifies the need for increased vigilance by corporates not only to avert but also mitigate the unending risks that come with litigation.

The central role of the judicial system

From the very onset, the place and centrality of the judicial system in a democracy are both inexplicable and unfettered. Perhaps the underlying comfort in the mind of every citizen is that there is no aspect within our governance structures that is more vital to the stability and continuity of their peaceful lives than the judicial organ.

It remains, after all, the fundamental responsibility of the Judiciary to ensure that not only order is maintained but also that the daily struggles citizens are presented with, either over law, ideology, politics, or social values, are resolved in the most peaceful, sensible, and fair manner as would be practicably possible. Additionally, courts ensure that these issues do not overwhelm or undermine the democratic civic space in the country, which supports the continuing vibrancy of constructive debates in furtherance of our democratic traditions.

The liberty to sue and the possibility of abuse

Fundamental to note is that our judicial system does not initiate proceedings on its own motion. A claim is filed by parties who pursue either public or private interests. These parties could either be natural and juristic persons like companies, who seek the guidance of the court on various issues affecting or relating to them. Often, court pronouncements have far-reaching ramifications on the general society.

The expansion of room for litigation and the embrace of public interest litigation has made the liberty to sue even more susceptible to abuse. With that liberty, genuine concerns are now being subsumed by thinly veiled personal and frivolous claims. With the liberties, there also exists room for abuse and exploitation. Baron de Montesquieu, a French judge, philosopher, and a man of letters, in his piece “The Spirit of Laws, contended that “constant experience shows us that every man invested with power is apt to abuse it, and to carry his authority as far as it will go.”

Way forward

Corporate entities have been on the receiving end of this liberty. Persons backed by entities with expansive financial muscles are now upping their ante and going after corporations. Leading Kenyan corporations have had to bear the brunt of the risks that come with litigation. While there are litigation queries that have largely been precipitated by their own misgivings, there are some that reek of suspicion. For instance, Safaricom Plc has been sued by two individuals regarding a regulatory sandbox that was created by the Central Bank of Kenya to pioneer the mobile money platform, M-PESA.

Need for effective risk mitigation

For the reasons cited above, corporations need to be increasingly vigilant. To effectively achieve this, they need to:

(a)  Design and implement sound policies

Corporations need to have policies that guide their operations in areas of concern such as contract execution, employee performance, retention and termination, intellectual property, and regulatory compliance among others.

Importantly, these policies should be subject to periodic review to ensure they correspond with change and dynamism and make them responsive and effective over time.

(b)  Seek legal advisory and counsel

Legal advisory and counsel for corporations are key. From such counsel, they can identify potential issues that would result in litigation. This can be done with the internal attorneys working with qualified external attorneys, who have experience and expertise in relevant areas of law and general litigation. Possible areas for advisory include contracting processes, regulatory compliance, risk assessment and management, and dispute resolution methodologies.

(c)  Accurate, organised and efficient record keeping

Secure, accurate and efficient records help corporations mitigate litigation risks. Evidentiary documentation in court plays a key role in ensuring information around transactions is not lost and is securely stored to ensure their integrity and admissibility as evidence in court.

(d)  Employee training and education

Employees pose a great risk to the entities they work in. Their actions and decisions can potentially expose the business to legal liability. Consequently, training and education tailored around issues such as contractual obligations, employment laws, intellectual property rights, and data privacy, among others is key for employees. These sessions come in handy to guide risk identification, reporting mechanisms, and best practices to prevent litigation.

(e)  Continuous monitoring of potential and existing legal issues

Being proactive with legal risks is fundamental. Proactivity helps to identify and address potential legal issues before they escalate into litigation. Monitoring can include conducting regular audits, risk assessments, and compliance reviews to identify any areas of concern. For existing matters, legal issues that may arise during proceedings can be handled to prevent them from snowballing into more significant problems, e.g., if an entity receives a demand letter, they should address it promptly and gauge possible ways of responding to the issues in question.

(f)   Explore Alternative Dispute Resolution (ADR) methods

As opposed to the risks and costs that come with litigation, Alternative Dispute Resolution (ADR) methods, such as mediation or arbitration, are effective in the sense that they are timely, less costly and do not drag.

(g)  Insurance package for risks

Corporations should periodically review their businesses and highlight areas that may cause potential legal liabilities. Once this review is done, they can then onboard and enrol insurance packages to cover and protect against legal liabilities. These could include general liability insurance, professional liability insurance, directors, and officers (D&O) liability insurance, product liability insurance, and other specialised coverages depending on the nature of the business.

(h)  Strong legal team

A strong legal team is critical to handling litigation risks for a corporate. A legal team could either be in-house counsel, outside counsel, or a combination of both, and this varies on the size of an entity.

Such a team comes in handy in identifying risks from an early stage, contractual processes, regulatory compliance advisory and addressing potential legal issues. Fundamentally, creating and building a strong working relationship, and having clear lines of communication with this team ensures the business is well-equipped to manage litigation risk effectively.

(i) Embrace early case assessment and strategic planning

Early case assessment and strategic planning are potent tools for corporations in managing litigation risks. It ensures that a corporate entity can carefully evaluate the facts and circumstances around an issue, identify potential risks and liabilities, and develop a strategic plan to address the situation proactively.

Early case assessment involves gathering information around a particular issue, thoroughly reviewing the documents and consulting counsel, to have a holistic appreciation of the issues in question.  This assessment helps appreciate the strengths and weaknesses of a matter and guides which processes should be taken in response, considering the risks and potential costs.

Regarding the strategic plan, corporates should design a playbook that informs their response to litigation risks. This playbook should outline the possible response scenarios, reputational risks, impact on customers and key stakeholders, and how to handle them and ensure all these responses are aligned with the business’s overall goals and objectives.

(j) Keeping up to date with legal and regulatory changes

Laws and regulations are constantly evolving, and corporations need to be alert and informed of these changes. Staying informed of legal and regulatory changes ensures the entity’s internal policies and structures are compliant even with changes.

Where need be, it is essential to seek legal counsel on these changes and ensure they are operating within the prevailing legal conditions. As is aptly said, ignorance of the law is not a valid defence in litigation, and businesses need to take proactive steps to stay informed and comply with all applicable laws and regulations.


The burden litigation imposes on corporations is massive. Litigation itself is a costly process that consumes a lot of time. When combined the impact it has on an entity’s financial health, reputation, and entire operations can be significant. Consequently, it remains crucial for corporations to be proactive enough as to how they manage and respond to the risk of litigation, particularly now that financial conglomerates oil court matters under the guise of non-profit organisations. The steps outlined above are basics, but corporations need to embody an integrated and proactive approach in order to navigate the unending risks that come with litigation.