This paper examines the legal and tort risks faced by IBM Canada, one of the country's leading providers of IT services, products, and business consulting solutions. The paper identifies major tort risks — including employee injuries, product liability, data theft, and delivery delays — and explains how IBM Canada uses business contracts and internal policies to manage them. Applying a four-step legal risk management model, the paper evaluates critical risks such as cyber threats, patent and licensing issues, and criminal compliance exposure. It also discusses how IBM Canada can leverage the law as a proactive foundation for risk mitigation, improving policies and procedures to reduce overall legal liability over time.
Over the last several decades, a variety of businesses have faced an increasing amount of legal risk. Part of the reason for this is that the overall nature of the law has been constantly changing. The legal system is based on various interpretations and case precedent, which provides the framework for the most appropriate analysis in any given dispute. This has meant that many companies have become increasingly exposed to a variety of liabilities, as lawyers frequently use this mechanism to pursue corporations for possible violations — including those that may amount to nothing more than employee error or anomalies.
Despite this, many attorneys will seek some kind of legal remedy once an issue has been discovered. For many corporations, this can be particularly problematic, as they must spend additional resources dealing with these challenges. As a result, organizations must be able to determine the overall risks they face and develop strategies to address them.
IBM Canada is one of the main providers of sophisticated IT services, products, and business consulting solutions. The company is dedicated to helping its customers achieve success in their respective businesses by using the latest technology and solutions. The industries it serves include aerospace, defense, automotive, banking, chemicals, petroleum, construction, consumer products, paper, education, energy, financial markets, healthcare, and insurance, among others. IBM Canada is a unit that brings significant profits to its parent company. However, in its efforts to maintain that success, it has become exposed to a wide variety of business risks. Because of the size of the company and the broad range of transactions it is involved in, managers must be aware of these underlying risks and how they can be effectively mitigated.
This paper analyzes the measures IBM Canada takes to manage those risks, the importance of contracts to the organization, the application of the legal risk management model, and the identification of key legal issues affecting the company. Together, these elements provide insight into the overall liabilities the company faces.
A tort is any wrongdoing that involves a breach of a civil duty owed to an individual or group of individuals. During daily business operations, IBM Canada faces a wide variety of tort risks. The most notable include: injuries to employees, product liability risks, risks related to delays in the delivery of products or solutions, general liability risks, privacy or security breaches due to employee negligence, and tort risks arising from the failure of a sub-contractor.
An IBM Canada employee who suffers an injury due to the functioning or operations of the organization is entitled to receive monetary compensation from the company. Accidents occurring to employees on the premises during work or other operations — through any medium — represent a major tort risk for the company.
Any individual who receives an injury due to the functioning or operations of IBM Canada is also entitled to receive monetary compensation from the company. The term "injuries" here includes not only physical injuries but also emotional and economic injuries resulting from the conduct of the company or its employees. Matters of privacy, security, and property are also covered under the category of legal injuries. (Osmond, 2010)
IBM Canada offers a wide array of services, including IT, business consulting, application services, outsourcing, end-user services, integrated communications, maintenance, technical support, middleware, and security services. Similarly, the company offers a variety of products including software, storage systems, servers, personal computers, printing systems, networking equipment, semiconductors, accessories, and small and medium-sized business products. All of this creates potential tort liability, which may arise from defective hardware or software products, or from copyright infringement occurring due to employee negligence.
IBM Canada receives a large number of orders and projects from clients, including software products, systems delivery, and various other services. Per its agreements, the company must complete all orders within the time constraints specified in the contract. However, there is always a risk that an order will not be completed on time due to unforeseen events such as a fire on the premises, a natural disaster, or employee issues. All of these situations pose tort risks for the company.
Data theft is another major tort risk for IBM Canada. One example involves an incident in which a hard drive was stolen from a subsidiary. The drive contained personal information about a large number of people. Even though no actual theft of data was confirmed, the company was sued for negligence and breach of fiduciary responsibility, and also faced charges of privacy violations and breach of confidence. ("E-commerce risks becoming mainstream insurance concern," 2004)
All of these tort risks pose a major threat to IBM Canada's success. Any one of these events can result in financial penalties, significant losses, and the loss of customers or clients. To avoid this, IBM implements numerous measures to deal with tort risks effectively. These include detailed risk management planning, the implementation of specified rules and guidelines for employees, and the adoption of various internal policies. Quality testing, data security, validation procedures, and user authentication are some of the protocols followed to minimize data theft and product liability risks. Contingency plans are made in advance to address situations that may hinder the timely completion of projects or orders. Recovery plans are developed to deal with natural disasters, and the company purchases insurance policies to cover accidents and natural disasters.
Business contracts serve as an effective tool for managing a number of risks for IBM Canada. They have played a very significant role in the success of the business. The company uses formal written contracts when engaging in transactions with other organizations. These written contracts provide a legal document that describes the expectations of both the client and IBM Canada, and explains in detail how the parties can handle any unwanted situations arising during business operations. Because these contracts are legally enforceable in a court of law, they act as a tool IBM Canada can use to protect its assets and resources. They also help the company secure the desired level of services from its vendors and allow it to source resources or materials at fixed costs for a defined period of time. A major advantage of contracts for IBM Canada is the ability to limit any liability linked with contract risk within the document itself.
IBM Canada also enters into service contracts with other companies covering areas such as maintenance, technical support, and call center operations. These contracts ensure that IBM Canada receives quality services from its vendors at agreed costs for a defined time period. They also help IBM Canada maintain long-term relationships with customers, clients, and vendors, and give the company the ability to take legal action against vendors who fail to complete work in accordance with the agreement. (Osmond, 2010)
In today's business environment, it is increasingly common for legal cases to be filed against companies by employees, contractors, clients, and other parties. This is especially true in the IT sector, where companies face growing numbers of legal issues. It is therefore necessary for IBM Canada to properly evaluate and manage the risks that may pose threats to the organization.
"Four-step model applied to IBM Canada's legal risks"
"Using law proactively to build compliance standards"
IBM Canada is clearly facing a number of possible risks, including employee lawsuits, cyber issues, product liability, patent and licensing concerns, and criminal investigation and compliance exposure. These elements highlight the ongoing challenges the company confronts, as shifts in the economy, changes in the law, and new criminal techniques continue to increase the overall level of legal liability it faces.
You’re 49% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.