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Mr.

Introduction:

Over the past few decades, the world witnessed a wide array of liability suits against corporations from customers, suppliers, employees, shareholders, third parties, and the community at large. These occurrences were also in accordance with various reforms in the law that governs the responsibilities of corporations towards their stakeholders. Due to the complex nature of the law and the implications it has on the firm’s total risk, it imperative to highlight the techniques available for managing corporate liability exposure.

A Component of Pure Risk

Liability exposure is a function of pure risk. It is a risk borne by the existence or nature of a firm, and is associated with possible reductions in business value from various sources, some of which are; damage to the firm’s assets, legal liability, worker injury, employee benefits, etc... In that sense, liability exposure could be defined as the degree to which a business entity is open to the legal elements of pure risk.

Forms of Corporate Legal Liability:

When identifying a firm’s liability exposure, we look at the major forms of legal liability that can arise from:

- Employment practices and employer responsibility for paying compensation benefits to injured workers.
- Products sold to consumers.
- Environmental damages.
- Actions of corporate officers and directors.

Before delving into the details of each form of corporate liability, it is important to highlight the laws which govern the way legal liability risk is assigned.

The Legal Liability System:

To start with, there are two main sources of law, known as common law and statutory law. The former refers to laws that haven’t been established by a legislative body, but have developed over time as a result of court rulings. On the other hand, the latter refers to laws that have been established and passed on by a government body. Law can also be categorized as either criminal or civil (Harrington & Niehaus,...