An earlier version of this article was published and distributed worldwide via the Internet by Mondaq® and by email from on December 6 and 7, 2006, respectively. It is copyright to Douglas C. Allen P.A.© 2006-2007, All Rights Reserved.
Published here May 2007.

Introduction | Scope of Work | Statement of Work, Resources and Control
Risk, Communications and Closure | Budget | Schedule | Communications | Summary

Risk, Communications and Closure

  • Mitigation of Risk. The SOW for the management of any legal matter should include a discussion of how potential risks will be addressed. A risk analysis for a legal matter may include analyzing the assumptions, contingencies, options or alternatives, and strategies and tactics underlying the scope of work.

    One useful tool for quantifying and evaluating these risks is the decision tree. The decision tree provides a way to quantitatively and iteratively assess how changes in the probabilities of different outcomes might impact the expected costs. This can be a powerful tool for assessing risk to the client and allowing the client to make informed decisions whether to pursue a legal matter, how long to pursue it, or for evaluating the timing and parameters of a potential settlement. An example of a simple decision tree created using TreeAge Software's Tree Pro® is shown in Figure 2 (See also Endnote 4 for further description).
  • Figure 2: Simple example of a legal issue decision tree
    Figure 2: Simple example of a legal issue decision tree[4]
  • Communications. A formal description of how information should flow within the legal team and between the legal team and the client is important for ensuring that effective and efficient communications occurs during the execution of the work. The frequency, format (e.g., email, telephone, memos, status meetings, etc.) and recipients of any project communications are just some of the parameters that need to be specified.

    Since a large portion of communications in today's business world is conducted electronically and since e-discovery has become such a hot topic, the communications section of any SOW may also need to include protocols or guidelines for addressing this potential issue.
  • Closure. The SOW should identify what event or endpoint (e.g., deliverables, signed agreements, etc.) will mark the end of the work assignment, what work may remain to be done, and any follow up work that is necessary or anticipated. Closure of a matter may also address what procedures need to be implemented for the disposition of client-sensitive or confidential information.

    Another closure-related item that can be addressed in the SOW is any end-of-matter assessment or case debriefing that may be required or desired. The feedback obtained from an assessment or de-briefing can be invaluable in determining how closely the completed project met its stated goals and objectives, whether the client's needs and expectations were met, and the "lessons learned" from the project that can be applied to future work assignments.
Statement of Work, Resources and Control  Statement of Work, Resources and Control

4. A basic decision tree, like the one shown in Figure 2, consists of a series of branches organized from left to right and connected together by one of three types of nodes:
   (1) The blue square represents a decision node at which point a decision maker is faced with two or more options or choices. Branches emanating from a decision node represent the options or choices available to the decision maker. The decision maker can choose only one option;
   (2) A green circle represents a chance node over which the decision maker has no control. Branches emanating from a chance node represent the possible outcomes of the event. Each branch has an associated probability (P) of occurrence. The probabilities for all branches emanating from a chance node must sum to 1.0 (or 100%);
   (3) A red triangle is sometimes used to represent a terminal node beyond which there are no further activities.
   The terminal node is also referred to as a consequence or, when money is involved, a payoff or net value. The probability of occurrence for an individual pathway of nodes and branches is the product of the probabilities along that pathway; the payoff value is the sum of the costs along that pathway. The expected value (EV) is calculated from right to left in a process often referred to as "folding back" or "rolling back". The EV for a terminal node is equal to its payoff. The EV for a chance node is the sum of the products of the probabilities and the payoffs of the branches emanating from the chance node. The EV for a decision node is equal to the value of its best option.
   Conceptually, the construction and analysis of decision trees is relatively simple and straightforward. However, the use of computer software programs, like Tree Pro®, facilitate more efficient analyses (including sensitivity analysis on one or more variables) particularly where complex trees are involved and/or there is a need for quickly assessing "what-if" scenarios. Decision trees can be constructed to include all of the major phases of litigation or a legal transaction, or any individual part that is particularly important to the end user. In any decision analysis, the selection of probabilities and expected values (and to a lesser extent the structure of the decision tree itself) needs to be realistic.
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