If a units is fired on from the flanks, it suffers double morale loss and may only fire at flanking force with 25% strength.
Flank is considered 45% side arc from the corners of the unit.
The principle I use in my Battle system is based on the premise that the unit commander will react to any close threat, therefore it does not require micro-management on behalf of the commanding player. In situations where a unit may face multiple threats then I would either seek instructions (if PBEM) or base my decision on the situation on had (if solo).
Therefore where a unit sees an enemy moving on its flanks and is not threatened (fire or charge) from another, it is then assumed the commander of the defending unit will change his frontage accordingly without instruction (assuming he passes the reaction die roll) If he were threatened to his front as well as the flank he may opt to refuse his flank. This will have the advantage of not suffering a double morale penalty (flanking fire) but it does mean his fire to the flank is 25% of his strength and to his front 75% of his strength.