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QUALITY STANDARDS AND RISK MANAGEMENT IN THE LEGAL PROFESSION
The key to future survival and prosperity?
Several commentators have said recently that the biggest risk to law firms is how well or otherwise they manage the changes that are coming their way. So, the key skill for partners aside from the whole range of management skills they have been encouraged to acquire in recent years, is in Change Management. This is particularly relevant to quality standards and risk management with the recent changes in market conditions and the regulation of the profession.
The 90’s – the decade of the quality standard
In general terms, the 1990s in the legal profession were about client care and quality standards whilst the hot topic in the “noughties” has been risk management. The two are not mutually exclusive but perhaps invite a different approach and attitude. In the 90s, there was a large element of choice in the extent to which a firm embraced client care and quality beyond the requirements of the old Practice Rule 15 and, for those involved in Legal Aid, the Franchise Scheme [a quality standard by another name]. The noughties, triggered by the emerging open market for indemnity insurance after the demise of The Solicitors Indemnity Fund, have seen less choice and more compulsion with a tougher attitude from the underwriters recently, a much more competitive market place for legal services and of course, changes in regulation through the Solicitors Regulation Authority.
The 00s – the decade of risk management
Due to the high level of cross over, those law firms who embraced quality standards in the 90s found themselves well placed to deal with the demands of risk management under the new indemnity insurance market. For the man in the street, these firms may not be immediately apparent although many promote with pride the fact that they are accredited to ISO9000, Investors in People or Lexcel. For those involved in public funded work there is no option, they must attain the LSC’s Specialist Quality Mark. As we approach the end of the first decade of the 21st century, there is no doubt that those who embraced quality and risk management have embraced change and set out to manage the necessary changes effectively.
Whilst around 600 law firms have achieved the Lexcel standard, often as a management tool for tackling risk management issues, this represents only 6% of the total number of firms in England and Wales. What about the others? Whilst SRA grapples with the challenge of regulating the large City and national firms, is it safe to assume that, due to their size and nature, they have risk management all sorted out? If so, that still leaves the vast majority of the profession made up of either sole practitioners or small high street firms with 2 and 4 partners.
So how do we go about tackling risk? In general terms, firms must first recognise the risks that exist in each area of their business and the list may be very long [for example, we may find many of them in the “Weakness” and “Threats” boxes in a SWOT analysis]. Next, we must decide on those risks that are strategic i.e. those risks that threaten the existence of the firm or at least its profitability [e.g. should we close the branch office? Should we continue to do unprofitable Legal Aid work?]. Clearly, strategic risks need serious strategic thinking and solutions. It is extremely difficult to eliminate risk completely but we can recognise the risk exists and make arrangements to minimise the chances of the risk becoming reality.
Regulatory risk is easier to recognise because it is imposed
upon us but is not necessarily easier to manage. The laws that
affect us as traders and employers are ever more numerous and
complex and the protection they provide are more and more for
the benefit of our clients and staff. Consider the risks of
falling foul of the Money Laundering Regulations, Data
Protection Act, Anti Discrimination and Health & Safety
legislation and so on?
On an operational level, risk is managed through policies and procedures for client and case management. These are designed to deliver advice and service at the required level [quality] and avoid complaints and negligence claims [risk]. The policies and procedures adopted must be appropriate to the size and nature of the firm and the type of client and work involved but must be effective in managing [minimising] the risk of things going wrong. What risk assessment process do you go through when you take on a new client or instructions – are you considering all the risks?
The SRA through the Practice Standards Unit is charged with policing the Solicitors’ Code of Conduct, now in 2009 edition. Monitoring visits are getting tougher and the hot topics continue to be; Rule 2 – Client Relations, Rule 5 –Management, Rule 7 – Publicity and Rule 9 – Referrals. Partners must consider the very real risk associated with non compliance with the Code of Conduct. Of course, all risks have consequences attached to them, the bigger the risk the more serious the consequences. For example, having a solicitor up before the SDT or worse, struck off will have serious consequences for the individual concerned but also for the hard earned reputation of the firm who employed him/her.
Damon Swindell, director of Lawrisk Ltd, advises firms on risk management issues and is a Law Society accredited adviser and assessor for the Lexcel standard. Damon is available to give advice and assistance on all risk management issues, why not call or email for a no obligation chat about your risk issues? O7799 880822 /
damon@lawrisk.co.uk.
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