The increase in PII costs for law practices over recent years has put risk management firmly in the spotlight for many firms, but risk isn’t just about claims or mistakes.
The legal sector - Risky Business
With the SRA describing itself as a “risk-based regulator”, how should firms approach the challenges they have identified whilst fulfilling their regulatory requirements and remaining profitable?
A structured approach like Lexcel can be a good starting point.
What are the risks?
Cybercrime is often recognised as the most pressing risk concern for many firms, but other categories should not be ignored. This firm‘s social media activity caused enormous reputational damage and possibly the loss of contracts all of which might easily have been avoided if the risks had been taken into account. Basic issues such as failing to deal with complaints can be avoided by ensuring robust policies and procedures are in place, which will, in turn, alleviate the associated risks to firms and lawyers.
Although risk can never be eliminated completely, some form of risk management of is essential in any business, especially in law firms where the stakes can be very high. Changes in the regulatory landscape mean a tick-box approach is no longer an option, and if risks are ignored the consequences can be devastating for clients, practices and individual lawyers.
Lexcel’s risk-based approach
Section 5 of Lexcel deals specifically with risk management but in reality the whole standard works towards reducing risk and potential harm in a number of areas including Information Security and Client Care. As Lexcel has been designed by solicitors for solicitors, its approach to these apparently general issues is in fact specifically tailored to the challenges of the legal sector.
Find out more about the benefits of Lexcel here
Can risk be an opportunity?
Properly managed, risks can be mitigated not only to prevent harm but also to create opportunities.
Outsourcing for example can have enormous benefits for firms in allowing fee earners to concentrate on their areas of expertise, but can also have drawbacks. Archiving and destruction of records are often outsourced, but how many firms really know how secure the process is before they hand over confidential information to subcontractors?
Paperless case management systems and use of IT can increase efficiency in firms, but can also expose weaknesses in information management and security.
In discussing mergers the SRA concludes that “Some firms will experience consolidation as a crisis, while others will experience it as an opportunity… Sound risk management can help firms find their way in a time of change.”
Although Lexcel isn’t a panacea it provides a solid basis from which firms can continuously identify, evaluate and address the risks they face.
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