Technology to the rescue?
Part 2 of a survey of how information technology can help practices lessen their exposure to risk
While the adoption of new technology can allow practices to streamline processes and cut costs, it may also cut down on the potential for claims. Although larger practices have invested large amounts in IT, the benefits of IT in managing risk may be obtained by firms of all sizes. Many firms are put off utilising the technology more because of:
- Difficulty in adapting existing processes to fit with the technology (or vice versa)
Marsh asked five practitioners to comment briefly on how IT can reduce the potential for claims within practices.
Ewan McIntyre, a partner with Morton Fraser from 1st November, has been responsible for IT systems’ development and testing
Ian Thomson, Partner, Morton Fraser, has been instrumental in developing in-house IT solutions, including electronic filing systems
Alison Grant, Partner, Biggart Baillie, uses technology on a daily basis in litigation and licensing work.
Ian Hunter, Partner, Jas. Campbell & Co, developed and implemented an IT infrastructure for the firm while concurrently achieving Investors in People accreditation.
Colin Macleod, Partner, Dundas & Wilson, has wide ranging experience of the use of technology to assist in risk management issues.
The contributors were asked to give comments on some general issues relating to IT and risk management systems.
Electronic document storage
Another area where IT solutions may provide practical benefits to all sizes of firms is document storage. There is, of course, a requirement for clear instructions and procedures to ensure the accuracy and reliability of scanned material. The question of how original documents are dealt with after scanning must also be addressed. With the increasing cost of storing physical files and documents and decreasing costs of hardware storage solutions, some firms are looking to save on archival storage costs by transferring documents to electronic formats. Ian Thomson states: “My firm certainly sees this as an efficiency saving, notwithstanding we still have a large amount of ‘hard’ records.”
The risk management benefits are that, if done properly, electronically retained files can be located easily and searched efficiently. Alison Grant cautions: “Provided the procedures are in place to ensure documents are, in fact, saved correctly onto the system, there can be benefits”. The chances of files going “missing” from archive are reduced, since the file can be retrieved multiple times and yet still remain physically in the same place. Additionally, the storage of documents electronically can allow easy off site storage of an entire archive. The benefits of this type of system must be weighed against the resources which will be required to implement it – including getting documents scanned. Some practitioners regard this type of storage as the next logical step in file management since the outgoing correspondence is stored electronically.
Ewan McIntyre comments: “Assuming scanned documentation is correctly indexed, this should reduce the prospect of documents being misfiled. It should make it easier for fee earner and colleagues to examine the file (especially useful in the absence of the fee earner dealing with the file. It should also be easier to store archived information electronically than in hard form and with proper back up systems recovery of complete files is made easier.”
Some risk issues regarding the ‘paperless office’ have already been addressed in the Journal. (see, for instance, the risk management articles in the March and November 2001 issues of the Journal).
How do you see technology helping smaller practices with risk management?
Ewan McIntyre: “Diary systems and account reporting mechanisms should make it easier for firms to keep on top of things. Relatively low cost case management systems and use of style letters should help firms compete on grounds of profitability with competitors and ease delegation of work rather than leaving sole practitioners with an excessive work burden.”
Ian Thomson: “A big question! For a small firm the level of investment may not be realistic. However, I think that smaller firms may be able to gain access to IT solutions developed by other firms, like ours. This would allow the hassle factor to be taken out of the IT development and would continue to allow local firms to continue to effectively use their local market knowledge as an advantage over larger firms.”
Ian Hunter believes that, with careful planning, smaller firms can make existing key systems better, commenting that “we have attempted to incorporate an element of case management and reminders of stages, time thresholds etc. into the diary system.”
Colin Macleod: “For those committed to risk management, I think that it can streamline the process. It can attempt to minimise the amount of fee earner time and achieve the risk management objective at lesser direct/indirect cost to them. If they are, otherwise, introducing IT into the practice anyway (ie. not necessarily for risk management purposes) then I think there is the ability to "bolt on" at no great extra cost diary systems or the like which can assist in this.”
Gordon Brewster, Director of Online Services and IT at the Law Society, appreciates that smaller practices may find it difficult to devote time to developing their IT systems but advises that the Society can provide some help in this regard.
No-one is suggesting that smaller practices are less well risk managed than larger practices. However, smaller practices may lack the resources to devote time and effort to combining IT development and risk management. As technology progresses and software providers begin to tailor applications for particular areas of practice, it may be that some technology will help practices in terms of increased efficiency and improved management of risk.
Which areas of practice risk management would benefit most from the initial application of technology?
While Colin Macleod sounds a note of caution by saying “The major issue, is not to sell IT as a complete resolution to the problem once it is bought, because it is plainly not that!”, he accepts that, if implemented properly, IT can help in the management of risk.
Ian Thomson is keen to point out that some sort of a process management tool will likely be a good risk (and practice) management investment. However, he mentions the importance of producing “a realistic and achievable project plan on the basis of what it is that the firm wants to achieve and then look for a product that gives a framework to develop.” He advises that starting at a realistic level is important – a system “which is implemented successfully (even to a limited degree) can be built on – a poorly implemented system would be a waste of time and effort…it will cause more problems than it solves”.
Ian Hunter believes that a practice could see improvements in risk management and office systems across the board, providing staff understood the system and accepted it as a positive benefit. If staff were not happy with the culture change, the benefits were likely to be limited.
As for priority action plans, Ewan McIntyre is clear where most practices can benefit: “Efficient diary and cash accounting systems must surely be a priority. An ability to run a report with details of matters where there has been no activity for a fixed period would identify files where a review might be due”. In addition to file review, the cashflow management risk to practices can be helped by investment in technology, according to McIntyre – “Billing for work where work in progress reaches a pre-set level and recovering cash for bills rendered all assists in keeping existing work profitable. This avoids solicitors feeling the need to continually chase round to bring in new work where good profits might be elicited from existing instructions. More time can be spent properly servicing the needs of existing clients. A virtuous circle!”
The development and consistent observance of sound and effective systems in an office remains a crucial element of effective risk management. A process can be bad whether manual or electronic. Whilst practices which are thinking about installing IT systems or adding to existing ones have numerous considerations to take into account, risk management should be one of those. There are areas where the very fact of repetition from matter to matter can allow errors to creep in, where systems can help provide a push in the right direction, if not actually help progress the matter.
Investment in IT can be a major expense but practices which have been reluctant to commit investment to IT should consider not only the traditional benefits associated with systems but also the risk management benefits which could result. Even in practices with IT systems already in place, there may be scope for exploiting the existing capabilities further to maximise the risk management potential of technology.
Although IT is clearly not the solution to every potential risk problem, it may create a further layer of defences against the possibility of complaints or claims.
The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law and (b) is necessarily of a generalised nature. It is not specific to any practice or to any individual and should not be relied on as stating the correct legal position. Nothing contained in this article should be taken as expressing a view on the appropriateness of a particular IT system or product. Alistair Sim is Associate Director in the Professional and Financial Risks Division at Marsh UK Limited Charles Sandison is a Consultant with the Business Risk Consulting Division of Marsh UK Limited. He specialises in risk issues resulting from new technology which includes advising solicitors on issues of information security.