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Article

Looking back, going forward

1 January 04

A review of the risk and risk management issues considered over the past year and suggested new year's resolutions to address these in risk management planning for the forthcoming year

by Alistair Sim, Charles Sandison

January

Last January’s article reviewed some general risk management points, from controlling critical dates to managing clients’ expectations, by reference to a series of case studies.

Case review meetings – as part of your “belt and braces” approach to avoiding time bar claims, consider holding regular scheduled case review meetings at which there is a particular emphasis on critical dates. While these may appear suited only to firms with larger numbers of e.g. litigation practitioners, could the arrangement not be adapted to operate across disciplines or for sole practitioners?

Checklists – these can prompt consideration of any unusual factors affecting critical dates, e.g. foreign jurisdiction, capacity/status of your client, unusual time limits etc. that may be relevant.

File review/audit – Could a fee earner leave and no one take over responsibility for a time-critical file? How would you/do you ensure that the situation does not arise? A physical check should be conducted of all files handled by a departing fee earner.

Handover of file – if it is practicable, review the file while the colleague who has been dealing with it is still in the office and available to discuss and clarify any areas of doubt. The file needs to be read thoroughly to ensure that everything done to date is correct, nothing has been omitted and none of the crucial facts have been misunderstood or mis-recorded.

Managing the client – the client’s responsibilities; their expectations – as to outcomes, fees, timescales etc.

Diary systems – effective diarying arrangements are clearly critical to management of critical dates.

February and March

We considered systems, procedures and disciplines to c.o.n.t.r.o.l. professional risk and avoid claims, for example:

Client engagement checks, such as Client identification – have you done the checks? Capability, capacity and cover for the work – do you have it? Conflict checks – completed in every case?

Office procedures manual – would one be useful? How are procedures standardised for different types of transaction? How do you explain to staff, including new recruits, the way things should be done in the firm? Is it kept up-to-date? Who has responsibility for this?

No fear – mistakes need to be remedied, not hidden. Also, just say No! to work that you do not have the capability or capacity to handle.

Terms of engagement – state what is and isn’t your responsibility; what is required of the client and when; the basis of charging. Make sure they are kept under review.  

Review your own and colleagues’ files – are you sure that you haven’t overlooked a file (or a client)? Is there any non-compliance with agreed systems and procedures? Any signs of colleagues being overworked, not coping? Any evidence of dishonesty?

“0” for “zero tolerance” – towards dabbling; non-standard undertakings – don’t grant them!; obvious conflicts; repeated time bars.

Loose ends – don’t overlook them – they can lead to claims. Think about checklists, diaries and file reviews. Letter of disengagement – if withdrawing from acting, be clear to the client as to what is happening and any effect on the client’s matter.

April

April’s article took a look at some of the case studies and discussion topics and the relative risk management points addressed by the 2002 Risk Management Roadshow series. One of the case studies addressed the potential for crossed wires and non-communication of a time-critical message by a member of support staff. The principal conclusions reached in discussion at the roadshow sessions were that:

  • all members of staff, including support staff, need to appreciate the importance of their role in risk management through some level of training in basic risk awareness;
  • standard procedures for passing on messages should be considered and a review of the relative risks/reliability of email, voicemail etc may be appropriate.

May

Business continuity planning should be an important part of every firm’s overall management of risk. While it is a remote possibility that the firm will be faced with a major incident, a minimum amount of time devoted to planning will pay dividends in the event of unexpected absence of a principal or other fee earner; having to evacuate the building during working hours; having to cope with an out of hours emergency.

June

Eilidh Scobbie, an accredited specialist in trust law, considered how solicitors involved in will drafting and executry administration might address certain risks created by clients of uncertain capacity and also by powerful clients. The article went on to consider other areas of risk for trust and executry practitioners and gave examples of errors and omissions which have resulted in claims.

July

This article discussed risk issues to be considered when contemplating a merger or acquisition of another solicitor’s practice, and also risk management issues to be considered before and after a merger or acquisition. The due diligence undertaken prior to committing to a merger or acquisition might reveal, for instance, that a significant number of intimations arise out of the activities of one particular fee earner, department or office. It ought to disclose the other practice’s approach to claims prevention and risk management generally. You might discern that problems in the past have arisen out of e.g. poor management, lack of supervision, dabbling in specialist areas, or poor cashroom controls.

August

August’s article considered the professional indemnity insurance implications of a practice being established as, or converted to, a limited liability partnership.

The article addressed a number of questions including – Could we reduce the level of our PII cover if we convert to LLP? Do we get a reduction in premiums for converting to LLP? Will our premiums increase if we convert to LLP? If we convert to LLP, are there any formalities involved/additional forms to complete?

September

In advance of firms receiving Master Policy renewal papers at the beginning of October, the article suggested various ways in which a head start could be made by those who have responsibility for renewal of their practice’s cover.

In the lead up to the Master Policy renewal the article provided guidance on matters to be intimated as claims and “circumstances”, and action to be taken in the event of a potential claim arising – in terms of both the defence of the claim and risk management steps to minimise the risk of a recurrence, for example:

No fear culture – it is in everyone’s interests that colleagues should be ready, willing and able to make the appropriate person aware that a mistake has been made or that they need help.

Learning lessons – the opportunity to learn lessons and minimise the risk of recurrence must be the only positive feature of a complaint or a claim. More often than not it will be possible to derive some risk management benefit from a thorough discussion about the underlying cause or causes and the contributory factors – this is something that Marsh can help with, for instance, by facilitating the review process.

October

This article considered claims arising from commercial property work, their underlying causes and some essential risk controls, for example:

Engagement criteria – consider carefully whether the practice has the expertise and capacity to undertake the work and establish that there is no conflict of interest; consider whether the practice has adequate professional indemnity insurance for the level of exposure to potential claims.

Terms of engagement – ensure complete clarity as regards the scope of the work to be undertaken; matters which will not be the practice’s responsibility; what the client requires to do to assist in achieving their own objectives.
Delegation and supervision – where inexperienced colleagues are involved in complex or high value transactions, it is clearly particularly important to ensure that they are adequately supervised. Delegation should be of work, not responsibility.
Control of documentation – avoiding the use of out of date or otherwise inappropriate style/proforma documentation.
Communication – in transactions involving negotiation/drafting of complex documentation, there is an increased risk of misunderstandings between solicitor and client and particular care therefore needs to be taken to ensure that both are clear as regards advice imparted and instructions received.

November

November looked at the elements of effective systems of supervision within a practice and posed questions that solicitors might consider when reviewing how they deal with supervision of colleagues.
Methods of effective supervision were considered, for instance: insisting on case review meetings; encouraging discussion and giving feedback; conducting file audits.
Supervision should be an important part of risk management procedures – done well (and this does not necessarily mean being heavy-handed), it will minimise the chances of a complaint or claim. In addition, proper supervision means effective training, which must be beneficial to both supervisor and supervised.

December

This article considered how setting out the terms of their engagement and terms of business assists solicitors manage their clients and their clients’ expectations and helps to minimise the risk of claims and client dissatisfaction.
Scoping of the work – do it properly as well as spelling out:

  • how instructions are to be given/ received – make it clear
  • fees and outgoings – basis for charging and terms of payment
  • responsibilities of the client – helping clients help themselves
  • timescales – manage the client’s expectations
  • limitation of liability

Conclusion

Referring to this brief review of topics addressed in 2003 as a checklist, how do you assess (a) the extent to which you and your colleagues have an awareness of areas of risk, and (b) the extent to which these risks are already being addressed? How successful was your risk management during 2003?

Hopefully, 2004 will be a year to build on the risk management work you have already done and to make this year as successful, profitable and risk-free as you can make it.