Planning a year of action

by Alistair Sim

Some of the activities that might form part of a practice's risk management plan for the year

The Journal, February 2006, page 32

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Review how well the practice is doing

Master Policy rating

A year on year comparison of the level of the practice’s own Master Policy loss ratio and premium discount/loading position may reveal a trend, whether improving or deteriorating, in the practice’s risk management performance.

If your recent Master Policy loss ratios have been consistently high and premiums have included significant premium loadings, that tends to suggest that there may be scope for improving the effectiveness of the practice’s risk management.

Even if your loss ratios have been consistently low and premiums have included low claim discounts (tending to indicate that the practice’s risk management is proving effective), bear in mind that risk management has to be seen as an ongoing process of enhancement – meaning that systems need to be kept under regular review and a high level of risk awareness maintained to ensure that the practice’s risk management remains as effective as possible.

Number of claims, complaints etc

The number of intimations on the practice’s rolling five year record is worth noting and comparing on a periodic basis, at the end of each (insurance) year for instance.

Whether the number is increasing or, preferably, reducing, consider whether that is attributable to:

• improvement in the effectiveness of the firm’s systems and procedures;
• greater awareness of risks, through training initiatives.

Bear in mind that the nature of legal work is such that a claim arising today might have resulted from an error or omission years ago. A claim on the firm’s current/recent record arising out of work done several years earlier may provide little insight into the firm’s current risk profile.

Subject to this, consider the scope for (further) improvement in the firm’s record.

As with Master Policy intimations, the relative numbers of complaints over the course of comparative reference periods can provide an indication of the effectiveness of the firm’s risk management.

Again, as with claims, there may be a time lag between the service complained about and the complaint being made.

Analyse claims/complaints

Undertake a thorough analysis of underlying causes and contributory factors in respect of each of the matters on the firm’s Master Policy record. Do the same for complaints, “near misses”, write-offs of fees/outlays, and lost clients.

Devise a preventive action plan and allocate responsibilities and timescales for implementation of all elements of the action plan.

Monitor the effectiveness of risk improvements on a regular basis.

Plan risk management training

As well as introducing and enhancing risk management systems and practices, it is critical that risk awareness is maximised by appropriate risk management training. Analysis of the claims experience and underlying causes indicates that many claims could have been prevented if, in addition to having more effective risk management systems and practices, there had been a greater level of awareness of risks.

Update provides a range of risk management training and education opportunities in the form of the Risk Management Roadshow series; the Risk Management for Paralegals and Support Staff event; the risk management session of the Practice Management Course (for new partners/principals); and Surviving and Prospering as a Sole Practitioner. Places at these events are limited so it makes sense to plan ahead, identify relevant events and register early. If you have a training need that doesn’t seem to be catered for in the current Update syllabus, why not contact Update and ask if a suitable event could be arranged?

On a more ad hoc basis, risk management seminars and workshops are available to faculties and associations and to individual practices.

There is also ample risk management material which is suitable for training purposes. This includes monthly Journal articles on a wide range of subjects. Risk management training materials prepared by Marsh, comprising case studies and discussion topics on a wide range of risk and risk management issues, as well as further practice area-specific workshop materials including Commercial Property Risks, Litigation Risks, Conveyancing Risks and Trust & Executry Risks, are all available from Marsh.

To assist with planning the firm’s risk management training, the Marsh solicitors’ website www.marsh.co.uk/ lawsociety (for username and password please email me) includes a set of documents comprising:

• Guidance note
• Risk management training plan
• Schedule of risk management training events and materials.

The training programme includes a risk management training plan outlining core elements of risk management training. The training plan is designed to assist in identification of relevant events and materials, the process of planning risk management training, and monitoring its effectiveness.

The plan is not a prescriptive document. It does not intend to imply that the events and materials listed are “approved” or “accredited”, nor that any of the suggested events is compulsory. Each practice will require to decide for itself which courses and materials would be most appropriate. The training plan is intended to assist with the planning and scheduling of external and in-house training.

The training plan contains certain “core” elements which most practices should be seeking to achieve but, by analysing the practice’s own record of claims, complaints and “near misses” (by reference to underlying cause(s) and contributory factor(s)), it will be possible to identify any additional risk management training requirements applicable to individuals, teams, departments or all personnel. Such further, targeted, risk management training can then be incorporated into the plan.

Conduct risk management self-assessment

Using a checklist or questionnaire (Marsh can supply one), conduct an assessment of how much is currently being done to control risk of claims and complaints, and identify gaps in the firm’s risk management systems and procedures which need to be addressed.

Prioritise the items requiring action and decide on allocation of responsibility and realistic timescales for actioning these items.

Set clear goals and objectives

While this isn’t a once and for all exercise (effective risk management is an ongoing process of assessing areas of risk, learning from claims, complaints and near misses, enhancement of risk controls and continuing training), it is good to set some short and medium term goals and objectives – goals and objectives that are specific, measurable, etc. For example:

By the end of 2006:

• all the practice’s terms of engagement to have been reviewed and updated;
• all claims, circumstances, complaints and near misses to have been analysed to identify underlying causes, contributory factors and preventive action;
• all fee earners to be undertaking, monthly, a physical review of all files for which they are responsible;
• checklists to have been created for specified practice areas, say house purchase and sale, taking instructions for a will etc;
• a note to have been devised (and agreed/implemented) concerning the practice’s approach to limitation by contract of the practice’s liability to clients;
• a review to have been conducted of the practice’s procedures for managing critical dates and recommendations for improving the effectiveness of those procedures;
• an independent file review/audit checklist to have been drafted and approved;
• an email/internet usage policy for the practice to have been drafted, approved and implemented;
• complete a risk management self-assessment and identify/prioritise for action the gaps/weaknesses identified in the practice’s risk management;
• all support staff to have gone through a basic risk awareness seminar/workshop;
• each practice area/department to have run at least one (two hour) risk management workshop;
• a risk management training plan to have been prepared for implementation in 2007.

More ambitious targets might be set involving longer term projects or challenges, such as:

• having a risk management manual drafted and issued to the practice’s personnel;
• having a database of style and proforma documents created for each area of practice, with responsibility for review and relative timescales allocated to each style/proforma;
• reduce the incidence of missed time limits and critical dates to nil;
• reduce the incidence of fee-related disputes by X%.

Alistair Sim is a Director in the FinPro (Financial and Professional Risks) Practice at Marsh, the world’s leading risk and insurance services firm. To contact Alistair, email: alistair.j.sim@marsh.com.The information contained in this article provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisers regarding specific coverage issues. Marsh Ltd is authorised and regulated by the Financial Services Authority.

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