At some point in our lives, many of us have considered using a service provider only to change our minds after we have seen the manner in which the negligent or disorganised manner in which business is conducted. In the unfortunate event that we have used the service provider and something does go wrong with the service, we are reminded of the warning signs that we noted at the onset. The same can be said of the experience of clients instructing a law firm.
Every legal practice faces the risk of a possible professional indemnity (PI) claims being brought against it, unless appropriate steps are taken to mitigate against the underlying circumstances that could lead to PI claims materialising. As with any other enterprise, there are certain risks, which are inherent in the practice of law. Implementing appropriate risk management measures can either prevent the risk from materialising or ameliorate the consequences for the firm in the event that the risk does materialise.
It is best to take a proactive approach to risk management. A reactive approach will not be helpful as it amounts to acting after the proverbial horse has bolted. Risk management should not be adopted in a ‘top-down’ approach but getting staff involved at every level of the enterprise. People in the firm should all be educated so that they can appreciate that their actions or omissions could lead to claims. The consequences of a claim materialising must also be explained to staff and there should be sanctions for non-compliance. The consequences to the firm will depend on the underlying circumstance and could lead to, inter alia:
- Financial losses;
- Regulatory action by the law society;
- Damage to the firm’s reputation;
- Clients losing faith the firm and thus no longer instructing it;
- Criminal charges (in case of illegal conduct); or
- The dissolution of the partnership or closure of the firm.
However, risk management should not be seen as a tick-box exercise or in a negative light. Risk management is essential to the firm meeting its strategic goals and being successful and sustainable. In marketing the services of the firm to potential clients, the proactive approach adopted can be emphasised. This may be the difference between your firm and those of your competitors. This will give existing and potential clients the assurance that appropriate steps are in place in the firm to guard or protect their interests. A practitioner who does not take the internal risks faced by a firm seriously, cannot expect that clients instructing the firm will have confidence that their matters will be attended with the necessary level of diligence.
Many risk management measures are based on pure common sense. This website contains a host of material that practitioners can have regard to in preparing a risk management plan. Obviously each firm will have to adapt the information and resources to its own unique circumstances. There is no one-size-fits-all approach to risk management. Every firm is structured differently, has a different staff profile and operating structure, the areas of practice vary and operates in a different environment. Practitioners should avoid just adopting risk management precedents without properly applying them to their firm’s environments.
The proper application of the risk management measurers will go a long way to preventing negligence on the part of every member of the firm. This, in turn, will prevent losses to clients and PI claims flowing therefrom. In the event of a PI claim being brought against the firm, the fact that the necessary risk management measures were taken in dealing with the matter may be your best defence- the same can be said of a disciplinary enquiry by the law society. If you have applied all the necessary diligence and risk management measurers expected of an attorney in your situation in the circumstances, you could hardly be faulted by any court or the law society.
The AIIF team members are available to assist with any risk management queries practitioners may have. We will also gladly visit your firm in order to have a discussion with you and your staff about the importance of risk management and to suggest possible measures that could be implemented in your firm. Please contact us should you have any questions.