Sunday, April 26, 2015

Risk Management Survey Report: Priorities, Attitudes & Approaches


Global insurance broker Willis has published: “Risk Barometer: A Study on how Attitudes And Approaches to Risk Management differ between U.K. Law Firms.” While the report focuses on the UK, the topics covered and findings are sure to be of interest regardless of your geography.
  • “This report aims to identify which risks concern U.K. law firms most and what strategies are being adopted to mitigate them. The report includes the following:
    • What keeps risk managers awake at night?
    • What are law firms doing to mitigate risk?
    • The role of insurance in risk management
    • How much resource should be allocated to risk management?”
On Risk Investment Levels
  • "Our survey data reveals that, on average, law firms with over 100 Partners dedicate 1.2% of total revenues to risk management."
  • "Three quarters of surveyed firms with more than 100 Partners plan to increase investment in risk management during the next 12 months." 
On Client Risk, Engagement and Terms of Business
  • "31% of surveyed law firms with over 100 Partners identified claims risk as their number one risk, more than the proportion citing any other area of risk. This is likely a direct result of the surge in claims against law firms in 2014. High Court data reveals 418 professional negligence claims were issued against UK solicitors in 2014, almost three times the number in 2013."
  • "Despite the importance of claims risk to UK law firms, our survey data reveals a clear lack of consistency in establishing clear terms of engagement and undertaking client due diligence when retaining clients."
  • "For example, only 76% of surveyed law firms with more than 100 Partners always ensure their work does not stray beyond the scope of their PII cover. Even less (62%) always ensure lawyers are adequately supervised and only 48% always define the scope of the retainer."
  • "Our survey data reveals that a large number of law firms are not undertaking relatively simple risk management measures as a matter of routine whenever clients are retained. This is surprising given claims risk was frequently identified as the top risk facing U.K. law firms."
  • "While nearly every surveyed law firm checks for conflicts of interest as part of CDD, a smaller proportion undertake other vital CDD checks or relatively simple client engagement procedures. For example, only 76% of law firms with over 100 Partners always ensure work does not stray beyond the scope of PII cover, only 62% always ensure lawyers are adequately supervised and only 48% always define the scope of the retainer."
On Information Security and Confidentiality Management
  • "Some 19% of surveyed law firms with more than 100 Partners identified cyber attack as their greatest risk, making it the joint-second most frequently cited risk behind claims risk... Encouragingly, 87% of surveyed firms with more than 100 Partners are currently strengthening internal data protection and client confidentially systems related to human processes."
  • "Almost 90% of surveyed law firms with over 100 Partners are strengthening internal data protection and client confidentiality systems related to human processes. This is the most common risk management initiative currently being undertaken by U.K. law firms with more than 100 Partners."
  • "The growing cyber threat has also forced a number of law firms interviewed for this report to seek ISO 27001 accreditation. This enables them to demonstrate to their clients that they are adopting best practice cyber security procedures."
On Anti-Money Laundering Compliance
  • "It comes as no surprise that over 90% of surveyed law firms of all sizes review the systems and controls in place to avoid the misuse of client assets and improper use of clients’ money at least once a year. However, our survey data reveals a wide discrepancy in the regularity of anti-money laundering training provided to fee earners – 52% of surveyed law firms with over 100 Partners provide anti money laundering training to fee earners less frequently than annually."
The full report, freely available from Willis, runs 48 pages and provides a wealth of additional detail, including data covering smaller firms and information on insurance trends.

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