Importance of Putting Someone in Charge of Risk Management
Byline: GUY HINCHLEY
For the last 14 years PricewaterhouseCoopers has produced an annual survey on financial management in law firms.
This year's report makes particularly interesting reading. Among the findings, it reveals the stampede by large firms in the last 12 months to improve their risk management procedures.
According to the survey, 82 per cent of the UK's top 25 firms now have formalised risk management procedures.
So what is driving this trend? Certainly tougher industry regulation and the growing awareness of reputational risk are among the key factors.
2006 will see increased regulation of the legal industry. Firms will need to put increasing emphasis on regulatory matters as the Law Society's previous responsibilities in this area are taken over by a consumer watchdog - with teeth. Small law firms will be as accountable, and vulnerable, as large ones.
Insurance costs are also driving the change. Insurance is now the third biggest cost for law firms, after staff and premises. And while we are seeking to cap our premiums, the insurance companies are equally looking to contain their own exposure. As a result, we are now routinely asked to provide data on risk management.
Where the large firms sometimes lead, the small-medium ones will surely follow. So, what is it we need to do to get our houses in order?
Drafting policies which pay lip service to risk management is not enough: these have little impact on what happens at the coalface. A risk management strategy needs to be engrained within the system, so that its practice becomes habitual to fee earners. …