Outcomes Focused Regulation: Risk of a Culture Shock?

By Jarman, Jane | Nottingham Law Journal, Annual 2011 | Go to article overview

Outcomes Focused Regulation: Risk of a Culture Shock?


Jarman, Jane, Nottingham Law Journal


This is the calm before the storm. With the release of the Solicitors' Regulation Authority's final pronouncement on its new outcomes focused approach to regulation draws near, solicitors will increase their focus on the four letter word at the heart of the regime: risk. In the past, the SRA have been very clear in stating that the advent of Outcomes Focused Regulation ("OFR") will require firms to take responsibility for identifying and managing risk. Those firms that are able to demonstrate that they can do so effectively will be "left alone" to some extent, with resources being targeted at firms that are unable to do so. The devil is in the detail, or the lack of it.

Firstly, it is a mistake to consider risk management as simply a synonym for "claims avoidance". This new approach is evident in the inclusion of four new core principles within the proposed new Code of Conduct: legal and regulatory compliance, business and financial governance and risk, the promotion of equality and diversity and the safeguarding of client assists. Indeed, the drafting of one "core principle" that firms must run the business effectively and in accordance with proper governance and sound financial and risk management principles is a prime example. Risk management, in all its forms, will be a much more pervasive issue. It will encompass both questions of basic operational risk and "file work" and also strategic and financial issues. However, most of the training in relation to risk management in the UK focuses on claims avoidance rather than other aspects of risk analysis used in other businesses and professions such as concepts of risk tolerance, probability and impact.

Secondly, it is still an open question, as to just how much information firms will have to provide in their Annual Information Report to enable the regulator to make a risk assessment. Thirdly, what type of evidence should the firm collect to enable it to make an informed decision as to whether it is achieving the right outcomes? For instance, it is assumed that it will be possible to collect client satisfaction data via a questionnaire. A client satisfaction questionnaire seems to be an appropriate research tool. Clients are well versed in filling them after seemingly almost every consumer purchase. However, how effective will such a mechanism be in practice in a law firm? Law can be a "stress purchase" and the relationship may well be fraught with difficulties. …

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