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Risk Management in Law Firms

Mitigate Risk and Enhance Firm Success

Katerina Menhennet, William Glynn, Niya Phiri, Alexia Howard, Simon Konsta, Nigel Miller, Simon Chester, Sandy Gill, Anousheh Bromfield, Charles Kuhn, Brian Rogers, Rebecca Atkinson, Frank Maher, Peter Noyce, Noah Fiedler, Tracey Calvert, Jamie Butler, Ruth Bonino, Chris Holme, Jessica Clay, Iain Miller, Lucinda Soon, Jonathon Bray

Published: 2022
Pages: 195

eBook: 9781787429185

Risk Management in Law Firms brings together lawyers, consultants and other risk and compliance professionals to provide expert and practical guidance on essential risk management topics.

Effective risk management in law firms has never been more important. Lawyers must contend with the long-standing risks associated with the practice of law, such as anti-money laundering and issues of client confidentiality, as well as new risk areas such as data protection and cybersecurity, and increased regulatory burdens. Poor handling of these risks can lead to reputational damage, diminished client relationships, and even regulatory action, and so it is critical for law firms to remain vigilant and put in place robust risk management policies, processes and systems.

Risk Management in Law Firms brings together lawyers, consultants and other risk and compliance professionals to provide expert and practical guidance on essential risk management topics. Chapters cover risks relating to clients, internal operations and law and regulation, and address recent developments including issues arising from the shift to hybrid working, the increased focus on ESG and climate change, and the extended influence of clients through outside counsel guidelines. There is also consideration of the future of risk management with coverage of the proposed changes to the SRA Codes of Conduct to address issues relating to wellbeing and unfair treatment at work, and the commercial opportunities for law firms and individual lawyers presented by the increasingly flexible principles-based regulation.

This title aims to help law firm leaders and individual lawyers understand and prepare for the risks they face – as well effectively handle them when issues do arise – whether they occur in the firm’s internal operations or its dealings with clients. In-house counsel and others will also find it useful to understand their law firm colleagues better, enhancing professional relationships. With the comprehensive coverage of key risk areas in this title, lawyers and firms can not only ensure compliance, but also maintain healthy client relationships, educated staff, a positive reputation, and continued success and growth.

Table of Contents

Cover Cover
Title Page i
Copyright Page ii
Table of Contents iii
Executive summary ix
About the authors xvii
Chapter 1: Managing risks in the hybrid “office” 1
Introduction 1
People risks 1
Operational risks 5
Data/IT risks 7
Legal/regulatory risks 9
Conclusion 11
Chapter 2: Climate change and ESG risks for lawyers 13
Introduction 13
What is ESG? 13
Reputational risks 14
Transition and transactional risks 16
Corporate disclosure and liability risks 17
Greenwashing 20
Diversity and inclusion 21
Conclusion 22
Chapter 3: Data protection 29
Introduction 29
Overview 29
Data protection principles 31
Lawful ground for processing 34
Accountability 35
Data processors 37
Individual rights 37
Personal data breach 39
International data transfers 39
Marketing and cookies 40
Conclusion 41
Chapter 4: Cybersecurity: an existential risk for law firms 43
Regulatory requirements 45
Client pressures 46
Cloud computing 47
Remote working 48
Policies and procedures 48
Insider risks 50
Assessing precautions 52
Insurance 54
Planning for breach 55
Next steps 58
Chapter 5: Criminal finances and investigations 63
Introduction and types of financial crime 63
Investigations 63
Privilege 66
Representation 69
Jurisdiction 69
Specific considerations for certain offences in law firms – (section 330 POCA) 70
Conclusion 71
Chapter 6: Anti-money laundering – are you doing enough to protect your firm? 73
The money laundering landscape 73
Law firm sanctions 73
SRA AML thematic reviews 74
AML guidance 75
AML governance 76
Firm (practice)-wide risk assessment 76
Client/matter level risk assessment 77
AML policies, controls, and procedures 77
Conclusion 80
Chapter 7: Professional indemnity insurance 81
The requirement to have professional indemnity insurance 81
How much insurance cover to buy 82
What a circumstance is, when and how to notify possible claims to insurers, and who will handle the claim 83
Should you rectify mistakes? Beware own interest conflict 85
PI insurance renewal – what happens each year and top tips for renewal: how to present your firm well 86
Possible PI insurance exclusions for sanctioned entities and certain types of work 88
A short note about cybercrime insurance 88
Limiting liability clauses 88
Conclusion 89
Chapter 8: Protecting partner assets 91
Introduction 91
Professional indemnity insurance and the exclusions 92
Retirement and professional indemnity insurance 95
Defensive practice 96
Insurance options 98
Conclusion 98
Chapter 9: SRA compliance 101
What is the SRA and when do you need to be authorized by it? 101
How to get authorized 104
The annual reauthorization process 104
The SRA Standards and Regulations 106
SRA Enforcement Strategy 112
The COLP and COFA role and reporting requirements 113
Ethics and how to approach 115
SRA warning notices and guidance 115
Chapter 10: Mitigating risk through your client journeys and practices 119
Take on process 119
Throughout the transaction 120
Completion 120
Financial disciplines and controls should also be part of the toolkit 121
Conclusion 123
Chapter 11: Outside counsel guidelines 125
Comprehensive outside counsel guidelines become standard 125
Indemnity provisions 126
Defining conflicts of interest 127
Managing the risk of OCGs 129
OCGs are here to stay 130
Chapter 12: Conflicts of interest and confidentiality duties – effective risk management 133
Own interest conflict 133
Conflicts of interests when acting for clients 134
Confidentiality and disclosure 135
Risk management 136
Risk compliance objectives 137
Risk management pinch points 138
Compliance solutions 140
The bigger picture 141
Chapter 13: Complaints 143
The requirements regarding complaints 143
What should the complaints handling process be and who should undertake complaint handling in the firm? 144
How to effectively handle complaints 146
Complaints made by non-clients 149
How to handle online reviews – good or bad 149
The Legal Ombudsman Scheme Rules, publication, and case fee 150
Further guidance 152
Chapter 14: Effective supervision in remote and hybrid teams 155
Why is good supervision important? 155
Risks, challenges, and opportunities of remote supervision 156
Core skills and characteristics of an effective remote supervisor 156
Setting “ground rules” to establish responsibility and build trust 157
Communicating for effectiveness and productivity 158
Maximizing engagement, inclusion, and wellbeing 158
Hybrid working – developing approaches 160
Hybrid working and supervision – opportunities and challenges 161
“Supervisor as coach” skills – managing from a distance 162
Chapter 15: Lateral hiring in law firms – risks and reward 165
Introduction 165
Basic legal, ethical, and regulatory obligations of partners in UK law firms 165
Setting the scene 167
The due diligence process – how to avoid overstepping the mark 168
Pre-employment vetting 169
Conflict checks – how to avoid breaching confidentiality obligations 170
Integration issues 170
Key rules of the road 172
Chapter 16: Culture matters – a new era for law firm risk management 173
Ethical culture under the spotlight 174
Assessments of unfair treatment 177
Concurrent employment claims 178
Challenging behavior that does not meet the standard 179
Personal and professional boundaries 180
Conclusion 181
Chapter 17: Innovation and the opportunities in flexible regulation 185
Regulation-led innovation 185
CMA report 186
Deregulation-led innovation 187
Other external factors 189
Ten years of ABSs – evolution rather than revolution? 190
Innovation is easier said than done 192
About Globe Law and Business 195
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