Hoping for the best and crisis-to-crisis improvisation are not effective risk management methods.
three high-probability risks in any law firm
Even the best-managed law firms, populated by the most brilliant lawyers and most diligent staff, must confront three serious risks in everyday operations:
- business risks -- which result in poor productivity, operational inefficiencies, and low profitability
- client service risks -- which can cause your firm to lose your best clients to your competitors
- professional risks -- which can produce professional indemnity claims, malpractice accusations, and a bad reputation in the legal market
Vulnerabilities in any of these three areas can open the door to serious business consequences for any law firm. However, small and midsize law firms face even greater risks because they typically have the least financial tolerance for bad decisions, lapses in good business judgment, internal inefficiencies, and poor client service.
five traditional strategies
Law firm strategies typically follow one or more of these five patterns.
- Accept the risk and plan for it.
Example: Prepare disaster response plans for a fire, earthquake, or flood
- Reduce the risk by addressing the factors that cause the risk.
Example: Install a computer-managed financial reporting system that automatically reminds partners of excessive unbilled work in progress or accounts receivable that are long past due.
- Transfer the risk.
Example: Outsource document management and production functions in litigation cases.
- Move away from the risk.
Example: Withdraw from a practice area that has become unprofitable for the firm.
- Do nothing and hope for the best.
Unfortunately, most law firms pursue this one by default. "We will cross that bridge when we come to it" unfortunately is not a strategy.
Where are your worst risks?
Do you even know?
Unlike most businesses, the most serious risks to business success in law firms are often hidden deep inside the organization and its management structures, and not in the external market.
When a law firm fails to respond to a crisis or to achieve a business objective, it is not because their lawyers are stupid or lazy or that the clients are unpredictable. In most cases, a firm fails because its governance and management structures have failed the firm.
But it gets worse than that.
When a crisis or opportunity arrives, these weaknesses, which contributed to the problem in the first place, also fail to provide the support that any business needs to respond.
how we can help
Walker Clark members have been designing and administering risk management programs in the legal profession since the early 1990s. We can help you to install a system of internal management controls that will:
- integrate into your daily work processes, rather than be a burden on them
- document your risk management and crisis response policies and procedures, to ensure that they actually will be followed
- enable you and your colleagues to spot potential risks before they become crises
- make the adjustments and continuous improvements that every law firm needs to respond to changing conditions in the firm and in the legal market
- pay for themselves many times over in terms of reduced vulnerability to serious financial loss
Contact us for a complementary 30-minute teleconference to learn how we can help you select risk management tools and methods that are right for your firm.