Risk management – a look back

Written by Anna Forsyth and Matthew Thomson, Lockton

As we settle into a new year, Lockton reflect on its engagement with the profession in 2024 and share some notable take-aways on all things risk management in Scotland’s legal sector.

2024 was another busy year for us, just as it was for the legal profession. We had fantastic engagement with so many of you over the course of the year, through workshops, seminars, panel sessions and conferences, and we are now looking forward to the new year with several events in the coming months.

But first, a look back at 2024. In terms of risk management practices and claims trends, we continue to see that most Master Policy claims arise from practical errors. This may be the deed that isn’t registered, the deadline that is missed, or the advice that was not properly recorded. With this in mind, we continue to promote practical risk controls such as case management plans, robust diary systems with appropriate escalation, comprehensive file notes and regular file reviews, to name but a few.

Conveyancing remains the practice area in which we see the highest number of claims. Conveyancing work is of course transactional in nature and often high volume. Client demands for competitive pricing squeezes budgets. Where there is a pressure to increase work to maintain profitability, so there is arguably a heightened risk of mistakes arising. Add to this changing legislation and regulatory compliance, and you have a challenging environment.

Problems with tax advice remain a feature of some claims, particularly Inheritance Tax (IHT) issues. It is important to be clear on the scope of the tax advice you are giving to the client and to keep a detailed record of the advice itself. Just as importantly, try to be as clear as possible on any areas where you are NOT giving advice and where the client will need to obtain specialist tax advice elsewhere.

Scope creep is another risk that straddles all practice areas. It is easy to find yourself undertaking work that was not originally anticipated. If parameters for work carried out and the fees to be charged are not discussed with the client before this happens, your relationship with your client can become fraught, potentially leading to a claim or complaint. The risk of scope creep and how to avoid it was covered in a Lockton article for the Journal earlier last year; see Don’t let scope creep up on you.

The risk of cyberattacks or payment fraud is an ever-present threat. Security experts advise that law firms are a top target for cyber criminals, due to the volume of employee and client data they hold, and the frequent transactions involving transfers of funds. We saw instances of law firms or their clients falling victim to phishing attacks last year, so it is important to be vigilant. Training is key to mitigating the risk.     

Another issue that is becoming increasingly challenging for the legal sector is staff retention. We understand that recruiting and retaining talent is very difficult amid a market where the salaries are fiercely competitive, and a new generation of solicitors have changing workplace expectations. We focused on this in our November article; see The risks of poor employee retention.

Remote working continues to be a talking point even now, some time on from the days of lockdown. Firms continue the conversations around balancing the risks posed by remote working, particularly difficulties in ensuring adequate supervision, against the benefits for work-life balance.

Finally, 2024 brought a new and positive focus on staff wellbeing and workplace culture. Why is this relevant to risk management, you may ask? The answer is that wellbeing is a risk management issue in itself. In our discussions with the profession, we have increasingly focused on the fact that the underlying cause of many practical errors that lead to claims may well be stress caused by overwork or other associated mental health issues. To address staff wellbeing is to treat the root cause, not the symptoms.

For more on this, take a look at the Law Society of Scotland’s wellbeing pages, for a wealth of resources and signposting to organisations that can help you put a robust wellbeing strategy in place for your firm. The good news here is that there have been some brilliant conversations around wellbeing in 2024, which look set to bring about meaningful changes as we head into 2025.

So, many continuing challenges and risks and some fresh ones to grapple with. However, our main reflection from 2024 is that law firms are proactively facing these challenges head on and increasing their focus on risk management, which can only be a good thing.

We’ll look at the challenges ahead in 2025 in a separate article very soon but for now, we hope the profession had a peaceful Christmas and holiday period, and thank you all for your engagement in the past year.

Written by Lockton, as part of their partnership with the Society and Journal.