Consider the risk factors

The sessions in the Society’s Conference entitled “New Areas of Practice for the Future” and “Globalisation: International Clients and How to Attract Them” were forward-looking, addressing innovations and debating future developments in the practice of law, all consistent with the Conference theme “A Vision for the Millennium”.

Management of professional risk is a factor which to some extent operates as a barrier in the development of legal practice in these areas.  The main focus of these sessions, quite reasonably, was on the potential rewards and other positive aspects of adopting an entrepreneurial and innovating approach.  Although certain risks were identified in these sessions, these tended to be confined to what might be described as “trading or business risks” rather than “professional risks”, the risk of errors and omissions.

The article considers some of the professional risks and Master Policy implications, by addressing the questions “But is it good risk management to venture into these areas; to take on unfamiliar work of that sort; to set up an office abroad?”

‘New Areas of Practice for the Future’

The justification for a Conference session addressing this subject will be all too obvious to practitioners.  Whether the appropriate response for the individual practice involves diversification or specialisation, the threat (or, to some, the challenge) is essentially the same – an under-supply of quality work at a time of increasing competition, both direct and indirect, for the profession’s business.

Discussions in this particular Conference session focused on two broad areas of potential development:

• Specialising in existing “traditional” areas of practice
• Developing truly “novel” areas of practice

To judge by the queries raised regarding cover under the Master Policy, certain practices at least are actively exploring the possibilities in both categories of practice development.

So do considerations of Master Policy and Risk Management act as barriers?  Only entirely novel areas of practice are likely to challenge the wide scope of cover provided by the Master Policy, which caters for the already extensive range of activities in which the Scottish profession engages as “men and women of business”.

‘Novel’ areas of practice

The potential “novel” areas of practice that have been raised have been relatively limited:

• Giving advice on sporting contracts and also acting as negotiators of contracts on behalf of sports men and women.
• Undertaking searches in the Registers.
  
• Lobbying activities, particularly related to the advent of the Scottish Parliament.
  
• Undertaking “foreign work”, which accounts for the majority of recent enquiries.

Most of these enquiries have received an affirmative response which is indicative of the wide scope of Master Policy cover.  Risk Management issues related to certain of these activities have been discussed in previous issues of this page [Searching the Registers (February 1999); Foreign advice (January 1999)].

Specialisation

As far as specialisation in more “traditional” areas of practice is concerned, Master Policy cover is clearly not a problem and Risk Management principles positively encourage specialisation.

The areas of potential specialisation which were mentioned in the Conference session included child law and recent developments in human rights law and clearly these activities are fully covered under the Master Policy.  If practitioners are to develop these activities as specialisms that can only be positive in Risk Management terms: a business/profession which is becoming even more technically complex and demanding.

An area of activity identified by one of the speakers which at least sounded novel was that of representing clients in preparing and submitting tenders for business.  In this, lawyers are using a core skill, namely their skill of advocacy.  While this may appear to be a quite novel area of activity, it is an activity which is arguably low risk.

‘How’ legal services are provided

Many cover queries received of late have tended to involve considerations of “how” legal services are provided:?

• Seconding personnel to the client as well as seconding specialists from other firms, including non-Scottish firms
  
• Providing services by e-mail and Internet and otherwise utilising IT
  
• Employing English and dual qualified solicitors to undertake cross-border work, including conveyancing and court matters
  
• More onerous conditions/wider scope of client engagements/instructions
  
• The increased deployment of Certificates of Title

For the most part, the firms concerned have been advised that the Master Policy provides cover but there are issues of Risk Management involved, some of which have been considered in previous issues of this page.  [Controlling faxes and e-mails (July 1998); Instructing other professionals/secondments etc. (January 1999); Certificates of Title (October 1996)].

Risk Management as an opportunity for solicitors

What about solicitors undertaking management of legal risks as a service to clients?  This means offering a review of the client’s legal obligations and potential liabilities in terms of employment terms and conditions, terms of supply, other contract terms and conditions, etc.  Certain solicitors have adopted this sort of approach in relation to Year 2000 issues specifically by offering a Year 2000 contract vetting service.  Clearly, advice on contract matters is work which is covered under the Master Policy although technical systems advice would not be.

‘Globalisation:  International Clients and How to Attract Them’

This Conference session was concerned with the opportunities and risks associated with attracting to this country business from overseas clients and also with establishing a presence overseas.  The professional risk issues are many and varied and arguably include:

• Communications challenges and potential language barriers in working along with foreign qualified lawyers.
  
• Supervision issues when foreign advice is involved, particularly when that foreign advice might be provided by lawyers with little or no English.
• Implementing office systems and procedures in offices abroad, in the face of potential language and cultural barriers.
• Obtaining instruction from foreign clients and managing their expectations where communications are complicated by logistic and language barriers.

These are client care and Risk Management challenges which are likely to face firms giving advice involving issues of foreign law, whether the clients are themselves foreign or UK based and whether the advice is given here or abroad.

As far as Professional Indemnity Insurance cover is concerned, the Master Policy covers the giving of foreign advice or undertaking foreign work provided the person concerned is demonstrably “competent”, irrespective of possessing any formal qualification.  This limitation on the scope of cover is related to Risk Management and the competence of a Scottish practice to undertake and/or supervise foreign work.  If there is no one in the practice competent to give the relevant foreign advice or undertake the foreign work, the firm’s options include:

• Avoiding altogether undertaking the foreign work/advice.
• Referring the client to an appropriate lawyer in the jurisdiction concerned to deal direct with the client.
• Instructing a foreign lawyer whose advice is relied on in giving advice direct to the client.

Offices overseas

The extension of cover for foreign advice also applies where a practice operates an office overseas although the USA raises special issues and the position regarding compliance with local law also needs to be considered. 

Alistair Sim is Associate Director at Marsh (formerly Sedgwick Professions)

[The information/advice in this page is (a) advice on practical Risk Management and not on legal issues and (b) is necessarily of a generalised nature. It is not specific to any practice or to any individual, nor should it be relied on as stating the correct legal position.]