Professional risks – self assessment

Do you consider you and your colleagues to be ‘risk aware’ in the sense of being aware of the risks in your area of practice of claims and complaints arising?  Would you expect others to agree with your own assessment? This month, Alistair Sim comments on how we individually perceive and how we might assess our personal approach to managing professional risks.

How would you assess your level of awareness of professional risks, ie. your awareness of the risk of claims and complaints arising out of your client work?  What is your personal attitude towards risk and risk control?  Are you fully aware of how risks are capable of being controlled?  

Your own awareness of and attitude towards the professional risks you run in your practice are relevant to the exposure of your practice to claims and to complaints.

Naturally, attitudes and awareness vary.  This has been illustrated, for instance, by the differing reactions and responses to the risk issues raised in some of the case studies discussed in the current series of Risk Management Roadshows.  

To take one example, some participants have indicated that, subject to compliance with the Conflict of Interest Rules, they would be prepared to accept instructions to represent the interests of various family members in a joint property purchase/funding transaction. Others take a different view of the same set of circumstances and consider it unduly risky to accept instructions to act for all the family members.  They would prefer to represent one interest only and decline to represent the others.

Perceptions of risk awareness/attitude

Our own personal perceptions in relation to risk can be misleading.  We may genuinely believe that we are risk aware and that we only practise in a safe and defensive manner but, when compared with the approach that others adopt to the same risk issues, our awareness of and attitude to risk may be shown to be quite different.  

Many practitioners against whom claims are made have a genuine belief that they could not have avoided the situation in which they find themselves; that they did all they could to avoid a problem; that they practised safely and defensively.  The reason for the claim they attribute to bad luck, a malicious client or a “unique” set of circumstances.

Risk (self) assessment

How do we measure ourselves (objectively)? Perhaps there is no truly objective measure but it can be very instructive to go through a (self) assessment using a variety of measures.

There is an example of a self-assessment questionnaire in “Ensuring Excellence, Even Better Practice in Practice”  (p.30).  It is aimed at assessing the extent to which risk awareness and risk management can be demonstrated across a whole practice. The questions which follow are aimed at assessing your individual attitude and behaviour in relation to risk.

Consider the following questions:

• Do you ever, without supervision, undertake work in specialist areas of which you have no previous experience?
• Are you willing to undertake work with less than a full set of instructions?
• Do you find yourself agreeing under pressure from clients/colleagues to do anything in relation to client work with which you feel uncomfortable?
• Do you find it difficult to decline further work even    when you consider you already have too much work?
• Would you feel unable to solicit help to alleviate the pressure of workloads?
• Do you find that you sometimes just process a transaction without stopping to consider conflicts or potential conflicts or the risks for you or your clients?
• Do you have lapses of concentration because of working very long hours or because of fatigue or pressures of workload?  Do you carry on working?
• Do you find yourself cutting corners in relation to client work because of the pressures of time/workloads?
• Do you ever give the firm’s undertaking in respect of matters (other than delivery of clear searches) which are not within the firm’s control?
• Do you find yourself answering questions about a client’s transaction or about the terms of documentation without checking the file/the documentation?
• Do you sometimes not bother with file notes of meetings and telephone conversations in order to save yourself time?
• Do you take the view that conducting regular physical file reviews are a luxury for which you do not have sufficient time?
• Do you have any concerns about critical dates which it is your responsibility to act upon not being effectively diarised?
• Do you have any concerns about those critical dates being missed by colleagues in the event of your unexpected absence because of the way you have/have not diarised them?
• Do you consider it pointless to agree terms of engagement for most of your clients?
• Are you unclear about your responsibilities in terms of Money Laundering regulations?

What do your answers reveal?

It is not being suggested that you are necessarily operating recklessly or negligently if you have answered ‘Yes’ to any of these questions.  However, your answers to questions of this sort are indicative of your attitude to risk and risk control.

It is often helpful to consider extremes as these demonstrate the range of possibilities and help you to place yourself relative to these extremes.  For instance, if you answered ‘Yes’ to every question, that indicates that you become involved in situations which will tend to involve additional risks for yourself and your colleagues – risks of claims or complaints.  If, on the other hand, you answered ‘No’ to every question, then this probably indicates that you are aware of the risks involved in various sets of circumstances and choose to avoid those circumstances.

You may find it interesting to repeat this self-assessment exercise on a periodic basis in order to review how your own attitude to risk situations may have changed over time.

Remember, this is not a ‘scientific’ way of measuring risk awareness or your capabilities in controlling the risk of claims and complaints.

Nor is it necessarily meaningful to compare and contrast the answers of one person with another’s.  Personal and other factors including status in the firm/organisation; age and experience; size of practice; areas of practice, geographical practice location will impact on the way individuals answer these questions.

With all these variables multiplied by the number of individuals in a practice, it is easy to see why the management of risk within a practice is a challenging management issue for every practice, large or small.

Contingency planning

If asked to consider what event might result in the destruction or loss of files or the material disruption of our businesses, most of us would probably think of fire or flood as the most likely cause.  An office conflagration or inundation can have devastating consequences for any business but these are not the only disaster scenarios that could have an adverse impact on a legal practice.

It is therefore prudent to have a plan in place describing, prioritising and allocating responsibility for the action to be taken in the event of a theft, fire, flood or other such event as a result of which records are lost, destroyed or inaccessible and the business is materially disrupted.  

The plan should include a list of contact details of those who may be able to provide assistance according to the type of event.  This will include –

• the police
• the firm’s office insurers
• the Master Policy insurers (per Marsh), at least on a precautionary basis – it may be that loss of systems and data will result in claims
• particularly if the firm’s accounting records have been compromised,  the Society’s Chief Accountant.

Arrangements might be made for temporary relocation to other premises in the event of the firm’s offices being destroyed or severely damaged.  Ideally, there will be facilities to enable IT systems to be re-instated on a skeleton basis, sufficient to allow the practice to continue its business.

The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law and (b) is necessarily of a generalised nature.   It is not specific to any practice or to any individual and should not be relied on as stating the correct legal position. Alistair Sim is Associate Director in the Professional Liabilities Division at Marsh UK Limited.