Seven steps to effective risk management

The key to effective Risk Management in practice, minimising the risk of errors, omissions and client dissatisfaction, must include being in control of your files, workload, clients and clients’ expectations.

A thorough approach to Risk Management is likely to allow you to  be, and to remain, in C.O.N.T.R.O.L. The first part of this article (February 2003) considered –

Client Engagement

Office procedures manual

No fear culture

T is for

Terms of Engagement – it makes sense to issue terms of engagement.  These should not be regarded as a matter of generating paper just for the sake of it.  Terms of engagement are a critical part of managing the client and the client’s expectations – for instance, by stating what is and is not the practice’s responsibility; what is required of the client (instructions, documentation, signatures) and when; how the fee and outlays will be assessed and charged and in what circumstances these may increase. Bear in mind that this is not necessarily a static document (see Review).   

Time management – quite apart from the necessary technical skills and knowledge, this is an essential aspect of managing files effectively, meeting deadlines and managing workloads and competing priorities.  Simple, effective, techniques include:

• Categorising tasks as Urgent, Important, Non-Urgent etc.
• Scheduling “no interruptions” time for important, complex and time-consuming matters
• Preparing daily action plans to ensure that matters are prioritised
• Setting up a series of reminders in advance of deadlines

Timescales and time limits – in every type of work, not just litigation, there are critical dates, as well as the potential for delay leading to client dissatisfaction.  A ‘belt and braces’ approach needs to be adopted in relation to critical dates – as well as back-up/central diary systems, put in place regular, scheduled file reviews; independent file audits; case review discussions .

Tidy desk – as an aspect of effective time management, it makes sense to aim to have a tidy desk on the basis that a cluttered, disorganised desk acts as a distraction and makes it difficult to prioritise.  It will tend to be an inefficient way of working and will often result in wasted time and unnecessary stress.

Transferred files – whenever a file is transferred from one fee earner or one department/office to another, there is the potential for misunderstandings to arise and for incorrect assumptions to be made eg. about issues previously considered or not considered; critical dates already identified, diarised, communicated or not; etc.  With that in mind, it is advisable to take time to review critical aspects of the file for which you have taken over responsibility.  

(See article ‘Transferred file or hand grenade?’  JLSS August 2001)

R is for

• Review terms of engagement – unless you review the terms of engagement agreed with your client at the outset, you may find that they do not properly reflect changes in the client’s instructions (for instance, a straightforward purchase became a purchase and lease back) and the timescales, feeing arrangements and responsibilities recorded in the terms of engagement will alter accordingly.  When matters are concluded, review the terms of engagement to ensure that the work has been completed as agreed and that the fees charged are in accordance with the agreement.
• Review your own files – unless you conduct a scheduled, physical review of all your files on a rolling basis, there is a risk that a time critical file will be overlooked and not diarised; even if an overlooked file is not time critical, client dissatisfaction may arise on account of failure to communicate.
• Review colleagues’ files – independent file audits of colleagues’ files will assist in identifying a range of issues eg. inconsistency of approach between colleagues; non-compliance with agreed systems and procedures; colleague not coping/over-worked; evidence of dishonesty.
• Review styles and proformas – because of the rate of change in the law and practice, style and proforma documents require review and updating on a regular basis.  This process needs to be structured to ensure that the review/updating is scheduled and that responsibility is allocated/identified.  Another aspect of this process is ensuring that newcomers to the practice/department/team are not using unapproved, out of date documentation.

Rolling diary – this is just one method of avoiding unintended delay and staying in control of critical dates.

Record of meetings/discussions - there should be a contemporaneous record on the file of all meetings and discussions. Otherwise, you may have to rely on your own recollection of a conversation and, in the event of a dispute with regard to instructions/advice, the client’s version will tend to be preferred to your contrary version.  

It may be helpful to use a standard format of file note, one that concludes with a section for ‘Action Required’.  

Minutes/notes might be copied to the client, for approval.  The client’s written confirmation might be insisted on in respect of a contentious issue or if the client is reluctant to accept your advice.

O is for

The second O isn’t a letter at all.  It’s a zero for ‘zero tolerance’.

Zero tolerance for -

• Dabbling – it is not good management of risk to undertake complex, technical work of which you and your colleagues have no experience.  Even if pressurised by an important client, or a senior colleague, you should be firm about declining to undertake the work.  It may be possible to satisfy the client by sub-contracting the work or referring the client to a suitable specialist.  In this event, be clear about the terms of engagement with your client (if any)/the other firm.     
• Non-standard undertakings – in the event of a claim arising out of the granting of a non-standard undertaking, there will be a doubled self-insured amount payable and the claim will affect the practice’s Master Policy claims record resulting in loading of the practice’s future premiums (for a period of up to 5 years).  Only ‘Classic’ Letters of Obligation should be granted.
• Obvious conflicts – claims arising out of breach of the Conflict of Interest Rules result in a doubled self-insured amount and premium loading, as for non-standard undertakings (see above).
• Repeated time bars – while the standard level of self-insured amount applies to the first claim arising out of time bar, any further time bar claims arising (4 specific categories) in a rolling 5 year period are subject to a doubled self-insured amount and premium loading, as for non-standard undertakings (see above).

L is for

Loose ends – the Master Policy claims experience reveals evidence of the  various matters which arise at the tail end of a transaction or other piece of client work being left unattended to and leading to claims.  There are ‘post completion’ tail end matters to deal with in most types of work.  Whether it’s a litigation matter, the administration of an executry estate or establishing a trust, there will be critical matters that need to be dealt with timeously and ought to be on a checklist and in a diary system to ensure they don’t become overlooked.  As well as checklists, diaries and file reviews can all play a part in addressing this area of risk.

Limitation of liability - It seems that solicitors are increasingly giving consideration to the potential for limiting liability to clients by contract.

The wording of any proposed clause limiting liability and the effectiveness of any such clause are matters of law and of professional practice which are beyond the scope of this article.  Subject to complying with relevant rules of professional practice and law, it is for the practice and the client concerned to agree the terms of any limitation of liability.  The Master Policy insurers can have no objection to the principle of solicitors limiting their liability to clients.

Letter of disengagement - occasionally, problems arise where the client has failed to meet his obligations eg. failed to provide clear/timeous instructions and the solicitor wishes to withdraw from acting.  In such cases, you need to be absolutely clear about your position and give consideration to issuing a letter terminating your engagement and explaining (by reference to your terms of engagement) why you have decided to discontinue acting for the client. It is appropriate to refer to the time limits that you are aware of and the implications for the client of failing to comply with those time limits.

The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law, (b) necessarily of a generalised nature and (c) not intended to endorse or recommend any particular product or service. 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 and Financial Risks Division at Marsh UK Limited