Risk Management Column: A New Year – Time to rethink and reassess the approach to risk management
By the time this edition of the Bulletin is published, many practices will be well into the implementation of their strategic plans for the year. As part of the strategic planning, an assessment must be done on the risks that may affect the achievement by the practice of its strategic goals. Improving the way risks are managed must be one of the goals for every practice in 2020.
In the unfortunate event that risk management was not given the appropriate priority in the past, the beginning of the new year is an opportune time to rethink your approach. A prudent approach is to constantly evaluate the efficacy and efficiency of the risk management practices and policies in place in the firm.
A number of organisations have published what are predicted to be the main risk focus areas in 2020. Some these surveys have focussed on certain aspects of legal practice in other jurisdictions. I am not aware of a survey conducted in South Africa which looks into the proverbial crystal ball on what 2020 holds in store for legal practitioners in this country. While these surveys are based on the mandate and area of focus of the respective organisations, several general observations can be gleaned from the publications. These include:
- The importance of constantly scanning the operating environment holistically (internally and externally) in order to identify the risks faced by an enterprise;
- A risk management plan must assess the potential impact of a risk materialising and the development and implementation of a risk management plan appropriate for the identified risks;
- The increase in various forms of cyber related risks;
- The numerous risks arising from the changing regulatory and economic environment;
- Embedding the risk management plan within the enterprise; and
- Concerns regarding the sustainability of legal practices and how certain areas of practice are affected by the identified risks.
Management of risks requires constant action on the part of practitioners. It cannot be assumed that risks will ‘auto-correct’. Practitioners must make a concerted effort to identify the risks applying to their respective environments and then develop measures to deal with the risks. Practical measures must be taken to manage risk. Such measures will include the risk treatment options (accept,avoid, mitigate or transfer). The risk management plan must address the unique circumstances of the practice concerned. No legal practice is totally immune from risk. The obligation to have a risk management plan has its genesis in the regulatory and governance requirements applicable to law firms. The legislation, rules and professional duties of a legal practitioner impose certain risk management obligations on practitioners. Risk management over all aspects of the practice is an absolute necessity and cannot be seen merely as a tickbox exercise, applicable only to some areas. The benefits to the practice and all other stakeholders of the risk management will depend on the attitude taken by the senior members of the practice and the amount of effort put into the exercise. When addressing younger practitioners, I often suggest that in an increasingly competitive market, the manner in which risk is managed in the firm may be the distinguishing factor that sets one practice apart from the competition.
The Legal Practitioners’ Indemnity Insurance Fund NPC (the LPIIF) provides risk management assistance to insured legal practitioners at no cost to the practice. Please contact either Henri van Rooyen (our Practitioner Support Executive) or me should you require any assistance with risk management. We can be contacted on (012) 622 3900 or email us at Risk.Queries@ LPIIF.co.za.
The annual completion of completion of the risk management self-assessment questionnaire is prescribed by the rules and the LPIIF policy. For your convenience, we have included a copy of the questionnaire in this edition of the Bulletin. A copy can also be downloaded from the LPIIF website. The rationale behind the completion of the questionnaire is set out in the note accompanying it. We must add that the information required is important in order to give the LPIIF, being the primary professional indemnity insurer of all practitioners with Fidelity Fund certificates (see section 77 of the Legal Practice Act 28 of 2014), the underwriting information required in order to assess the risk pool.
We look forward to ongoing engagement with the profession with regards to risk. The LPIIF, the Legal Practitioners’ Fidelity Fund, the Legal Practice Council (as the regulator), every member of the profession and all other stakeholders have a common interest to ensure that risk is properly managed by all practitioners. In this regard, we encourage members of the profession to inform us of any risk related topic they wish us to address and to bring any new developments to our attention. To this end, we are also going through a process of assessing our various publications in order to ensure an improved offering to readers. We look forward to your input. Keep a look out for further communication from the LPIIF in this regard.
Our publications this year will cover topical risk matters and we will, as far as possible, attempt to provide members of the profession with practical suggestions on how to avoid or mitigate risks.
Embed risk management in every aspect of your firm, make it part of the DNA of the practice and we trust that you will have a claim-free 2020. All stakeholders in the firm will reap the benefits of a properly developed and implemented risk management plan.
Telephone: (012) 622 3928