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Law firms must embrace risk as a business growth enabler

'The line between risk and compliance has become blurred,' warns Louise Fleming

7 September 2015

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By Manju Manglani, Editor (@ManjuManglani)

Law firm leaders need to take a more strategic approach to risk if they are to achieve their business growth plans.

That's the view of Louise Fleming, who has 20 years' experience of working with professional and financial services firms in business and risk management.

Now a partner at Aretai Consulting, she believes that attitudes to risk need to change if it is to become a valuable management resource.

"Risk management needs to be seen as a business growth enabler, not a dull board agenda item or a box-ticking exercise," she warned.

"In the current market there is significant opportunity for firms that are prepared to take a positive approach to risk."

The key is to separate risk from compliance, rather than viewing the two as one and the same.

"Firms have been so obsessed with compliance with regulatory objectives that the line between risk and compliance has become blurred," she said.

"Regulatory compliance is one of the risks a firm must manage and, whilst non-compliance may be high impact, in firms with a well-managed compliance function, the residual risk should be relatively low probability."

A strategic risk-mapping exercise can help law firm leaders to identify the areas in which they can grow, as well as the areas in which their ambitions may exceed their risk appetite.

"Firms need to map the risks to their strategic objectives (mergers, lateral hires, international expansion, introduction of alternative delivery models and so on) to get a true picture of their risk profile," warned Fleming.

"Understanding your risk appetite is about determining the nature and extent of the risks your firm is willing to take to achieve its strategic objectives."

For her, a firm's risk appetite should be considered as part of its strategy development process, rather than as a standalone exercise.

"Risk and reward will need to be balanced in a way that is consistent with your firm's fundamental purpose and values," she said.

Ultimately, it's up to each managing partner to embrace risk as a key part of their firm's growth plans.

"Businesses must take risk to make money: the key is to do so with your eyes wide open," said Fleming.

 

 

 

Categorised in:

Business development & Strategy Risk & Compliance