Most small to mid-sized firms have trouble with risk management

By Thomas Berman, Principal, Berman & Associates

This is a first of a two-part letter on the role of a risk management partner in small to mid-sized firms.

On an evolutionary scale, the changes which occur in law firm management tend to happen first in the larger, more complex law firm entities. Many of those changes and alterations then filter down to small and medium-sized firms as the practice world grows more complicated and the issues take on the same or a similar cast to those experienced by larger firms.

A classic example of this is the position of managing partner which has, over the past two decades, become increasingly popular in the small to mid-sized law firm environment. This is simply an organic and evolutionary result in response to the growing complexity of managing a smaller law firm: dealing with the business of law as well as managing in an ever-more competitive practice environment.

In the same manner, larger firms have been increasingly appointing lawyers to other positions with specific responsibilities aside from and additional to those of a managing partner. One of these emerging choices is that of a risk management partner (RMP).

Just as was the case with the adoption of a managing partner role, it appears to be time for the smaller and mid-sized segment of the law practice world to look carefully at this newer option and decide whether it is appropriate to add that capability to a smaller law firm environment.

Time to change

The reason for firms adopting an RMP position today is to address the growing responsibilities of managing a group of 20-60 lawyers. Just as those pressures and the corollary management requirements grew in the 1990s, the time constraints currently involved in focusing on the financial aspects of the practice take all the time and effort of the individual in that role. This includes managing billings and collections, ensuring that there are adequate law practice controls in place and trying to keep the firm competitive in a tough legal environment (while still trying to practice law).

The result is that there are a number of requirements for a risk-adverse, efficient and effective practice where efforts all too often fall very short of the attention they deserve.

The usage of an RMP is in response to both external as well as internal challenges to legal practice. The position can be customised to involve itself in responsibilities for very important matters which are often given inadequate weight or little coordination due to time constraints and/or other factors.

These categories of responsibility include issues involving complex lawyer-client relationships, the firm’s relationships with other law firms (co-counsel and joint ventures), managing the professional liability landscape (insurers), defending professional liability claims, managing new matter intake into the firm and advising on ethical constraints.

Of course, no one would argue that it doesn’t really matter how these various issues are managed, as long as they are managed. That’s the joker in the deck, however: unless it is someone’s direct responsibility to see that these issues are covered, they are generally not adequately addressed. If covered at all, it is often only on a patchwork basis.

Lawyers talk about these particular responsibilities (and others) all the time and leave their firms’ annual retreats with a serious commitment to do a better job in these areas. But the reality is that, at the end of the day, most firms are not very successful at keeping up the pressure and accomplishing these goals. Despite the very best of intentions, even in firms that are on the whole generally well run, most of these responsibilities are not accomplished particularly well in a vast majority of cases. 

tberman@bermanassociates.net