Practice management | Compliance health check

Law firm compliance and the associated training requirements have been high on the agenda since October 2011, when outcomes-focused regulation (OFR) replaced the previous rules-based regime.

Compliance is – let’s be frank – not the sexiest of subjects. Couple its dull image with widespread hostility to the introduction of OFR, and it’s a tough call for those responsible for making sure everyone knows about and embraces risk-based regulation.

Most firms have faced up to the challenge, implementing the changes that are needed and undertaking the staff training that is required to meet the OFR requirements. Some practices have even seen the exercise as an opportunity for a root and branch review of how work is done and how client service is delivered. Where risk reviews have shown up archaic working practices and poor client care,

it has enabled firms to address problem areas and work towards better service delivery. And better risk management gives a win-win for the practice and its insurers, as fewer claims means less insurance pay-outs, which should in turn lead on to lower premiums.

The positive aspects of implementing the new regime have been felt by LawNet’s west London-based member IBB Solicitors, where compliance manager Anu Kapila says there is definitely greater awareness, explaining: “Fee-earners are keen to ensure they are compliant, and are referring many more queries to the compliance team than under the rules-based system, and that’s just what we need to effectively manage and grow any compliance system. We’re finding that non-fee earning staff have a heightened awareness of the risk issues due to the raised profile of compliance within the firm, which also helps.”

That said, acceptance of the benefits of OFR is not universal and many firms are experiencing ‘regulatory overload’, however well-intentioned their fee-earners. Another theme that seems to be emerging from discussions with those responsible for the new systems, is that younger lawyers may embrace new systems more keenly. Perhaps they are more in tune with computerised systems and how they can streamline the process, or they may be more open-minded about how to get the job done.

?Cost-efficiency?Getting everyone trained to understand the risks in their area of work is a big challenge. Not least, the costs involved in providing training for all in the practice. LawNet’s annual benchmarking survey for 2012 showed 50 per cent of respondents would not be increasing their training budget for 2012/2013 and 15 per cent had decreased it.

With training budgets under pressure, many firms have been looking to minimise cost by using in-house resources. The LawNet survey revealed that many firms were delivering training on regulatory changes in-house, with 42 per cent of the respondents saying their in-house programme did not cost them anything.

Some firms are using e-learning packages which can be completed at any time; they are usually desk based and have the added advantage of recording activity, to provide an audit trail.

So what is best practice for law firm compliance training? According to Charles Jennings, a thought leader and learning performance consultant in the USA, simply training people in compliance is not going to be enough.

In his blog, ‘Compliance Training: does it really work?’ (https://charles-jennings.blogspot.co.uk/2012/08/compliance-training-does-it-really-work.html), he examines the financial services and banking sectors and concludes that despite tight regulation, this has not translated into highly compliant organisations – as is evident from the issues that have arisen in the banking sector, for example, the LIBOR rate scandals. He concludes that for a compliance regime to be effective, senior managers need to be on board and supportive, and to demonstrate that they actively follow the procedures. They must demonstrate all the behaviours that are expected of them – they must “walk it like [they] talk it”.

This is echoed by Anu Kapila from IBB who said: “Management should be on board, seen to be committed and participating in the training. For us, that’s translating into people undertaking training beyond the mandatory. They are asking for training and support in specific areas, and we find that real life examples are key to keeping people interested and motivated.”

At Vanderpump & Sykes (see panel) training is tailored to the individual’s requirements and compliance manager Andrew Anthony uses IT to track ?training, so he can be sure that everyone?is equipped to deal with the compliance issues that will affect them on a day to ?day basis.

Compliance culture

All this training should help raise awareness of the compliance issues and risks, but it needs to be reinforced with systems and procedures. Which brings us to yet another sharp issue: should compliance best practice include the adoption of a quality standard?

Quality management systems, whether ISO 9001, Lexcel or IIP, are all part of ensuring consistency in procedures and practice, but are the current standards fit for purpose under the new OFR regime?

A basic ISO 9001 system which is not customised to the legal profession is a poor tool for monitoring compliance with OFR. Lexcel, although specifically designed for measuring quality in law firms, is about managing the practice, rather than risk management and it has little depth in relation to OFR compliance.

In order to be a useful compliance tool, any quality standard for legal practices needs to keep pace with the OFR requirements. It’s against this background that LawNet has designed a bespoke ISO:9001 standard which embodies the requirements of Lexcel and the crucial elements of client protection, as set out in the outcomes of the SRA Handbook. It has also been expanded to cover the review and audit of client service. We all know about regulation overload, so ways of bringing together the challenges of quality, regulation and keeping our clients satisfied, while minimising the resources needed to achieve this, look set to become ever  more important.

Standards, systems, procedures, training and quality are all vitally important in establishing and supporting compliance, but the crucial element is an open culture which supports the reporting of any system or policy breaches. While whistleblowing policies are essential for when someone does not feel able to report an issue openly; a healthy compliance regime should encourage open discussion on what is and is not acceptable.

The most successful compliance regimes are those where people don’t see it as something separate and bolted on but an integral part of the firm and how they work. To help create the right compliance culture, COLPs and COFAs may find it useful to identify compliance champions within work teams, who can highlight area-specific risks and issues and then help develop systems and procedures that work for their team.

Induction training can be vital. At IBB, the firm is holding robust induction training for new starters, to ensure that the compliance culture is clear. That is followed up with short, sharp campaigns targeted at specific work areas to keep compliance issues alive within the practice.

Another emerging issue in compliance is how COLPs, COFAs and compliance trainers keep up to date with change and how they can draw on best practice. There are various products on the market, but there is no single, simple way of keeping on top of changes, particularly if budget is an issue. Regular visits to the SRA website is a good starting point; as is monitoring compliance discussion topics on LinkedIn discussions. And creating your own network of compliance professionals can be a good way of sharing best practice, testing ideas and identifying profession-wide trends.

Despite resistance to the new regime, the profession has come a long way in the last 18 months. Attitudes to compliance have shifted across the board, but there is still much to be done to keep the profile of compliance high in law firms. COLPs and COFAs have now taken up their roles and the challenge for the future is how to keep practices on track with OFR compliance in meaningful and cost effective ways.

Copyright & permissions