How to effectively complete a client & matter risk assessment part 3: Identifying and overcoming common risk assessment pitfalls encountered by SME law firms

Category: Blog, Practice Management, Staying Compliant 5th July 2024

This guide, the third in our series, focuses on identifying and overcoming common pitfalls in client and matter risk assessments encountered by SME law firms. Drawing from the Solicitors Regulation Authority (SRA) guidelines, we will explore practical strategies to enhance the effectiveness of your risk assessment processes.

Expert advice on ensuring compliance in SME law firms

In both our Build Better Habits webinar series and our Empowering Law Firm Leaders podcast, we’ve spoken to several compliance experts from Teal Compliance, ILFM, and DG Legal who have shared their best practices and top tips for general compliance. Throughout part 3 of the CMRA guide, we’ve shared their top tips to help you mitigate risk. 

8 CMRA pitfalls most SME law firms face and how to avoid them 

  1. Teams working on and off system

It’s common, perhaps due to lack of training or ineffective change management, for teams or individuals to work off system and follow their own rules. When team members work off system, it becomes harder to track and manage potential risks effectively. This can lead to gaps in information, inconsistent risk assessments, and potential compliance issues. Alex Simmons from The Law Factory explains: When you have a hybrid team, paper-based systems no longer work. [Employees] need to stay on system and ensure all data and actions are kept on your CMS, as that will provide an audit trail to keep you compliant.”

To avoid individuals creating workarounds for client and matter risk assessment processes, and working away from your case management solution, it’s important that the employees have detailed, regular training on the tools at hand. Clear expectations and accountability should be put in place to ensure a firm-wide utilisation of your tech tools. Not only does this assist with compliance and risk management, but increase ROI on your tech investments. 

To make it easier for employees to stay on system, integrate your tools effectively so they can continue to use the system they’re familiar with. Osprey integrates with Word, Outlook, and InfoTrack for example, so it’s easier to navigate between platforms. 

2. Compliance not prioritised by employees

Ensuring compliance with client and matter risk assessment requirements is a fundamental aspect of risk management. However, in many SME law firms, compliance may not be consistently prioritised by all employees, leading to significant risks.

A lack of prioritisation of compliance can be the result of several factors. Amy Bell, owner of Teal compliance, recommends managers be curious as to why processes aren’t followed, “ I’ve seen many cases where people simply don’t like something, so they find workarounds. That’s frustrating but no one tends to ask why and there’s probably a sensible reason. Analyse the tech usage and get a feedback loop so you know why. Perhaps it’s a training issue or the software doesn’t work as you’d expect. Focus on curiosity not blame.”

To overcome employees not prioritising compliance, you have to start with fostering a culture where compliance is a collective responsibility. This can be achieved through leadership commitment, regular communication about the importance of compliance, and integrating compliance into the firm’s core values.

Prioritise continuous monitoring too, and implement compliance-related KPIs and success measures to evidence the importance. Then there is clear expectations, and accountability when individuals aren’t buying into the culture and values of the firms. 

3. Time and workload pressures

When lawyers and teams are overwhelmed with heavy workloads and tight deadlines, they may rush through client and matter risk assessments, overlook potential risks, or fail to implement comprehensive mitigation strategies.

To overcome time and workload pressures, consider the following approaches:

  • Efficient case management: Implement efficient case management software and digital tools that streamline workflows and reduce administrative burdens. This allows lawyers to focus more on substantive legal work, including thorough risk assessments.
  • Prioritisation and delegation: Leverage technology for the process-driven admin tasks but effective delegation across individuals and roles is key to efficiency. Consider assigning responsibilities for monitoring and peer reviewing too, so everyone is responsible for the overall compliance of the firm. 
  • Resource allocation: Access to real-time performance data can help with managing resource and ensure you have enough people, and the right people across your clients and responsibilities. 

4. Inadequate initial risk assessment

One of the most significant pitfalls is conducting an inadequate initial client and matter risk assessment. Similar to the best practices for effectively scoping a case, the more resources, data captured, and questions asked at the outset can save you in the future. 

Firms should implement a structured approach to initial risk assessments and rely on standardising tasks using tech to ensure consistency. Amy Bell from Teal Compliance emphasises, “Automation in risk assessments can significantly reduce human error and enhance thoroughness.” Implementing systematic processes and utilising tools that ensure all necessary data is collected efficiently can greatly improve the quality of initial assessments.

5. Insufficient ongoing monitoring

Risks can evolve as new information emerges or circumstances change, and without continuous monitoring and risk assessments, firms may fail to identify new risk. 

David Gilmore, founder of DG Legal advises firms to: “Regularly reviewing and updating risk assessments is crucial to maintaining a proactive stance on risk management.” Establishing a routine for periodic risk reviews and integrating these practices into the firm’s standard operating procedures can help maintain ongoing vigilance. Real-time risk alerts and updates can also enable firms to stay informed about any changes that could impact a matter’s risk profile.

6. Overlooking regulatory compliance

Failing to adhere to regulatory requirements is a critical pitfall that can result in severe consequences for law firms. SME law firms may struggle to keep up with the complex and ever-changing regulatory landscape, particularly regarding SRA regulations.

Karen Edwards, head of professional development at Institute of Legal Finance & Management (ILFM) emphasises that: “Staying current with regulatory changes is non-negotiable for maintaining compliance.” Firms should leverage compliance tools, resources and regular training to stay up to date with compliance requirements. 

7. Inconsistent documentation

Inconsistent documentation of risk assessments is another common issue that can undermine the effectiveness of risk management. Incomplete or poorly organised records can lead to gaps in information, making it difficult to review and act upon risk assessments.

Amy Bell highlights, “Consistent and thorough documentation practices support transparency and accountability.” By utilising robust documentation tools that generate detailed and consistent risk assessment reports, firms can ensure that all findings, mitigation strategies, and actions taken are thoroughly documented. Taking the documented policies and engineering them into pre-approved digital workflows can build standardised and consistent processes that teams can follow. 

8. Lack of customisation in risk assessments

Generic risk assessment templates that do not account for the specific nuances of different legal matters can result in inadequate risk identification and management. This is often the result of tick-box style compliance requirements that don’t empower individuals to proactively assess the risk for each client and case.  

Customising risk assessment templates, workflows, and data capture forms, to suit various types of legal work, ensures that all relevant risks are identified and addressed. David Gillmore suggests, “Tailoring risk assessments to the specific context of each matter allows for a more precise and effective process.”

Additional strategies for effective client and matter risk assessments

In addition to addressing the specific pitfalls mentioned above, SME law firms can benefit from the following general strategies to enhance their risk assessment processes:

  • Engage stakeholders: Involve all relevant stakeholders, including clients, colleagues, and external experts, in the risk assessment process. Their input can provide valuable insights and help identify risks that may not be immediately apparent.
  • Document the assessment: Maintain detailed records of the matter risk assessment process, including the identified risks, their likelihood and impact, and the mitigation strategies implemented. This documentation is essential for regulatory compliance and can serve as a reference for future assessments.
  • Utilise technology: Leverage technology and risk management software to streamline the risk assessment process. These tools can help automate data collection, analysis, and reporting, making the process more efficient and accurate.
  • Stay informed: Keep abreast of the latest regulatory developments, industry trends, and best practices in risk management. This knowledge can help law firms anticipate and respond to emerging risks more effectively.

Empower employees and utilise tech to effectively complete client and matter risk assessments 

Conducting effective client and matter risk assessments is essential for SME law firms to ensure compliance, protect their reputation, and deliver high-quality legal services. By identifying and overcoming common pitfalls, such as inconsistent practices for teams working on and off system, lack of prioritisation of compliance, and time and workload pressures, firms can significantly enhance their risk assessment processes.

Implementing strategies such as fostering a compliance culture, leveraging technology, and prioritising efficient case management can help SME law firms navigate the complexities of risk assessments effectively. Drawing from the SRA’s guidelines and best practices, firms can create a robust risk management framework that supports their growth and success in the legal industry.

For further advice and best practices you can view parts one and two of our CMRA guide: 

Part 1: A guide to completing matter risk assessments

Part 2: 7 ways Osprey can assist your law firm in completing matter risk assessments