Managing your law firm’s reputational risk
As Benjamin Franklin once said, it takes many good deeds to build a good reputation and one bad one to lose it – as a few jewellers, airlines, car manufacturers, newspapers and banks have discovered in recent times.
At this year’s Airmic Conference in June, the annual hoedown for the UK’s risk managers, large corporates were discussing how they are now supplementing their five-year business plans with five-minute business plans. After all, armed with a smartphone and a Twitter account, we’re all journalists now and it only takes one individual to expose a serious corporate ball-dropping for a long-standing, reputable brand to be instantly trashed.
Law firms are, of course, just like any other business and face the same issue. As we all know, there is only so much disaster recovery and business continuity planning a firm can do, as events have a habit of circumventing even the best of them. Minimisation rather than elimination remains the only realistic goal.
So, what can law firm leaders do to minimise reputational risk and the damage that can flow from a reputation impacting event?
As the holiday season is upon us, we have prepared a print-out-and-pack REPUTATIONAL RISK CHECKLIST that you can wedge between Hilary Mantel and John Grisham as you head off to your Airbnb haven. It highlights some things that you might want to double-check are on your firm’s risk register and management agenda when you are back at your desk with a view to minimising your firm’s exposure.
INSURANCE Quite rightly, law firms spend days fretting about professional indemnity insurance, but what about management liability insurance (also known as directors’ & officers’ liability insurance or D&O)? This cover is designed to protect senior individuals (including directors, officers, managers, partners, members and compliance officers) from loss resulting from claims or proceedings for alleged ‘wrongful acts’ in the discharge of their management functions. Importantly, it includes a level of funding for legal and other costs to enable individuals properly to defend themselves. This financial firepower can prove critical in protecting an individual’s reputation and, ultimately, the reputation of their law firm. Cyber liability insurance and crime & fidelity liability insurance can also be valuable in compensating firms in respect of loss arising from cyber-attacks and fraud, enabling them to limit reputational damage by getting back up and running quickly and maintaining financial stability. As usual with insurance, the devil is in the detail so it is wise to use an insurance broker with genuine legal sector expertise to advise on and place these policies for your firm.
DATA PROTECTION As you will no doubt be aware, the new General Data Protection Regulations come into force on 25 May 2018 and the regulator will be looking for a few law firm scalps to make sure everyone sits up and takes notice of the new regime. Someone needs to be given lead responsibility for preparing your firm for these new rules as data breaches are set to become even more eye wateringly costly and the inevitable public exposure is never good for a firm’s reputation. It is also worth reviewing your contracts with the service providers with whom you share relevant data to ensure their compliance too.
CONTINUING COMPETENCE Or in my case, continuing incompetence. Professional negligence lawyers are rubbing their hands at the prospect of the disclosure of training records in claims against fellow lawyers. Don’t let it be one of your lawyers who hits the headlines. Make sure your systems and controls for the ‘new’ continuing competence regime are up to scratch and your lawyers properly understand their own training responsibilities.
MONEY LAUNDERING I’ve washed a few fivers in my jeans pocket over the years but this is more about the new Money Laundering Regulations 2017 coming down the track. Make sure someone is on this case and tracking what needs to be done to adapt your policies, systems and controls. Money laundering breaches, however unintentional, tend to become public and undermine confidence in the individuals and firms concerned.
SOCIAL MEDIA Social media ceased being new media a long time ago so, if you haven’t done so recently, now might be an appropriate time to dust off your email and social media policies and refresh your staff training and enforcement procedures. Oblivion is just a click away. Gosh, it must be the holiday mood as I’m not usually this cheerful.
STAKEHOLDERS Maintaining the confidence and support of the firm’s key stakeholders is one of the prime responsibilities of any law firm leader, be they owners, managers, regulators, employees, introducers, investors, bankers, accountants, insurers, brokers or service providers. Having stakeholders who speak positively about the firm (whether you are in the room or not) is a massively important part of managing and enhancing a firm’s reputation. No pressure then!
DIVERSITY AND EQUALITY No doubt you watch the news.
HORIZON SCANNING Whilst not strictly a reputational risk, finding yourself in the wrong segment of the legal marketplace or outflanked by a new entrant can leave you feeling exposed. Keep your eyes peeled, your strategic head on and surround yourself with advisers who are at the forefront of legal sector innovation.