Firms 'fail to assess risk'

BUSINESS OBJECTIVES: survey finds that many staff do not understand employers' strategy

Smaller law firms are failing to evaluate their exposure to risk, with only one-third carrying out formal assessments, according to new research.

The survey of 74 small and medium-sized firms by accountancy firm PKF found that 63% had not carried out a formal assessment to identify key risks facing the practice.

The survey also revealed that while firms frequently thought about problems, few actually took action.

When respondents were asked whether they had informally considered a number of specific risks to their firms, the majority said they had.

However, when asked if they had implemented any controls to prevent those risks, far fewer agreed.

It also showed that a quarter of firms had set no strategic or business objectives for their practice.

Of the 71% of firms which claimed to have objectives, more than half - 53% - were not convinced that all their staff knew and fully understood them.

Sue Weatherson, head of risk management for professional partnerships at PKF, said: 'The problem is that if a firm has no clear aims and strategic objectives, individuals, departments and divisions often become isolated and introverted.'

Legal management consultant Andrew Otterburn added: 'This is often a problem in firms where the management and partners draw up a fine list of principles and objectives, while not keeping all the staff properly informed.'

He said relatively few firms carried out formal risk assessment because they often over-estimated the amount of work involved.

'Smaller firms in particular, which are very busy, do not have the time to carry out a formal procedure and adjust their systems accordingly,' he said.

'In reality, a successful risk assessment will actually help them to run their files smoother and faster.'

He suggested that more firms were coming round to the idea of risk assessments because they believed it would help reduce their professional indemnity premiums.

A Law Society spokesman said: 'The number of people who responded to the survey seems very low and we do not believe the figure is representative of the wider profession.

'Indemnity insurers encourage firms to have risk management procedures in place and Lexcel, the Law Society's quality mark, can only be awarded if risk management criteria has been met.'

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Victoria MacCallum