Risk management

More of the sameLast week we studied examples of claims that can affect all law firms regardless of which areas of law they practise.

This week we continue the theme by looking at firms which have multiple offices - especially, but not exclusively, those in overseas countries, and why they can be at particular risk.One reason for this is a lack of continuity between a firm's offices.

It is all very well to have excellent risk management procedures at head office - but can you be sure that all your other offices, either regional or abroad, are following suit? It is vital that all offices within a practice comply with the same risk management structures.Supervision is another key factor in controlling risks in any firm, which can increase many times over when more than one office is involved.

Having trusted, experienced people to manage and supervise multiple offices, combined with tight controls and reporting procedures, should reduce the incidence of claims inherent in such offices.

But what can happen when such safeguards are not in place?l A law firm was sued for conflict of interest in relation to a personal injury claim.

The claim was being made against a company for which it had acted previously with regard to a commercial transaction.

Systems were not streamlined between the offices, and as a different office had dealt with the commercial transaction, the office dealing with the personal injury claim had no record that the firm had previously acted for the company.

The litigation was successful and the practice lost not only money, but also its previous status as a good risk practice.l Professional indemnity claims have arisen in the past because of a failure to disseminate information to multiple offices both regionally and internationally.

A good example of this is a firm which, while its head office had understood the new EU legislation and changes in practices and procedures, the senior partners did not explain these changes properly to their other offices throughout Europe.

This resulted in a claim against one of the European offices, where - owing to the lack of explanation from the head office - staff had not understood the new rules, and had not even been aware that they were practising wrongly.

l Rogue employees are also a well-known source of professional indemnity claims.

For example, a firm had a senior partner who, while good at his job, moved offices and began to work in an isolated and unsupervised fashion.

He was allowed to progress cases without reference to others, and follow his own maverick procedures rather than conform to the normal office practice.

He missed some important third-party details in a case, as a result of which he was hit with a professional indemnity claim.These examples show how important it is that firms ensure that good risk management procedures are in place throughout their offices.

It is essential that all solicitors within a firm must be working to similar guidelines and rules.

A professional indemnity insurer will look at a practice as a whole.This column was prepared by the Alexander Forbes Professions risk management team.