Risk management

Contingency planning

With the devastating flooding which has hit much of Europe during the past few weeks, it has been reported that some law firms in Prague and Germany have had to close for business.

In light of this, how confident are you that your firm could continue to practise should disaster strike?

Contingency plans are something that the larger law firms - those with 20-plus partners - tend to have in place, owing to the nature of their business.

However, for the smaller firms contingency planning tends not to be at the top of the list of priorities.

Understandably, most partners would view the likelihood of fire or flood as minimal.

Nevertheless, it is important, and a necessary part of good risk management procedures, to have a disaster recovery plan in place.

Here are some examples of how you should be protecting your firm against the threat of not being able to practise.

- Who's in charge? Probably the most important part of contingency planning is having one person in your firm with the responsibility of letting all staff know what has happened, and what they should be doing.

This person should have a list of telephone numbers for all staff kept outside the office.

- Hard copies of all paper and electronic files should be kept in fireproof and waterproof cupboards and cabinets.

It will be of little use, if hit with a claim of negligence, to try the excuse that the files were damaged.

Your files are always your main back-up when disputing a claim of negligence and failure to produce such files will probably mean the claim is upheld.

- All computer systems should be properly backed up so if anything goes wrong with the computer, files will be current up to the previous day.

For example, certain law firms have been sued for loss of documents following the World Trade Centre disaster in New York.

- If the office is uninhabitable, you need to have an alternative location in mind.

Whether it be an archive office in another building, or even using another practice's offices or meeting rooms.

A client will more than likely bring an action for negligence if the completion date on a deal is delayed, regardless of the fact that you had no office to work in.

- It is important that you also have access to headed paper, telephones, fax machines and computers if your office is out of action.

A client waiting for work to be completed is unlikely to be satisfied with a response of 'sorry, we couldn't get our hands on a fax machine to complete the deal in time'.

- Make sure your insurance limits are adequate and that cover extends to include increased costs of working cover.

Ensure protection is available to cover costs of restitution of documents.

A practice prepared for all eventualities will be looked on far more favourably in the event of a notification being made.

It is up to the practice to prove it has not been negligent, and if the relevant files have been destroyed for one reason or another, it will not instill confidence in the judge, and the firm will more than likely end up paying out.

This column was prepared by the Alexander Forbes Professions risk management team