Risk management

Internal reporting

We have discussed risk ownership before, (see [2002] Gazette, 28 November, 40) and how important it is for everyone to be aware of the risk management and the subsequent procedures necessary.

The resources required to implement the firm's risk management policy must be clearly established at each level of management and within all business units.

In addition to other functions staff may have, those involved in risk management should have their roles in co-ordinating the risk management policy clearly defined.

To monitor and review the risk management process a risk team will require effective review and reporting mechanisms that will ensure that risks are effectively identified and assessed and appropriate controls are in place.

The following questions and issues should be considered with regard to this review process:

- What are the most obvious risks the practice may face? Is it something that the practice does as a whole, or are certain departments more at risk than others?

- How can these risks be prevented? The routes to preventing claims of negligence will probably vary from department to department in the firm, as will the risk factors.

Therefore, it is important to ensure that all risk management procedures are pertinent to each department and their particular risk profiles.

- How should the firm react should a crisis occur?

- How will the practice ensure risk awareness among all employees?

- Are there checks in place which will guarantee that the risk management process is working as it should?

Although it may seem a drawn out process, it is important that everyone within the firm is consulted, to ensure that no areas have been overlooked.

It is sometimes the case that one person may be doing something on a day-to-day basis and not realise that he is putting himself at risk of a negligence claim.

Alternatively, it could be a secretary or an assistant who has seen a partner working in a manner which could leave themselves vulnerable, but previously did not realise that this way of working could be problematic for the practice.

If all staff are consulted when conducting the risk management research, there should be less chance of missing a high-risk area of the practice.

This procedure, and the in-depth research undertaken will provide firms with the information needed to form a comprehensive internal risk report.

Once completed this report will highlight where the practice is most vulnerable and what needs to be done to minimise all areas of risk.

This information will prove to be of great value to a practice and should go some way to maintaining a good claims record.

This article was prepared by Alexander Forbes Professions' risk management team