Many of the factors involved in law firm risk management are reasonably obvious. However, some of what is reasonably obvious may, on reflection, be contrary to the perceived self-interests of individual lawyers. Taking a structured approach to risk management helps overcome the self-interests, makes for better risk mitigation and leads to a more productive, profitable firm. Not all risks are of equal concern in law firms. Some risks are very common and relatively insignificant. Some are rare but have a huge impact when they occur. Other risks may be rare but also inconsequential. When underwriting insurance policies, insurers distinguish between risks that are “frequent” and risks that are “severe.” Firms that seek to properly approach risk management should likewise assess their different relevant types of risk so they can understand what strategies to implement in response. Invariably, though, looking at the source of a risk is key to understanding and mitigating that risk. For law firms, the two principal sources of risk are the firm’s clients and the firm’s lawyers—and, not coincidentally, these sources are also a firm’s principal assets. Read More
