Thursday, 30 April 2020

COVID-19 Pandemic and Risk Management

The COVID-19 pandemic has created an environment of profound change and uncertainty for the legal profession.

Change typically increases risk as legal practices deal with new laws, a tighter market for legal services, changing needs and expectations from clients, and news ways of working, both internally (working from home) and externally (access to courts and other legal remedies).

Legal practices should recognise the need to manage the risks that arise from these changes and take measures to prevent or mitigate risks or allocate them to other parties.

Law Mutual (WA) has identified three key risk areas arising from changes brought about by the COVID-19 pandemic, along with potential response measures:

1. Uncertainties over service approach, outcomes, timing and cost

Changes to court access and legal remedies, substantive laws and working from home will each impact how practices provide services and the time and cost of doing so. To avoid disputes, insureds need to actively manage their client’s expectations and desire for certainty around cost, timing and outcomes.

Response measures:

• Review existing costs agreements and other undertakings to clients on outcomes, timings and costs. Where any of these are now unrealistic or uncertain, communicate with the client and have a discussion around that uncertainty -  what is uncertain and why, what are the range and likelihood of outcomes, and who will bear the risk (and cost) of that uncertainty – the client or the practice? 
   
• Adopt a similar approach for future costs agreements and ongoing communication with clients on outcomes, timing and costs. Regularly revisit and revise assumptions the practice and client might have made regarding the legal, business and personal context of the matter.  Identify areas of uncertainty and have discussions with clients around outcomes, legal strategy, timing and costs.      

2. Changes to legislation and the firm’s risk appetite   

The pandemic will continue to result in new legislation, or changes to existing ones, that are drafted quickly and have potentially widespread and uncertain impacts. At a time when many practices are seeing existing work put on hold, these legislative changes increase risks associated with:

• Working outside current expertise in order to attract new business and sometimes taking the view “no one is an expert in this new law, so why not me?”
   
• Working within their area of expertise, lawyers fail to identify or properly understand the application of sudden legislative changes.

Response measures:

• Explicitly discuss and manage the practice’s risk appetite. If there is a consensus appetite among partners for higher risk work, then actively manage that risk by investing in legal research and the engagement of external counsel to acquire expertise. 
   
• Review how the practice identifies and understands legislative changes and how this information is disseminated within the practice. Is there now a need to further invest in newsletters, ongoing research, or new networks? How does the practice ensure that all information on changes is disseminated to people working from home? 

3. Working from home arrangements undermine processes developed for the office

Many processes designed to protect a practice or manage the quality of its legal services were developed for an office environment and may not be fully effective when people work remotely. These processes might include verification of identify, screening clients, conflicts checking, managing files and information, maintaining client confidentiality, tracking and meeting deadlines and supervising juniors.

Response measures:

• Review key processes and identify those that rely on face-to-face meetings and/or access to physical documents or office-based IT systems. Law Mutual (WA)’s Matter Management Guidelines (the Guidelines), which sets out the 33 activities of any legal matter, provides a useful structure for this review, and can be downloaded from the Law Mutual website.
   
• Assess which processes are now ‘high risk’ and develop ways to maintain service quality and protect the legal practice.
   
• Draft a work plan to implement these improvements.

Table 1 provides a high-level assessment via a heat map as to which activities in the Guidelines become higher risk in a remote working environment.  

Table 1: Pandemic Matter Management Heat Map
(Click on the image to enlarge)

Upcoming Webinars

To further discuss and analyse the areas of increased risk for legal practices, Law Mutual (WA) will facilitate two interactive webinars to consider which risks arising from the COVID-19 pandemic are of greatest concern and what response measures legal practices should consider implementing.

Register below to attend one of the COVID-19 Pandemic - Risk Management for Legal Practices webinars:

Places are limited. Please complete and return the registration form to cpd@lawsociety.asn.au by Friday, 8 May 2020.

Attendance at the webinar provides 1 CPD point in Competency Area 1 – Practice Management and 1 hour of Law Mutual Risk Management Training.