How the issues addressed in a risk management questionnaire from another jurisdiction have been addressed by the Society in Scotland
There’s always something to learn from comparing the approach to risk management here with the approach in other jurisdictions.

A self-assessment questionnaire from a Canadian jurisdiction contains almost 100 questions covering a range of issues from filing, diary and conflicts systems to accounting, personnel management and insurance issues.  These are all issues that have a bearing on the risk profile of a professional practice, on the likelihood of mistakes occurring, of claims and complaints being made.  The subject of the questions in the Canadian questionnaire and the way the questions are framed indicate that there is little about the approach to risk management in that jurisdiction that contrasts materially with the approach being encouraged by the Society here and adopted by an increasing number of firms.  There are questions addressing the following areas of risk:

Filing systems

The fact that there are some 20 questions relating to various aspects of the operation of filing systems indicates the importance attached to this apparently mundane aspect of practice management.

Do you have a borrowing card system for all files?  A borrowing card arrangement is recommended and illustrated in the Flowchart and Model Procedures issued by the Society in March 1999.

Do you avoid having correspondence unfiled?  This highlights the dangers of practitioners working on files which are not completely up to date.  The Society’s Better Client Care and Practice Management manual addresses the importance of filing, as well as the opening and movement of files.

Do you ensure that no file is returned to the filing cabinet without an entry being put in your diary or brought forward system?  Counsels of perfection?  Perhaps, but the relatively high incidence of time bar claims and client complaints of delay and failure to communicate seems to justify the rigorous “belt and braces” approach to diary systems which has been promoted in the Flowchart and Model Procedures, in Better Client Care and in Ensuring Excellence.

Do you have an established procedure for closing files?  Is there a requirement for the responsible partner to review and sign-off a file before it is closed?  Is a letter issued to all clients on final conclusion of the file to address “loose ends”?  Is there a system to ensure that the ledger is clear and all fees and outlays have been paid?  If not, there is a risk that outstanding matters will be left unattended to - retention monies not consigned or uplifted; searches not instructed, delivered or chased up, undertakings left unimplemented.  The Society’s Risk Management flowchart recommends a simple checklist and auditing procedure to ensure files are not closed without account being clear.

Time limits and deadlines

It is not surprising that the Canadian questionnaire contains 15 questions aimed at the operation of the firm’s systems and procedures for avoiding time bar claims.

The questions point up the fact that the firm’s systems need to be understood and adhered to consistently by everyone; that there need to be fail-safes built in to deal with the exceptional case that slips through the net; that there needs to be a monitoring of compliance.

Conflicts of interest

The questionnaire contains a series of questions the terms of which indicate that a checklist approach is considered appropriate.  The Flowchart and Model Procedures promote that approach too.

Communication with clients

There are more than 20 questions in the Canadian questionnaire concerning client communications.  These include questions along the following lines:

Is a client engagement letter issued for every new file?Does your standard client engagement letter include an indication of the sequence of events and timetable for the work in question?Do you adopt the practice of issuing a non-engagement letter when you decline to take on a case; withdraw from acting because of lack of instructions; need to make it clear that you are not representing a party who might otherwise believe that you are?When your advice is not followed by the client, do you write to the client restating your advice, highlighting the risks the client is taking and requiring the client to give clear written instructions to proceed acknowledging the advice you have given?

Communicating with colleagues

The questionnaire asks whether the firm has a manual explaining standard procedures and policies and whether every new member of staff is provided with a copy.

There are questions about instructions to staff on the subject of confidentiality, handling of mail, scheduling of work, passing on work/files.

The questionnaire asks if staff are encouraged to discuss problem cases or ethical issues.  This is an important aspect of risk management.  We all get stuck with difficult files from time to time and we are all capable of making mistakes.  If there is an acknowledged acceptance of these facts of professional life, if everyone is encouraged to share these problems and, in appropriate situations, to pass on a file to a colleague, this will help to avoid problems getting worse and unnecessary stress being created.

The problem with systems…

Sometimes claims arise not because there are no systems but because the systems have broken down in some way.

There may be a thorough system to deal with time limits, but that won’t work if the system isn’t operated consistently - if there are some dates that aren’t being entered into a diary or brought forward system, for instance - or if there are individuals within the firm who prefer to do things differently.

Apart from the risks involved, it is extremely frustrating and a waste of time and effort putting systems and procedures in place if only a few months or weeks later some of them are not being maintained or adhered to. Why does that happen?

Systems may be inappropriate

The systems may not work for those who have to operate them.  In that event, you need to review the systems to make them workable.

Systems may not have been properly explained

If those concerned don’t have a proper understanding of the systems, it is entirely likely that there will be variable implementation and, after a short period, non-implementation.  This really means that systems and procedures need to be put in writing.  This certainly makes it easier to review and update on a regular basis and it also makes it easier to ensure continuity of implementation notwithstanding changes in staff.  New staff can be referred to the written description of all relevant systems and procedures.

No one reviews the system or compliance

Unless someone is assigned responsibility for reviewing systems and procedures and monitoring compliance, over a period of time, there is a real risk that the systems will gradually become inappropriate or fall into disuse.  Regular spot checks and periodic reviews need to be carried out and therefore need to be made someone’s specific responsibility.

Alistair Sim is Associate Director in the Professional Liabilities Division at Marsh UK Limited.

The information in this page is (a) intended to provide guidance on matters of practical risk management and not on issues of law and (b) is necessarily of a generalised nature.  It is not specific to any practice or to any individual and should not be relied on as stating the correct legal position.

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