A survey, conducted by Legal Business magazine and Marsh, concludes that the economic downturn has produced new risks for Britain’s leading law firms. Four-fifths of respondents believe that the recession had increased the risks facing their firm in the past 12 months.
The survey identified four new risks to the UK legal sector created by the current economic climate, in order of severity:
— 47 percent – client liquidity or risk of bad debt – 47 percent
— 28 percent – credit or other financial problems – 28 percent
— 11 percent – increased regulatory burden – 11 percent
— 9 percent – clients looking to apportion ‘blame’ – 9 percent
Overall, the top five risks identified as facing law firms in order of severity are:
— Bankruptcy or acquisition of significant clients
— IT security
— Pressure on fees and the need for ‘instant’ advice leading to claims
— Conflicts of interest
— Errors made by staff/lawyers on complex, high-value transactions
Marsh conducted the survey last January, polling the UK’s 100 largest law firms. It “also found that claims for negligence against property lawyers were increasing dramatically,” said the bulletin.
Sandra Neilson-Moore, European Practice Leader for Law Firms’ Professional Indemnity at Marsh, explained: “There is a historical correlation between an economic downturn and claims. We have already seen a rise in claims. There are a greater number of notifications that are truly substantial. When clients get hurt many seek to recover their losses by blaming their corporate advisers. Accountants are looked at first, and lawyers are not that far behind.”
Stephen J Doggett, senior reporter at Legal Business, and author of the report added: “The recession has pushed risk management up the agenda for many of the world’s leading law firms. Many law firms used to look to at the financial sector as providing the best examples of what they thought were robust risk management policies. That view has now taken a knock and, consequently, many law firms are actively reassessing their own strategies for risk management.”
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