How to Conduct a Law Firm Risk Assessment

“Taking risks doesn’t mean shirking responsibility, but embracing possibilities.” – Vick Hope

Especially if that duty is conducting a legislation agency danger evaluation.

Leave it to an writer and journalist to have a method with phrases, proper? While relevant to anybody’s skilled or private life, we expect this quote rings very true for attorneys and authorized professionals. Recognizing widespread dangers and responsibly planning for them might help your agency keep away from worst-case situations. 

As a authorized skilled, proactively figuring out and mitigating dangers to guard your legislation agency’s status and monetary stability are essential to your success.

If you aren’t certain the place to begin, that’s the place we are available. We recommend kicking off your agency’s danger administration technique with a radical legislation agency danger evaluation — this can show you how to establish the areas of what you are promoting which might be most in danger and allow you to focus your sources on the areas that matter most. 

Is Conducting a Law Firm Risk Assessment Important?

Yes. That’s what this complete article is about. Effective danger administration not solely mitigates losses however may also positively contribute to the aggressive standing of a agency. This is the place you may apply that “embrace possibility that comes from risk” mindset, as conducting a authorized danger evaluation can instill integrity inside your agency and higher your status in the long term. 

It’s additionally price noting that not all dangers are dangerous. Some dangers may find yourself rising your consumer base and even set your agency other than the pack. Risks can in actual fact yield prospects in any case. Just understand that dangers are all the time higher taken when you have got a plan prepared in case issues don’t find yourself the way you thought they might. And, you might even be extra keen to take extra dangers which have a possible upside if what to anticipate if issues go south. 

What Are the Key Risk Areas in a Law Firm?

The first step to assembling a top quality legislation agency danger administration plan is with the ability to perceive what kind of dangers your legislation agency could possibly be up towards. For most corporations, the first areas of danger related to a legislation agency embrace cyber threats, monetary dangers, operational or people-related dangers, agency administration, and strategic and environmental dangers. 

Common Threats Within Top Risk Areas 

Take a have a look at a number of the threats that these widespread areas of concern can pose. 

• Cyber: When contemplating potential dangers to your agency, cyber threats high the listing. From phishing makes an attempt, DDoS assaults, and good old style malware and information breaches, cybercriminals have many alternatives to reap the benefits of and goal what you are promoting or your shoppers’ private information. And even when your agency is well-protected, cybercriminals can get round safety methods by hacking less-protected networks belonging to 3rd events. Truly, there are such a lot of dangers to contemplate when assessing the digital aspect of what you are promoting. 
• Financial: Look at your agency’s monetary dealings, and also you’ll doubtless uncover one other treasure trove of dangers that might contain your inner monetary controls, monetary transparency and disclosure processes, credit score, agency investments, and portfolio. You’ll additionally wish to take into consideration anti-money laundering precautionary measures as part of your evaluation. 
• Operational: The individuals inside what you are promoting may also pose dangers to it. Employment, recruiting, and general administration of your staff’ bodily and psychological well being all have their very own dangers. 
• Firm administration: You’ll have to contemplate the enterprise aspect of your agency when assessing general danger, too. Factors like consumer relations {and professional} duties, together with malpractice and potential litigation assist, needs to be accounted for in your danger evaluation. 
• Strategic: Further, your agency’s reputational and market dangers should even be factored in. A  danger in one other space of your agency may trickle right down to this strategic piece and will find yourself inflicting longer-term harm than the preliminary menace. For instance, let’s say your agency is a sufferer of a knowledge breach. Your IT workforce shortly handles the state of affairs, however phrase will get out and present shoppers wish to cease working with you. What do you do? If you concentrate on this situation in your danger evaluation, you’ll have a plan prepared as a substitute of getting to behave on the fly. 
• Environmental: Last however not least, you’ll wish to take into consideration these circumstances which might be utterly out of your arms as effectively. No one expects — or needs — a pure catastrophe or epidemic to occur, however you may plan for one. 

5-Step Law Firm Risk Assessment 

While drawing up a danger evaluation plan, take into consideration your agency’s objectives and degree of danger tolerance. Once authorized dangers are recognized and prioritized, you may set up controls that restrict danger and expose residual dangers so you may plan for the sudden. Here’s a step-by-step information to assist legislation corporations conduct their very own danger assessments.

1. Identify your belongings. In this case, belongings can embrace issues like income and lengthen to issues like non-public consumer information. Go by every of the areas of concern outlined above to wholly account in your agency’s belongings. Create the listing and break it out by division or concern kind. 
2. Identify the dangers related together with your belongings. Once what you must defend, you’ll wish to establish the potential dangers related to every of them. We know that the dangers going through your agency are huge, so take your time when outlining the potential threats. Proper planning could be your saving grace when worst-case situations turn into actuality. Be certain to remember the person threats that exist for the totally different areas of danger. A complete understanding of each the quick explanation for the chance and its underlying root trigger is critical — addressing the foundation trigger could also be much more efficient than mitigating the chance itself. And the probability of the chance occurring and vary of outcomes the corporate may face are additionally vital to notice inside this part of your evaluation.
3. Identify the fee related to the dangers. Once you have got noticed and analyzed all the dangers, you’ll doubtless wish to estimate the fee or worth of the chance, relying on whether or not the chance has the potential to have both a unfavourable or optimistic end result. You would possibly discover that some dangers are in actual fact price taking. There is a straightforward and commonplace system for this: Risk worth = likelihood of occasion x price/worth of occasion if it happens.
4. Identify learn how to management the dangers. You’ll wish to establish danger mitigation methods and response plans along with the dangers and price evaluation. These response plans ought to embrace a suggestion for what to do and why. Contingency planning is a crucial part in a danger evaluation — it could possibly act as a well-conceived sport plan once you might not be clear-headed sufficient to react in one of the best ways within the second of disaster.
5. Record your findings and revisit recurrently. Risk work isn’t actually executed. You’ll wish to recurrently overview and replace your legislation agency’s danger evaluation to make sure it’s able to do essentially the most for you once you want it. Set a quarterly overview schedule and make modifications when wanted. Just you’ll want to talk any updates to your complete agency. 

Accepting that danger exists and defending towards these threats will solely give your agency an edge towards the precise dangers and your competitors. And who is aware of, you might find yourself taking some dangers you won’t have in any other case felt comfy with, and these dangers may repay in your agency.

Plus, executing a correct danger administration technique may also save your agency cash on insurance coverage prices. Chat with an Embroker insurance coverage skilled right this moment to see how danger mitigation can prevent in additional methods than one.