Partners working in “silos” pose major danger to law firms’ risk management strategies

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By Legal Futures

6 December 2010

Office silos: how not to arrange a legal practice

Lawyers working alone in “silos” present serious potential risks to law firms, but limiting partners’ autonomy can harm your practice’s bottom line, a conference heard last week.

Speakers at Managing Partner magazine’s risk management for law firms conference in London warned that under the Solicitors Regulation Authority’s move to outcomes-focused regulation (OFR), firms would be vulnerable if partners failed to buy into a culture of risk avoidance. Compliance officers will need to have the status and authority to stand up to partners who challenge the new culture, they said.

Representatives of two firms urged that steps be taken in particular to prevent partners working in isolation and unevaluated.

Andrew Wiltshire, a former partner and now risk director at Wilsons LLP, a 32-partner private client and charity practice based in Salisbury, said the biggest risk factor to a law firm is single partners working alone: “You have to make sure they don’t work in a silo”. One measure adopted by Wilsons is to make partners work in pairs and to discuss their work. “We’ve even moved partners from one building to another so they couldn’t work alone,” he added. After initial resistance, the partners have come round to the scheme.

Mr Wiltshire said he scrutinises the work of partners, including checking on the number of active files, their billing patterns and even their retainer letters. The firm’s document management system allows him to do this without their knowledge. “Because partners know they are accountable, their attitudes are changing,” he said.

Martin Cross, risk management partner at south of England firm Thomas Eggar, said his firm has changed the way it views risks to the firm and to its financial services company, which manages more than £1 billion in funds. Silo working is “antithetical to risk management” and should be avoided, he added.

Mr Wiltshire advised that under OFR, individuals charged with ensuring compliance will need “appropriate authority and seniority” to say ‘no’ to partners when necessary.

However, a note of caution over compliance officers being heavy handed when challenging partners was sounded by George Wilkinson, a partner in the corporate group at south-west law firm Ashfords. Partners are often instinctively risk-takers who do not think regulations apply to them and will “push back” if change is imposed on them, he said.

Risk managers have to understand partners’ profound sense of “ownership entitlement” to their freedom and privileges. Although this carries potential dangers, it is vital that in supervising partners they are allowed “sufficient autonomy to remain effective”, said Mr Wilkinson.

He went on to list a number of key risks to firms, including reviewing only junior lawyers’ and not partners’ work, failing to identify “rogue” partners in time and conducting inadequate due diligence when bringing in lateral hires.

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