Firms adopt a global approach to risk management
Intapp provides key findings of risk staffing survey
This is the first of a two-part series examining the results of the 2018 Intapp risk staffing survey. In this post, we summarize the key survey findings. You can also learn more about the benefits of centralizing risk management and the results of this survey in an upcoming webinar, featuring speakers from Dickinson Wright and Greenberg Traurig.
The law-firm risk landscape continues to grow in complexity. A reliance on mergers and lateral hires to support firm-growth strategies increases a firm’s exposure to conflicts, jurisdictional regulations, and patchwork processes. With the proliferation of these risks, firms are taking a threefold approach: hiring dedicated risk staff to serve highly specialized functions, reorganizing their operating models, and investing in technology to augment human effort and establish standardized, scalable processes across distributed offices.
A global approach to risk management
In November 2018, Intapp surveyed a number of law firms to learn how they are organizing their risk teams to address these growing challenges. Representatives of 44 firms responded.
Overwhelmingly, the survey results show firms adopting a global approach to risk management (74% of respondents), in which all offices — regardless of location — adopt the same policies, systems, and operating models, with limited exceptions for local requirements. This approach necessitates a heavy reliance on technology to ensure consistency, but it also requires firms to organize staff in ways that are conducive to the consistent application of policies across all offices and practice groups.
To this end, the industry has largely moved away from the distributed business acceptance model, where lawyers perform client due diligence and conflicts analysis. Firms are now centralizing these decision-support tasks and employing dedicated risk personnel. They are increasingly relying on conflicts analysts to perform the majority of research in these areas.
A centralized approach for conflicts management
All survey respondents indicated that their firm maintains a centralized team for conflicts management. At 82% of those firms, the conflicts team performs at least some level of analysis, though many firms still rely on lawyers for final clearance decisions. Only 18% of respondents indicated that lawyers are still performing conflicts analysis, and those respondents tended to represent smaller law firms where the total volume of clients and matters are much smaller. Similarly, on the client due-diligence side, 84% of respondents indicated their firm employs a centralized team that performs at least some level of analysis, though firms are more likely to rely completely on that team to give clearance to proceed. Again, it is primarily smaller firms that are still relying on lawyers to perform due-diligence checks.
The shift to a centralized business-acceptance model started with the client due-diligence function — and then conflicts clearance followed. Only 29% of respondents indicated that their firms had made changes to their client due-diligence model in the last five years, whereas 42% of respondents indicated the changes to their firm’s conflicts model have taken place in the last five years.
Technology and third-party tools play a key role
Unsurprisingly, nearly all respondents indicated that their firms utilize software systems to facilitate some or all of the business-acceptance process. Most firms also conduct research using third-party databases — such as sanctions lists, corporate-tree providers, or financial ratings — which, in some cases, are integrated into the software system.
The next area for change will be the management of outside counsel guidelines. Although the majority of respondents (87%) indicated they have a centralized team performing review of client-engagement terms, only 23% of respondents reported that their firm has a software system to help manage this process. Several respondents indicated that implementing this software would be a priority for their firm in the upcoming year.
In part two of this series, we’ll discuss the opportunities available to firms who have implemented a centralized approach to enforcing risk-management policies and processes globally. We encourage you to learn and explore the entire Intapp Risk Management Survey and please leave us a comment on our LinkedIn page with your questions.
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