Law firm conflict clearance, Part 2: why the centralization shift makes (dollars and) sense

This is part of two in a blog series about moving to a centralized model for conflict clearance. In our last post, we described the four types of clearance models we see. In this post, we explore why a law firm would move to a centralized clearance model and the value of doing so.

Firms large and small are considering a move to a centralized clearance of conflicts. Why is this? In a new world of competitiveness and new pricing models, they see the value to the bottom line in both efficiency and effectiveness. Ultimately, they want their high-cost resources applied to revenue-generating activities, not overhead.

What’s wrong with decentralized conflict-clearance? The major problem is the process is often both inefficient and ineffective. 

• In a decentralized conflict-clearance model, it’s usually a practicing lawyer, potentially with the aid of an administrative staff, who performs the searches. Because the lawyer only performs conflict searches occasionally, he or she isn’t as fast or expert as a person who specializes in clearing conflicts.
• By the same token, lawyers who perform infrequent conflicts searches may not be well-versed in the nuances of conflict review. For example, while ethical conflicts might be considered, a lawyer may not dig deeper to review the larger scope of business conflicts, financial suitability, or riskiness of the work. The pressure to drive revenue may also result in a lawyer who performs a cursory review in order to prioritize the day job. But that’s a dangerous approach: In an increasingly networked global world, even seemingly small matters have the potential to result in big conflicts.
• Practicing lawyers are usually quite busy with their primary business of working on matters. That opens up the potential for delays impacting the conflict-clearance process, resulting in a slowdown in billing for new matters.
• Finally, there are process and technology inefficiencies to consider. Conflicts searches are often initiated and conducted via email. It starts with a lawyer sending out a query about a new matter—and then depending on the responsiveness of other lawyers, who are also working on their own matters and may not prioritize conflicts requests. Worse, emails often drift to the bottom of inboxes of busy lawyers, so they can be overlooked entirely.

A More Efficient and Effective Model

By contrast, a centralized conflict-clearance model provides several efficiencies. A professional, non-practicing attorney completes the conflict clearance and can easily identify potential issues or clear issues that don’t pose risk. This results in a short, focused list of conflicts for lawyers to research, rather than a longer, unvetted list. In the end, they work to complete the conflict clearance quickly, so that the team can start to bill against the matter. This means that conflicts can be cleared very quickly within a reliable timeframe, rather than having to hew to the variable and often slower process employed by a decentralized model.

 Effectiveness is also improved because professional risk staff know exactly where to look for conflicts. They also are quite cognizant of the common, and uncommon, conflicts that a firm might encounter. Their searches are comprehensive, extensive, and protect the firm from downside risk. A dedicated risk staff also typically has access to more sophisticated search tools than do lawyers do—and has received extensive training on how to apply various search strategies within the tool.

 Ultimate Value: Improving the Bottom Line

When it comes down to it, the top reason why firms move to a centralized model is the bottom line. While the efficiency and effectiveness of conflicts is important, and can save firms on overhead, the reality is that when a practicing lawyer, especially a partner, clears a conflict it means they aren’t doing something else. This something else might be billing, mentoring junior lawyers, or engaging in business development pursuits. Without a centralized conflict clearance, firms are employing very pricey resources to solve a mostly administrative problem. Moving to a centralized conflict clearance model often offers a large, positive impact to the bottom line.

In Part 3 of this series, we’ll examine what it takes to move to a centralized model for conflict clearance.

Want to learn more about centralized conflict clearance? Discover more at OnePlace Risk & Compliance and Intapp Conflicts.