The Role of Risk Management Partner/Shareholder in Small to Mid-Sized Firms

PART 1

On the evolutionary scale, most of the time the changes which occur in law firm management happen first to the larger, more complex law firm entities. Many of those changes and alterations, over a course of time, filter down to small and medium sized firms as the practice world grows more complicated and the issues take on the same or a similar cast to those experienced by larger firms. The classic example of this of course is the position of managing partner/ shareholder which has, over the last two decades, become more and more popular in the small to mid-sized law firm environment. This is simply an organic and evolutionary result in response to the growing complexity of managing a smaller law firm: dealing with the business of law as well as managing in an ever more competitive practice environment.

In the same manner, over the last several years, more and more larger firms have started to appoint lawyers to other positions with specific responsibilities aside from and additional to those of a managing partner. One of these emerging choices is that of a Risk Management Partner (RMP). Just as was the case with the adoption of a managing partner role, it would appear to be time for the smaller and mid-sized segment of the law practice world to look carefully at this newer option and decide whether it is appropriate to add that capability to a smaller law firm environment.

The reason for firms adopting an RMP position today is to address the growing responsibilities of managing a group of 20-60 lawyers. Just as those pressures and the corollary management requirements grew in the 1990′s, today, the time constraints involved in focusing on the financial aspects of the practice such as billings and collections, assuring that there are adequate law practice controls in place and simply trying to keep the firm competitive in a tough legal environment (while still trying to practice law) take all the time and effort of the individual in that role. The result is that there are a number of requirements for a risk-adverse, efficient and effective practice where efforts all too often fall very short of the attention which theses categories deserve.

The usage of an RMP is in response to both external as well as internal challenges to the law practice. The position can be customized to involve itself in responsibilities for very important matters which are often given inadequate weight or little co-ordination due to time constraints and/or other factors. These categories of responsibility include issues involving complex lawyer-client relationships, the firm’s relationships with other law firms (co-counsel and joint ventures), managing the professional liability landscape (insurers), the defense of professional liability claims, new matter intake into the firm and advice with regard to ethical constraints. This paper suggests a list of just some of the possibilities for this position to assume.

  • Provide the impetus for the development of practice standards and application of the standards of Professional Responsibility (Ethical Standards) to the firm at large. This includes advising the firm on ethical considerations related to the practice including relationships with the governing bar authority, licensing of the attorney population and representation of individual lawyers in complaints which may have been brought against them.
  • Bring more focus to questions related to professional liability throughout the firm including the evaluation, acquisition and management of professional liability insurance questions including the management of Professional Liability Insurance matters including choosing the broker, assessing the coverage needs, selecting (for approval by the partnership) the insurer participating in claims defense.
  • Monitor the contractual relations with other law firms with whom there are on-going relationships.
  • Manage questions related to conflicts of interest including the development of a conflicts of interest determination program.
  • Help to develop standards for case evaluation and matter intake to insure that cases are accepted where there is expertise in the firm for handling the matter properly and that the firm’s fee agreements are adequate for the protection of the entity and that the agreements are used each and every time. Work with the firm in its development of “best-practices”.

Of course, no one would argue that it really doesn’t matter how these various issues are managed as long as they are managed. That’s the joker in the deck, however. Unless it is someone’s direct responsibility to see that these issues are covered they generally are not addressed adequately and if covered at all and then only on a patchwork basis. Lawyers in firms talk about these particular responsibilities (and others) all the time and leave annual retreats with serious commitments to do a better job on the subjects but the reality is that most firms are not very successful at keeping up the pressure and accomplishing these goals at the end of the day. Despite the very best of intentions, even in firms that are on the whole generally well run most of these responsibilities are not accomplished particularly well in a vast majority of cases.

 

PART 2

The answer to the question of “Why establish the Risk Management Partner/Shareholder (RMP) position?” is reasonably simple: to provide substantially more emphasis to the accomplishment of certain tasks (such as the management of the professional liability insurance issues, assistance in developing a workable and effect conflicts determination program, managing relationships with various Bar authorities and establishing ethical standards for the practice) as deemed significant by the firm. By creating such a position, the firm, even one with a fairly dynamic managing partner position, underscores and emphasizes the significance of these requirements. It is not that the responsibilities are necessarily so dissimilar in nature to those of a well constructed managing partner role but that they have at their core the protection of the firm’s interests in certain discrete categories outside the primary focus of most individuals handling the managing partner responsibilities and outside the focus of even an executive committee. In many firms, these responsibilities are handled in a way which might well be described similarly in the “as time permits” category.

The experience drawn from hundreds of law firm assignments in the U.S. and in the U.K. (Study of Claims, BERMAN & ASSOCIATES, Copyright 2008) tells the story of inadequacies in handling these very important aspects of the practice. Moreover, empirical evidence suggests that in an effort to attend to these additional responsibilities, hence, spreading the responsibilities of the managing partner too thin, the result is a dilution of the effectiveness of the managing partner in attending to their more traditional responsibilities as well.

The truth is that the Risk Management Partner position dovetails very nicely into a well managed firm decision-making (management) structure. It also provides a very welcomed degree of attendance to these issues in firms which may not be so well orchestrated. In other words, in firms where decision making is generally not as effective as it should be, the appointment of a RMP with a tailored position description brings a greater degree of structure to the whole of the practice. In either environment the appointment of a partner “point-person” tasked to insure the accomplishment of these goals is very much a “win-win” proposition.

Sample RMP Position Description

Please note that this is a composite description which will always be altered by the operation of other elements of firm governance (managing partner, general counsel, etc.) and their assigned duties and responsibilities.

  1. Point person for the development and operation of practice standards in the firm
  2. Overall charge of issues related to professional liability and risk management
  3. Overall charge of issues related to the firm’s conflicts of interest elements
  4. Involvement with the standards for new case accession into the firm
  5. Involvement with the firm’s docketing and calendaring operation as it affects risk management