Risk management is critically important, but it in itself should never be thought of as the end-goal or discussed in isolation. Instead, it is one element in the road to the true destination. Profitability of your law firm.
Good risk management and corporate governance are actually components of, and very often byproducts of, a focus on profitability.
At Elegrity, we have an enormous concern for good corporate governance and risk management. We push for it in every single business process we work with clients to improve. But in every case, that focus on corporate governance is really just a focus on a key component of profitability insurance for our customers. That's why increased revenue, accelerated cash flow and enhanced profitability are the cornerstone elements of our work with customers. Risk management is something that is necessarily embedded in our work because of its direct connection to the bottom line.
I get worried for our customers and prospects when I see risk management being looked at in isolation of profitability. And, of course, I also get worried when I see profitability being focused on with a disregard for good risk management and corporate governance! It can't be an either/or discussion. It has to be both.
A Broader View Of Risk Management for Law Firm Profitability
Accountability. When people know that there actions and decisions are audited and reportable, a new focus on high-quality and thoughtful decision-making begins to permeate the culture of the firm. Additionally, ensuring the right people have the right levels of oversight based on out-of-the-norm occurrences drives responsibility and accountability where it best fits.
Agility. Publishing policy updates or announcing the firm's new strategic adjustments on the portal isn't organizational agility. Agility is about continually re-injecting policy adherence and strategy shifts into every day work patterns and operations. In this way, risk management is a byproduct of how users work, not something to have to manually enforce. This means you can move your firm quickly, with adjustments almost immediately and consistently inculcated into the firm.
Visibility. We've all heard about business intelligence. What's it really mean? It means you can truly SEE AND UNDERSTAND what is happening, how it is happening, right when it is happening so that you can ask meaningful questions and make pointed, high-value adjustments. It means you can become a PROACTIVE, not a REACTIVE firm - and this is true corporate governance.
Sustainability. Isn't this a major risk for today's law firm survival? Darn right it is. If you don't have an eye on this risk, LOOK OUT. This means sales and marketing must enter the purview of risk management right now.
Social Law Firms. Whether they like it or not, Law firms must aggressively enter the world of social business. New delivery models incorporating in-house, outsourced and transient workforces. New kinds of collaboration. New compartmentalization of work. The management of risk and incorporation of corporate governance across the blurred walls of your law firm is only going to increase in complexity and importance.
Good risk management means better loss prevention (less money taken out of your profits). It means increased efficiency over the long term (because when the right people see the right information and make better decisions, that's more efficient). It means consistency of delivery and quality. It means better sales and marketing with lower cost of sales for sustainability. It means so much - all tied to the bottom line.
The next time someone approaches you to talk about "Law Firm Risk Management" without talking about how it ties to the profitability of your law firm in a much broader sense, beware...you are in old school territory.
This is 2012. We need to be having forward-looking conversations with a much broader understanding of the role of risk management and corporate governance in overall law firm profitability.