managing your client risks in difficult times peter scott peter scott consulting
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Managing your client risks in difficult times
Peter ScottPETER SCOTT CONSULTING
PETER SCOTT CONSULTING
Professional Firm Risks
Peop
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Financial
Asset
Reputation
Management
PETER SCOTT CONSULTING
Client risks
Financial Regulatory risks Liability to clients Reputation
PETER SCOTT CONSULTING
Your risk management team?
Who has a risk / compliance manager?
Can you afford not to have risk / compliance professionals?
PETER SCOTT CONSULTING
Financial risks
How much is your unsecured investment in your clients?
PETER SCOTT CONSULTING
Instructions W.I.P
Cash Debtors
Work
payment
billing
Managing your client financial risks is a process
PETER SCOTT CONSULTING
Get it right when taking instructions
Who should make the decision as to whether a client or a matter should be taken on?
One of the most difficult tasks for a Managing Partner is to tell a partner not to accept instructions
PETER SCOTT CONSULTING
Taking instructions -engagement letters
More than just compliance Build in protection Manage client expectations to reduce
complaints Frequency of billing / ability to stop work Incorporate terms to limit / exclude
liability LLPs will need additional terms
PETER SCOTT CONSULTING
Criteria to be applied?
Credit / cash management? Pricing / profitability? Nature of expertise required? Level of PI cover?
Know your client – - reputation? - new or existing? Conflict checking
PETER SCOTT CONSULTING
Credit / cash management
Work in progress and debtors are credits risks but you are not trained or paid to take credit risks
Client vetting Credit checking Credit limits Money on account Parent company / personal guarantees
PETER SCOTT CONSULTING
Work in Progress How do you manage your work in
progress? Do you record time daily? Do you ‘age’ your work in progress? Do you review all matters - with 30+ days WIP? - where no bills for 30+ days? Do you have weekly / monthly billing
targets Do you agree bills with clients before
sending them?
PETER SCOTT CONSULTING
Debtors
Do you: Have cash collection targets linked to
payments to partners? Review all unpaid bills over 30 days? Use your credit control system
effectively? Permit partners to ‘stop’ bill reminders? Talk to your clients about unpaid bills?
PETER SCOTT CONSULTING
Your finance team?
Who is in your finance team? Is the team performing? What should they be managing? Could they be improved?
PETER SCOTT CONSULTING
Regulatory risks
Invest in effective compliance: Money laundering regulations Solicitors Accounts Rules SRA / FSA regulation Complaints
Invest in training
PETER SCOTT CONSULTING
Managing client liability risks
Best practice Engagement letters Insurance cover If an LLP – then operate as an LLP
Operational compliance iskey to successful use of an LLP
PETER SCOTT CONSULTING
1. Letters of engagement
Problem – members may be liable for their own negligence in tort if they have assumed a personal duty of care to client
Consider disclaimers to prevent the creation of a personal duty of
care to clients ‘belt and brace’ exclusions / limitations designed to
exclude / limit liability of members Extending limitation clauses to cover members /
employees / consultants Provision to deal with use of the term ‘partner’ Application of Unfair Contracts Terms Act 1977 / Unfair
Terms in Consumer Contracts Regulations 1999?
PETER SCOTT CONSULTING
2. Members agreement Problem – liability of a member to LLP in respect of a
claim against the LLP by a third party in excess of its insurance cover arising out of negligence of member
Consider Excluding duty of care and liability for failure to exercise such
skill and care as would be expected of a [solicitor / accountant / other professional] carrying out such functions in an LLP?
Insurance cover (like D & O policies) Indemnities by LLP to members in respect of liability for
negligence as above? Excluding the right of LLP if a joint tortfeasor to seek
contribution against a member or members under Civil Liability (Contribution) Act 1978
PETER SCOTT CONSULTING
Members agreement (2)Problem – liability of a designated member to LLP for
breach of duty of care in carrying out functions as a designated member
Consider Appointing appropriate designated members instead of
appointing all members excluding duty of care and liability (other than criminal)
for failure to use reasonable care and skill in carrying out functions as a
designated member? be responsible for compliance with legislation?
Indemnities by LLP to members? Insurance (like D & O policies)
PETER SCOTT CONSULTING
Members agreement (3)
Consider No member to act or purport to act as the
agent of any other member or members No mutual indemnities to be given No good faith obligation to other members No obligation in the event of a winding up to
contribute in any way to the assets of the LLP in accordance with section 74 Insolvency Act 1986
Avoid partnership language Exclude / vary default rules Exclude s.994
PETER SCOTT CONSULTING
3. Insurance implications
Who needs to be insured? ‘D & O’ type policies Who pays? Level of cover? Obligations in members’
agreement Lifeboat policies
PETER SCOTT CONSULTING
4. Day to day operations – on conversion to LLP
Internal guidance notes and training New retainer letters – for existing and new
clients New stationary / business cards / bill paper etc Empty your wallets / pockets / handbags Website / marketing materials Signage Precedents / documents Emails / faxes
PETER SCOTT CONSULTING
Day to day operations – on going
What should we call ourselves? Members? Partners? Principals? Directors?
PETER SCOTT CONSULTING
Signing correspondence
“for XYZ LLP” NEVER sign in your own name
PETER SCOTT CONSULTING
Protecting your reputation from client risks
“Regard your good name as the richest
jewel you can possibly be possessed of”
Socrates
PETER SCOTT CONSULTING
Professional Firm Risks
Peop
le
Op
eration
alRegulatory
IT
Co
mp
etit
ion
/bu
sin
ess
Eco
no
mic
,p
olit
ical
,fi
scal
Financial
Asset
Reputation
Management
PETER SCOTT CONSULTING
Protecting your reputation Clients are potentially a risk – their
reputation (good or bad) can rub off on your firm
Check out new clients before you take them on
Manage complaints Use specialist advisers if necessary
PETER SCOTT CONSULTING
Any questions?
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