“Any business needs to consider their risk management plan, as it relates to a professional services firm where the delivery of services is so critical on the expertise of the individual people,” he said.

“You need to consider in a broader risk framework: what are your other risks, particularly professional indemnity risk, quality of your services and obviously, business continuity being one of them.”

Mr Deverson said this was particularly paramount for those starting their own firm.

“If someone was departing a mid or top-tier firm to start their own practice, I would certainly have it fairly high on the agenda. For a principal joining another partnership, buying into another incorporated practice, I’d be seeking that in my due diligence,” he emphasised.

“I would want to know what practice measures the firm has in place to mitigate risk, including [having a plan]. And if one weren’t in place, I would have it reasonably high on the agenda or at least have a program in place to get it on the agenda.”

Rather than having a specific plan in place for pandemics, which many businesses now do, Mr Deverson said that firms need to have a risk management plan in case of the sudden absence of a principal. At least 80 per cent of his Lawganised clients haven’t got a complete business continuity plan considered – a number which Mr Deverson said needs to change.

“The consideration of a sudden absence is something that all small firms, particularly solo principal practices need to consider because the sudden absence has a major effect, on not only your clients but equally the risk to your practice,” he said.

VIEW ALL

“And it is something that many firms don’t consider.”

Mr Deverson explained that principals need to consider critical information about ongoing matters, including the key dates, important individuals and who may need to be briefed to take over should they suddenly be unable to come to work. Especially within a smaller boutique law firm with smaller teams.

“But equally, with those solo practices, it’s the myriad of information that is stored in the principal’s head, be it essential records, IT, passwords to your financial records, details of your accountants, you name it. There is so much information that probably resides in the principal’s head that is not recorded,” he added.

“So, one of the key things the law societies will recommend for a solo principal is that they negotiate some sort of reciprocal arrangement with another solo principal that may be supported by a general power of attorney.”

According to Mr Deverson, firms are often so focused on their clients and business needs that they forget to consider what would happen in a worst-case scenario – and the future of their firm. And when they do, it’s often the least important on the agenda.

“I think particularly at that merger and acquisition level where firms are looking to expand, get extra capability, I do believe that business continuity is certainly on the agenda, but it’s very much down the list of priorities,” he said.

However, Mr Deverson has seen different types of power of attorney work as a form of risk management.

“I have seen one of my clients who has a very good business continuity plan in place where this firm, in particular, has two principals. One focuses primarily on litigation; one focuses primarily on transactional work. And in those circumstances, they both believe there’s no chance either could take over from the other,” he explained.

“So, they’ve gone out and spoken with other firms to provide that reciprocal power of attorney. And so, it can work if there is some degree of understanding of the area of law by individual principals.”

Mr Deverson added that in addition to having another law firm as power of attorney, businesses can look into insurance policies.

“Where a solo practitioner has the unthinkable occur, an insurance policy that will fund the practice’s next steps, whatever they may be, in my view is critical,” he said.

“That risk assessment by the underwriters and the insurance costs of that is obviously determined upon what that risk profile is. If that firm has millions of dollars of liabilities, then of course, the profile of that risk is going to be higher, and therefore the insurance premium is going to be higher.

“That’s what you’d be looking to fund by an insurance policy, not to mention other things that are operational expenditure or commitments through supply contracts, printers, leases, you name it. So, yes, it’s a cost, absolutely believe that that is a necessary cost.”

Nonetheless, Mr Deverson concluded that as important as having a risk management and continuance plan is, getting the right advice for your firm remains crucial.

“And any business owner would know as I do, you’re never going to know everything, and that’s why we have advisors around us,” he said.

“That’s why we surround ourselves with good people.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with Ben Deverson click below: