managing your client risks in difficult times peter scott peter scott consulting

Managing your client risks in difficult times

Peter ScottPETER SCOTT CONSULTING

PETER SCOTT CONSULTING

Professional Firm Risks

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Client risks

Financial Regulatory risks Liability to clients Reputation


Your risk management team?

Who has a risk / compliance manager?

Can you afford not to have risk / compliance professionals?


Financial risks

How much is your unsecured investment in your clients?


Instructions W.I.P

Cash Debtors

Work

payment

billing

Managing your client financial risks is a process


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


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


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


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


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?


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?


Your finance team?

Who is in your finance team? Is the team performing? What should they be managing? Could they be improved?


Regulatory risks

Invest in effective compliance: Money laundering regulations Solicitors Accounts Rules SRA / FSA regulation Complaints

Invest in training


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


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?


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


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)


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


3. Insurance implications

Who needs to be insured? ‘D & O’ type policies Who pays? Level of cover? Obligations in members’

agreement Lifeboat policies


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


Day to day operations – on going

What should we call ourselves? Members? Partners? Principals? Directors?


Signing correspondence

“for XYZ LLP” NEVER sign in your own name


Protecting your reputation from client risks

“Regard your good name as the richest

jewel you can possibly be possessed of”

Socrates


Professional Firm Risks

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Financial

Asset

Reputation

Management


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


Any questions?

managing your client risks in difficult times peter scott peter scott consulting

Documents

peter scott consulting

peter scott consulting

llp slide

training slide

process slide

credit risks client

clients reputation slide

client financial risks