‘Eton College, reputedly “the chief nurse of England’s statesmen”, had to tell its pupils to stay away after a 13-year-old schoolboy tested positive for swine flu last week,’ (as reported in The Times, 31.5.09). As the educational home of the Duke of Wellington, Horace Walpole, Harold Macmillan, as well as David Cameron and Boris Johnson, this unexpected debacle will have put enormous pressure on not only the school, but of course the globally-based parents: an organsational headache to say the least.
Managing the shifting sands
Most organisations know they need to have contingency plans to protect their business and the interests of staff, clients and suppliers in the case of an unexpected incident. This ranges from a simple missed deadline, a sloppy or negligent piece of professional advice, to full blown disaster recovery. The reality that most people do not foresee are the things that bring them down. Whilst it is "not done" to suggest the firm may face a disaster,) can your firm afford a puddingy mess?
- What would your firm do if faced with a serious, unforeseen calamity?
- How well followed and used are those ‘tedious’ policies and procedures?
- Could some staff behave as though they believe they are ‘above all that’, invalidating your insurance? (It happens!)
- Have you recently measured the impact of the unintended consequences to you and your clients if you had to close an office tomorrow morning?
It is likely there are a few smug businesses confident that should a crisis arise, or claim made – they will all know exactly what to do: my congratulations to them. However, few practices are static with regards to staff, clients or suppliers, and any and every shift in the dynamics is a risk to your Risk Management processes.
These shifting sands cover any changes to staff, (including roles, responsibilities and knowledge) changes in the external world / environment including Governments, fiscal policies, epidemics, or sector issues, such as the banking and financial crisis. None of these may be as a result of your own action, nevertheless, your business is affected by them. Some firms may not be able to sustain even a few weeks of inactivity and whilst you may think insurance will cover this, the cost, if the pundits are right, is due to go through the roof.
A deeper truth on risk management:
The other day at a Conference in London we were discussing how to manage the Return on Relationships, Emotional Capital and the spirit of staff in any organisation. Very HR and soft-skills stuff, I grant you, however, when we progressed on to look at the behaviours of those staff in relation to risk management we started to get closer to a deeper truth.
Managing risk is not the issue – but rather everyone’s approach to it, their understanding about why it is important, their ability to identify where the greatest pain and likelihood of hazard is and winning consensus on actions to be taken. Balancing the importance of likely risks versus the importance of likely rewards leads organisations closer to an effective avoidance process and profitability. Failing to bring staff and partners along on the process will defeat the firm in the end, and cost a fortune.
Box Ticking – a hazard in itself:
All the systems and procedures in the world cannot manage human behaviour. Tick box procedures,in paticular are now widely known to be relatively ineffective because of the old adage "familiarity breeds contempt". They are often ignored, over-ridden or just fall into disuse, because people don't understand why they are there and what they are for.
Over the years there have been many approaches to addressing Risk Management including the introduction of Lexcel, Investors In People (to a lesser extent) and of course the ISO standards. External Advisers have encouraged firms to be audited against these criteria, to write up complex procedures, and then ‘tick that box’ which has gone a long way to highlight risk issues and is excellent. Through implementing these standards, many firms have seen reductions in Complaints and Negligence claims, improved client relationships and delivered better quality work in the early years of implementation. This in turn did, in some cases, lead to those firms getting reduced (or not increased) Professional Indemnity insurance premiums.
Have you budgeted for an increase of 30 – 40% in PI cover?
Experts in the insurance world are saying that whilst it may have been ‘soft’ over the last few years, critical to today is the total unpredictability in this sector. Do you want to trust to luck or do something about it? Increases in Professional Indemnity premiums could be as high as 40% and in some cases much, much more. Reasons for complaints and negligence claims consistently remain to do with attitudes, communication and poor service. This demonstrates a continuing ignorance by Partners and Directors of how vulnerable their practice is to the individuals within it. Behaviour is the uninsurable element of a professional firm, and clients’ will no longer tolerate the irritation and frustration they experience with (perceived) expensive professional advisers.
Many fee earners especially in the small to medium sized practices are being asked to do more complex work in less time and for price-pressured fees. Unless time is invested in helping them understand the impact of their actions and Partners/Directors are genuinely committed, firms will remain vulnerable. There is time between now and the end of September to start embracing better approaches to risk management and demonstrate to insurers a genuine willingness to address risk. You could save money and peace of mind: after all, you don’t want to be a puddin’, do you?