Is the next US president on your risk radar?
The latest Annual Law Firms Survey from PwC – its 25th – paints a mixed picture of the state of law firm risk management.
On the one hand, it says that firms – like many of the organisations they advise – are responding to pressures by raising the profile of risk management year on year. There's an increasingly clear expectation that boards identify and monitor an appropriate framework for the organisation to follow.
But in spite of several high-profile security breaches in 2016, only 63% of firms had run a test of their business continuity plan in the preceding 12 months – which seems a pretty significant drop from the 85% saying they’d done so in 2015. Admittedly, the number that focused any such test on a ‘cyber’ scenario did grow from 20% to 34%. But does this perhaps suggest firms risk focusing on some risk areas at the expense of others?
Other findings include that the number of firms with an internal audit function has increased from 40% to 56% in a year. However, PwC suggests the focus of those functions may be insufficient, both too narrow – restricted to financial and compliance matters – and under-resourced (“well below” the standard UK benchmark of 0.05% of business revenues, it says).
Another commonly accepted sign of a healthy risk management framework is an up-to-date ‘risk register’ – something that may well need updating more regularly for the world we find our businesses facing. For example, continuing uncertainty surrounding Brexit is affecting exchange rate movements, which not only impacts financial reporting, but also inter-office transactions, remuneration arrangements and negotiation of client contracts, explains PwC.
You’d certainly hope that the evolving political scene would factor into law firms’ risk strategies one way or another – and if not .... well, perhaps this is the year that ought to start. But what, I wonder, about the chances of individual candidates winning power? Perhaps your business even does detailed scenario planning that considers growth prospects in light of the precise combination of potential world leaders?
I ask, because I see a survey from The Risk Advisory Group finds over a quarter (27%) of compliance professionals feel the imminent election over in the US is one of the biggest risks to their business for the next 12 months – and 80.5% are more worried about Donald Trump. That obviously – and for the sake of balance – means 19.5% see a greater risk posed by Hilary Clinton.
Of those that see Trump as a risky prospect, a fifth (22%) point to avowed policy positions – one for example, suggesting “greater protectionism” would hit both clients and those clients’ own customers. But for the other 78%, the problem is less specific policy than general (unsettling) uncertainty – or as one individual politely puts it, that he would be “more likely to institute random change.”
Just over half (55%) of the Clinton-risk-averse, meanwhile, cite aspects of her political record and pledges.
Could the election even pose a risk to a firm's future global talent supply? A recent press release describing a poll by digital insights business Toluna tells me that two-fifths (41%) of US residents think Clinton’s campaign has had an overall positive impact on the legal profession (31.6% said negative, and 27% no impact at all). And just over half (58%) said Clinton’s profile would impact on young people choosing law as a career (though whether that’s positive or negative, it doesn’t say).
And what of Mr Trump? More than a third (35%) polled put their tick in the box that said he would have a positive impact on young people going into the property sector – although when it comes to minding his own business’s post-election risk profile, 53% saw fit to recommend a rebrand.