Whatever approach you take to compliance under OFR, making sure you don’t fall foul is likely to be a significant and ongoing cost (just ask the financial sector). You might find that outsourcing presents the best value.
What is the biggest drain on your time? Clients? The court? Partners? Managing staff? The LSC? Insurers? The bank? Other solicitors? Business development? Endless forms?
Add to that the regulator and your conditions of authorisation. Firms are having to face up to the practicalities of Outcomes Focused Regulation (OFR), and what this means for the newly appointed COLP and COFA.
“How much of my time is going to be taken up with compliance?”
This is the question on everyone’s lips, and it is a critically important one for the health of the business. The answer of course is “It depends”. It depends on how big your firm is; whether you are both COLP and COFA; what systems are already set up, and what needs tweaking; whether you can delegate to deputies; whether your partners and employees are resistant to change or difficult to manage etc.
Suffice to say, we could be talking about a significant investment of time when you include:
- performing an annual compliance audit and gap analysis
- designing systems, policies and procedures to ensure compliance (e.g. conflicts, client care, fee-sharing, commissions, publicity, equality, undertakings, whistleblowing, bribery, mortgage fraud, money laundering etc.)
- designing systems, policies and procedures to record failures – this is often the real challenge: how do you ensure that you are notified of all breaches (not just the big ones)?
- overseeing those systems to ensure they are effective
- updating policies and procedures regularly
- constantly reviewing trends
- proactively identifying, prioritising and managing risks
- reporting breaches and completing the annual information report
- dealing with the SRA
- training staff on compliance issues
Sound like a full time job? That’s the worry. Most practices simply cannot afford for their senior fee earners to be spending 10, 20 or more hours per month on compliance issues! To do so would in itself be a business risk.
So what’s the answer?
You could of course do nothing and hope for the best, although that doesn’t come without its risks and cannot be recommended. For a start, you will sign binding declarations on your COLP/COFA nominations, to the effect that the firm has adequate compliance systems in place. You also have a duty to “comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner” – Principle 7.
You could decide to reduce your fee-earning capacity and increase your non-chargeables, perhaps promoting from within to fill your shoes. That won’t be a realistic option for all firms – and even if it is, when you analyse the costs and benefits that approach it might not be very attractive.
You could work longer hours. And quite frankly, who wouldn’t want to be dealing with compliance rather than seeing their family?
Employing somebody is a legitimate alternative, albeit an expensive one once all the costs of employment are accounted for. (That’s assuming there is any interest in the role from suitably qualified candidates.)
Another option – outsourcing
There is nothing in the rules to say that you cannot outsource the compliance function. You cannot outsource ultimate accountability or appoint an external COLP, but getting help with the time consuming practicalities of compliance seems only sensible. For some firms it could even be one way of demonstrating compliance with Principle 8.
The benefits are pretty obvious. Whilst you are busy earning fees and generating that all-important cash for the business, the vast majority of your COLP duties will be taken care of. This leaves you free to take more of an overseeing role, taking part in monthly compliance meetings and having some input in the annual information report. You get to see the big picture rather than getting bogged down in the nitty gritty of it all.
Outsourcing is nothing new. We routinely outsource HR, accounts, secretarial, IT and increasingly legal work and processes. So long as there is a business case for it, why not compliance too?
If you would like to discuss a quote for outsourcing your compliance, please contact us.
