Let’s face it- COVID -19 is creating havoc for many businesses. It is upending markets, impacting the travel and tourism industries, hitting the transportation industry and of course negatively impacting the world’s supply chain. It is a crisis. Which means, that companies must treat it as such. Instead of waiting for an official government proclamation that COVID -19 is now a pandemic, it is time to treat this as a serious crisis.

From a risk point of view, what should companies be doing? Well, it’s time to apply risk management processes. Such processes should seek to mitigate and minimize the impact of the COVID -19 crisis. Such processes can include:

- Mitigation of the spread of COVID-19. Does your company have processes in place to minimize the spread of the virus? How are you protecting your employees? Have you considered the HR issues you might face because of the rate of infection? These questions need to be considered.
- Business Continuity Plan. Have you considered a business continuity plan (BCP) to save the company or minimize the impact of the crisis? A BCP would cover the following steps:

1. Analysis- What aspects of the crisis could hurt the company and why?
2. Design- How do you design a response to the crisis? What measures should be created to address the threats?
3. Implementation- How do you implement the measures?
4. Testing- How do you test the Plan to make certain it addresses the threats?

In order to create and implement the BCP, consider the following risk management processes:

1. Assess the situation- assess the threats by setting goals and priorities
2. Identify all of the major risks
3. Do a risk analysis of the major risks identified by conducting a critical risk analysis
4. Implement a Plan that provides countermeasures to mitigate the major risks – i.e. an Action Plan
5. Review the Action plan to confirm whether it adequately addresses the risks and helps mitigate or minimize the risks facing the company.

It is uncertain how long COVID-19 will have an impact on the world's commerce. However, if you take the appropriate countermeasures now and mitigate your risks the less likely your company will later face threats that could seriously impact it.

Law firms and other service oriented organizations are just beginning to realize that risk management concepts apply to them as well as manufacturing based organizations. Lately, consultants are advising law firms to implement project control methods, look at legal processes from a six sigma point of view and even apply the basics of marketing 101 or sales 101 to increase business from potential clients. As the legal industry continues to shift from the old “charge per hour” model, law firms are beginning to realize that not only do marketing concepts apply to the “business and management of law” but risk management concepts apply as well including loss control.

Risk management should be viewed as an essential part of everyday management, including legal management. Managing a company’s risks is not only important but vital. Until recently, lawyers have been trained to think reactively- i.e. to react to a threat or perceived legal risks. But given the recent changes in the global business environment, as well as changes in how law firms manage themselves, attorneys and support staff must now learn to proactively manage risks. Such proactive management encompasses a large area of not only pure legal risks but also business risks that could lead to legal threats and issues. In essence, lawyers must now learn to proactively manage risks by minimizing risk, mitigating risks, transferring risks and eliminating risks. All are in a sense a proactive response to a risk rather than a purely reactive response. This of course includes minimizing costs and using processes or tools to minimize costs and risk.

Loss control is a tool that a law firm or other service related organization can utilize or should use to minimize or reduce risk. If properly used, loss control can reduce losses and decrease exposure associated with such losses. Loss control can of course be simply defined as “efforts that reduce expected losses”. But of course it is more than that as it encompasses management of efforts that reduce expected losses – or in other words processes that can prevent, reduce, or mitigate losses. Loss control processes, in other words, if properly used, can mitigate and reduce risk. Normally, loss control processes can be very effective in reducing costs and expenses faced by any organization, especially a manufacturing company that manufactures products. But it can also be applied to service organizations such as law firms or accounting firms.

The traditional definition or concept of loss control relates to loss prevention or loss reduction that is associated with products or monies related or associated with products. Loss control processes are normally divided into two main categories—loss prevention and loss reduction and are defined as follows:

Loss prevention: activities that reduce expected losses of inventory or monies associated with inventory by proactively reducing the frequency of losses

Loss reduction: activities that reduce expected losses of inventory or monies associated with inventory by decreasing the size of the loss, which is a reactive and not a proactive process

Applying these concepts to a law firm or service related organization we can see how six sigma and other concepts such as project management can be utilized as a loss control process. After all the main goal of six sigma as well as and project management would be to improve efficiencies and minimize waste or the costs associated with waste. Law firms tend to over analyze and over process matters. How much cost can be saved if documents are no longer over processed or over analyzed? How much time can be saved for more productive matters? From a loss control standpoint, what processes can a law firm or law department implement that reduces cost and monies associated with cost? What efficiencies will be gained once project management processes are implemented?

Six Sigma and Loss Control

Six Sigma has been championed by companies such as GE, Motorola, Samsung, IBM and others. Originally promoted as a process to improve profitability it is really about reducing expenses, waste, and loss as well as adding value and efficiency. Consider using six sigma when reviewing processes that involve:

(i) Client expenses
(ii) Office expenses such as mail
(iii) Review of documents
(iv) Use of software

Project Management

Project management has become another Legal Risk Management tool or process that has become more popular amongst law firms lately. Firms are realizing that once they get away with the old “charge per hour” paradigm and start focusing on alternative fee arrangements there is really a need to manage the matter on a project by project basis to contain and reduce costs.

Parts of a Project Management Process

(i) Initiation of the matter- this includes the scope of the matter, the desires of the client and the goals of the client and law firm.

(ii) Planning of the project- just like an architect plans the design and building of a house or a building, the planning portion of legal project management covers the key decisions in achieving the desired outcome.

(iii) Implementation- this is when the firm of the staff conducts the work to implement the plan.

(iv) Monitoring of the project- is the budget being followed? Are the expenditures reasonable for the work being performed?

The concepts of loss control (and really risk management) can be applied to the legal industry as well as other service industries. Just because the original concepts were applied to the manufacturing industry doesn’t mean these concepts can’t be applied to service related organizations as well. Remember, for law firms it’s all about effectively and efficiently representing clients in a manner that not only achieves the goals and objectives of the client but does so at minimal cost and expenses. The more efficient a law firm becomes at handling matters at minimal cost, the more value the firm adds to the client’s business. The will usually equate to a higher client retention rate.

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