SRA to roll out relationship management approach to larger firms
The Solicitors Regulation Authority (SRA) will use Relationship Management to deliver the risk-based supervision of large and global firms.
The SRA has been piloting relationship management since autumn 2010 with 19 volunteer firms. This has been alongside a trial of a range of new approaches to the SRA’s risk-based supervision of law firms and forms a part of the move to outcomes-focused regulation, introduced on 6 October.
More than 60 firms of all sizes across England and Wales applied to be involved in the pilot, with 19 eventually selected, to represent size, type and geography. Those chosen were then categorised into six groups:
- global and city,
- local, and
- sole practitioner.
The project then involved the team of eight Relationship Managers undertaking a five-step “cycle of engagement”, process that involved identifying, assessing and then addressing risks.
A comprehensive report on the success of the pilot was approved by the SRA’s Compliance Committee on 20 September and has been published on the website. It was agreed that relationship management should continue as a form of supervision for very large and complex firms as the close and continuous interaction enables “effective assessment and management of risks to the SRA’s regulatory objectives”.
The report says that the pilot was particularly successful with larger and global firms as they had “a greater range of issues that require greater engagement to understand”. These findings have informed the decision to apply relationship management to these practices.
The report found that the regulatory issues generated by the smaller firms involved in the pilot were generally less complex and capable of resolution without the use of an ongoing relationship management approach.
Suchitra Hammond, SRA Relationship Manager, said:
“The feedback from all firms was overwhelmingly positive. They saw relationship management as an appropriate alternative to our previous engagement processes, which was evident from the way in which they engaged with us as part of the pilot.
“Because of the resource-intensive nature of relationship management, we had taken the view that it would be most fitting for large and commercial firms. The evidence we’ve collected since we started the pilot proves this to be the case, so we will be rolling out the programme to work with these practices in this way.”
City law firms have already endorsed the decision to introduce Relationship Managers on a permanent basis in a report by Charles Rivers Associates on behalf of the Legal Services Board (LSB) which looked at the work of 21 of the top 200 firms by turnover. It said that “…interaction with The Law Society (TLS) or the Solicitors Regulation Authority (SRA)…has altered recently in the light of the SRA seeking to have staff explicitly responsible for large corporate firms, the use of relationship managers beginning and the development of outcomes-focused regulation. Despite the fact that city firms have sophisticated clients, interviewees were nonetheless generally in favour of being regulated and the role the SRA could play in encouraging best practice in respect of regulation and risk.”
Firms will now be assessed in terms of number of people and offices and turnover to see if their risk factor meets the regulatory criteria for inclusion in the relationship management approach to supervision. Organisations offering legal services as an alternative business structure (ABS) will also be assessed in this way.