City: resource-intensive nature of relationship management means it is most fitting for large firms
The Solicitors Regulation Authority (SRA) is to roll out supervision of large City and national law firms through relationship management after a successful pilot.
The year-long pilot, which involved 19 volunteer firms of various sizes, also highlighted outsourcing as an issue to which the SRA needs to pay particular attention.
The project involved a team of eight relationship managers undertaking a five-step ‘cycle of engagement’ process that involved identifying, assessing and then addressing risks.
A report on the pilot concluded that “larger and global firms present a greater range of issues that require greater engagement to understand and address. This is not because larger firms are inherently more risky but that they are more complex, requiring more detailed understanding, and if, a major event were to occur, the impact on the SRA regulatory objectives would be greater”.
Smaller firms, by contrast, “took up less resource in terms of engagement owing to the fact that the issues such firms presented were less complex and more easily resolved. The risks to our regulatory objectives presented by these firms were assessed as low”.
The report said that in its preparations for the pilot, the relationship management team identified outsourcing, and the related issues of offshoring and near-shoring, “as potentially involving key risks to the SRA’s regulatory objectives” and so focused on it “as an area of particular interest”.
The report says the pilot – and meetings with others in the outsourcing market – have helped produce a better understanding of how outsourcing might develop and where the greatest risks to the SRA’s regulatory objectives might lie. “This work is ongoing.”
Relationship manager Suchitra Hammond 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.”
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. Alternative business structures will also be assessed in this way.
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