Risk is a fact of life in business. There are basic risks that apply to every business, but certain industries face unique risks in their field.
In any legal proceeding, there are mountains of documents that get produced, filed, and referenced. And there is plenty of sensitive personal information in those documents. So data breach and privacy security are real, ever-present risks that must be managed. But the two main sources of risk for law firms center on the clients and the lawyers. Coincidentally, these are also the firm’s two biggest assets.
When conflicts arise, clients can sue for professional negligence or file complaints with regulators and state bar associations. In addition to direct costs including litigation expenses and damage awards, client claims can result in client departures, affecting current and future revenues.
Even experienced attorneys can make mistakes and lawyers who wear multiple hats, such as acting as a director, trustee, executor, or who otherwise might have a direct or indirect personal interest in a matter, may be more susceptible to creating conflicts. When a lawyer leaves the firm, confidential client and firm information must be protected.
Law firms tend to have greater volumes of sensitive personal information on their clients than other businesses. A data breach that causes exposure of client information could lead to damage claims, compliance costs, loss of business, and damage to the firm’s reputation that may take years to rebuild.
Law firms are no different from other businesses with a physical location. They must protect their facilities from damage due to severe weather, electrical outages, and criminal break-ins. In addition, the expertise of the attorneys and support staff is likely the business’s most valuable asset, requiring comprehensive employee benefit insurance coverage.