Hello and welcome back to the Fides Weekly Update. Here we aim to provide you with regular insights on what’s happening in your sector. Read on to see the key news stories in legal and compliance and don’t forget to check out the Movers & Shakers of the week.
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1. Regulatory roundtable on… Conduct risk
Following the release of the Financial Conduct Authority’s (FCA) business plan for 2019/20, the regulator has voiced it’s determination to enforce an internal culture of good conduct for financial instructions, eradicating the sector’s long-standing tick-box approach to compliance.
In collaboration with legal magazine The Lawyer, international law firm Gowling WLG hosted a roundtable discussion comprised of risk, compliance and governance professionals to explore how financial institutions are expected to adhere to the FCA’s standards for conduct risk as the regulator marks it a priority for 2019.
Introducing this form of cultural change cannot be completed using a set of guidelines, but rather a tailored approach, where organisations have constructed a definition and structure that suits their own business models. As this brings a host of different challenges, the roundtable participants shared the barriers and successes they face in attempting to establish an effective conduct risk framework.
It seems a key objective is to create a shift in individual mindsets on compliance from reactive to proactive. Both senior and junior employees alike have said they can’t understand why culture change needs to take place if they don’t have any visible compliance problems to be fixed: “Managing people that don’t think they are a risk means they often aren’t receptive to change”.
“This begs the question: if people think there isn’t a problem or risk of non-compliance, how can you put a framework around that?”
Another factor noted in trying to embed this culture is an openness to whistle-blowing. There’s a stark contrast when comparing an organisation that has a whistle-blowing function to an organisation that allows employees to truly feel safe to escalate risks: “This is a good example of where a structural change has been made but not embedded.”
Struggling to obtain a commitment to these principles can be largely attributed to lack of personal responsibility. It was highlighted that this feeling of personal responsibility for conduct risk needs to permeate through every employee in the organisation rather than be perceived as a responsibility of the compliance department.
During the discussion, it was voiced that one potential solution to embedding this culture could be to integrate values into annual performance assessments and incentivise good behaviours. Many organisations have begun to ask about a person’s attitude to conduct risk in interviews for internal promotions and senior hires, but this approach to would further emphasise the importance of good conduct and culture.
Regardless of the size of your organisation, changing the culture of a financial institution is by no means an easy feat. Most risk and compliance professionals will have to cultivate these standards across multiple jurisdictions, each with their own cultural nuances and behaviours, whilst educating and engaging all levels of seniority on the importance of conduct risk.
Click here to read The Lawyer’s full write up and see the list of roundtable participants
2. Clifford Chance launches ground-breaking pilot scheme that removes billable hours as a performance metric
Clifford Chance is piloting a scheme that would eliminate what many innovation professionals believe is the root cause for the perpetual struggle to innovate in the legal industry.
The magic circle firm announced this week that lawyers (excl. partners) in its Dubai and Abu Dhabi offices will no longer have their compensation based upon hours billed, but rather their engagement with Clifford Chance’s innovation strategy and their efforts in building client relationships.
Over the course of one year, the pilot will assess the impact of removing utilisation as a metric when evaluating lawyer contribution and performance in the Middle East. It will instead focus on matters that encompass the wider range of initiatives that Clifford Chance employs, which the firm expects will better outcomes for its clients, lawyers, and the firm itself.
The new performance-based factors will include contributions to thought leadership; applying process improvements to matters; engaging with the firm’s innovation strategy and deployment of the firm’s Best Delivery tools.
Mo Al-Shukairy, Regional Managing Partner for Clifford Chance, argues that: “This pilot is an acknowledgement of…change, and an explicit attempt to try to find a new model that is fit for the future. Our expectation is that this new way of working will bring material benefits to our clients and that our people will also find that it provides new opportunities to explore their own professional development, while advancing the firm’s strategy.”
As a result of this scheme, Clifford Chance will have accumulated an impressive bank of data and insights that will demonstrate what the precise impact on the firm is when lawyers are spending time on initiatives such as diversity, inclusion, wellbeing and legal technology, over client work.
Billable hours is a sticking point that many have been subject to when convincing law firms to adopt a more advanced approach. Increasing efficiencies is counter-intuitive under a firm’s current business model and it will be interesting to see how Clifford Chance’s pilot will affect not only the development of lawyers and their delivery of client services, but also the performance of the Middle Eastern offices themselves.
Movers & Shakers of the week
Six firms awarded spots on the new Post Office legal panel
Ashurst managing partner renewed for another four-year term at the helm
Partners Tara Waters and Jamie Ng selected to become co-chief executives of Ashurst’s new innovation arm Ashurst Digital Ventures (ADV)
Partner Eifion Morris has been appointed Stephenson Harwood’s new chief exec, replacing long-standing head Sharon White
162 year old asset management firm hires its first GC
In-house lawyer Samee Khan has left the Abu Dhabi Investment Authority (ADIA) to join alternative asset manager Gresham House as its first ever general counsel
Mergers & Acquisitions
DWF makes its first acquisition since IPO, purchasing an 85-strong team in Warsaw for £3 million
Simmons & Simmons unveils largest promotions round since 2008
Ashurst promotes 21 lawyers to partner globally, 52% female
DAC Beachcroft promotes 19 to partnership
RPC makes up six new Partners in 2019 round
Irwin Mitchell promotes eight to partner
Bird & Bird bets on Continental Europe in largest-ever promotions round
Equality & Inclusion
Herbert Smith Freehills resets gender partner target
‘Break the dominance of a single metric’: CC pilots dropping billable hours from performance reviews
Linklaters ramps up social mobility efforts with state school outreach
Technology & Innovation
Slaughter and May Picks Six Startups for Inaugural Legal Tech Programme
Linklaters launches Peerpoint-style platform and LOD makes Australasian acquisition