BDO identifies evolution of the legal C-suite
The global financial crisis has put risk management at the top of agenda for law firm bosses and the next five years will see a radical departure from the traditional law firm C-suites, according to a new report from accountancy and advisory firm BDO.
The study into the governance of law firms has revealed that all participants have made changes to their risk management processes in the last five years as risk management has become more meticulous.
Almost half (43 per cent) of 54 senior executives at national, international and global law firms have made significant changes to their processes for identifying and managing risk, including the creation of new risk & compliance boards, committees or dedicated risk management roles.
While risk management was by far the biggest change experienced in legal boardrooms in the last five years, it has been closely followed by changes to governance structures, where 93 per cent of firms had made some change and 43 per cent had changed to a large degree, and approaches to financial risk management, where 96 per cent had made some change and 31 per cent had changed to a large degree.
Despite radical changes, law firm leaders are expecting their management structures to evolve further post recession.
The top prediction from a fifth of participants (22 per cent) was the move to a more ‘corporate’ governance structure over the next five years, in response to a more competitive market. While law firms have traditionally sought inspiration from other professional services markets, increased competition and a need to stand out from the crowd will see the legal industry looking to corporates for best practice.
It was also clear the importance of retaining a sense of partnership within the culture of the firm regardless of the structures adopted, with the vast majority of firms very much focused on the partners themselves as the key stakeholders.
The third and fourth most popular predictions were the greater involvement of non-legal professionals (20 per cent) and non-executive directors (13 per cent). Executive and NED appointments from a pool of ex-lawyers may become a thing of the past, as law firms learn from their corporate counterparts and sector, finance, people management, marketing and technology expertise becoming more desirable.
Three quarters of legal bosses (75 per cent) thought that gender diversity at C-suite level was extremely or very important for their firm, particularly at global law firms. However the figures show that the ratio of women to men was higher at national firms compared to international and global firms. Only 2 per cent of respondents thought that gender diversity will be the greatest change to how law firms are managed in 2020.
Charles Barnett, professional services partner at BDO, said: “Governance at law firms has been overlooked for too long. The legal sector is moving to a buyer’s market and as law firms try to differentiate themselves from the competition, they’ll find that governance will become a distinguishing factor.
“The global recession has been a game changer for C-suites across the world, however it’s clear that this was just a catalyst and the boards will continue to evolve in the coming years. Those law firms that are prepared to take actively review and challenge their approach to governance , implementing more business-like structures, seeking skills outside of the legal industry, and nimbly negotiating the client demands, will find themselves standing out from the crowd.”