Tackling the root causes of risk

The definition of insanity is said to be doing the same thing repeatedly and expecting a different outcome. And yet, for many corporates, their approach to dispute risk hints at that. What if there was a way to use data to better engage with risk?

The challenge

Most client organisations will have an instinctive feel for what is driving risk, claims and disputes within their business. However, they will struggle to quantify it and prioritise the measures to manage that risk. As a result they will lack the business case to invest in addressing issues.

Over and over again organisations subject themselves to risks with common features. This creates commercial exposure as well as legal cost and business distraction. Profitability is affected. Working closely with one FTSE blue chip, we delivered a programme of work aimed at addressing this.

As our client observed, while most legal advisers will focus on providing an ambulance at the bottom of the cliff, we focused on building fences at the top.

The solution

Traceable Causes was a programme aimed at identifying and addressing the root causes of risk, claims, disputes and litigation within the sector before they happen. The aim was to support the in-house legal team in developing a targeted investment plan to reduce litigation risk.

The key features of the solution were:

• Quick and easy key data capture at matter opening stage through online instruction, which generated a comprehensive dataset;
• Pinsent Masons then analysed the data for trends and insights. This was specific to the client and also benchmarked against industry-wide data;
• Working with the client, we developed a targeted business improvement programme based upon those insights;
• The delivery of that programme, combined with a year-on-year evaluation and industry benchmarking process;
• The development of predictive analytics on particular types of risk, claims, disputes and counterparties.

Our deep commitment to a small number of industry sectors enables us to develop unique visibility on sector-wide issues. In this instance we were able to look at sector-specific resources to benchmark the client's risk profile against the wider market.

Further, we have developed the methodology in such a way that other law firms within the client organisation's panel can collaborate with us. By inputting disputes data into the model, either in real time or retrospectively, it helps the client develop a comprehensive dataset.

The result

Working with one major client, we were able to present data to its board demonstrating:

• The split between causes of dispute;
• Where they were significantly ahead of the market, benchmarking against national statistics;
• The financial impact of that variance. How specific business units could benefit from targeted improvement;
• Commonality among counterparties, both in terms of clients and suppliers, which could inform commercial strategy in future.

  The data is capable of significant interrogation, for instance looking at win/loss/settlement rates mapped against:

• Quantum
• Dispute type
• Business unit
• Method of dispute resolution
• Counterparty
• Any combination of these factors

Working with our client, we went on to implement a programme of targeted business improvement with tangible results.