Freeing up our client to focus on strategy
In 2012 Pinsent Masons launched a new, progressive way of working which fundamentally recalibrated the traditional ‘client/ adviser’ relationship with one of its major clients, a significant global financial institution.
At the heart of the arrangement was a programme to effectively outsource a significant proportion of its operational legal work for a fixed fee – in turn freeing up the legal team to focus on delivering a more strategic, value-adding service to the business.
Following the global financial crisis, the legal function at the client organisation recognised that without re-thinking its approach to delivering legal services to the business, it would be overwhelmed by high volume of operational work without truly delivering the strategic value which is expected of a modern, commercial legal function.
Specifically and by way of example, like many financial institutions in the wake of the crisis, our client was subject to a significant volume of legal complaints, queries and legal challenges requiring careful handling.
In addition to the volume of such matters, the position was made more complex by the fact that there was a huge spectrum of complexity and risk within the bulk. Some issues could be quickly and easily processed, others – without expert handling – could escalate and create a significant financial exposure, particularly when aggregated.
In the past a typical solution to such a problem might simply have been to instruct a private practice to process these matters, or to create a large in house team to service the work.
However, it was clear that neither of those models would be efficient or cost-effective, and wanted a more creative, modern approach.
Working with Pinsent Masons, with whom the client had an existing relationship dating back a number of years, the two organisations worked together to develop a new approach to collaboration that would allow the client to focus on what really matters to the business.
The principal components of the programme were:
- Fixed fees and long term certainty – the client knew exactly what its legal spend was going to be for specific work types
- Comfort that the service would be cost-effective because Pinsent Masons was sharing the risk – ‘bonus’ payments were effectively awarded for efficiency
- A transparent service: there were clear processes and reporting via the bespoke matter management system developed by Pinsent Masons. Each matter was categorised into gold, silver or bronze (based on a range of factors such as potential cost and legal complexity) and followed a relevant track. At all times Pinsent Masons could provide the client with management information such as number and type of matter, cost, time spent and other key indicators
- Together with the client, Pinsent Masons was able to accurately measure benefits and provide management information to detect trends and pre-empt legal risk
- Pinsent Masons invested in a bespoke matter management system for the client, incorporating built-in knowhow around the client’s preferred approach to specific matters. This, plus significant investment into resources and training, mean that the client received a consistent and seamless service across the various Pinsent Masons offices which serviced the arrangement
- The client was able to access specialist legal resource recognised as at the cutting edge of legal developments in the financial services arena, in addition to more junior resource and LPO providers through one partner – ensuring work was overseen and conducted at a level appropriate to the level of risk.
This new way of working was distinctive in that it fundamentally re-calibrated the relationship away from hourly rates whilst still providing the flexibility for creative legal thinking which can be inhibited by a strict fixed fee model.
We believe this is a first in this segment of the financial services sector and remains highly unusual owing to the unwillingness of private practice firms to engage with significant contingent risk.
The programme, which began in 2012, has been a major success. Costs savings of at least £1m to the client have been generated year-on-year as a result of the initiative.
More importantly, however, the programme has served the primary purpose of freeing up the legal function to take a more strategic role, advising on issues such as new product development which really add value to the bottom line.
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