Investing in risk management—cost-benefit analysis
Produced in partnership with Pam Grover-Mitchell
Investing in risk management—cost-benefit analysis

The following Practice Compliance guidance note Produced in partnership with Pam Grover-Mitchell provides comprehensive and up to date legal information covering:

  • Investing in risk management—cost-benefit analysis
  • Cost-benefit analysis
  • Functions
  • Effectiveness
  • Benefits
  • Cost
  • Ensuring your cost-benefit analysis is current
  • Getting the balance right

Investment in risk management is important.

You should have some sort of risk function offering maximum return on investment by:

  1. carrying out the greatest possible volume of risk-related work to the best standard (and potentially freeing up partner/fee earning time), and

  2. offering the most added value to both the firm and, where possible, its clients

What this means in practice varies from one firm to the next.

Cost-benefit analysis

To identify the right level of investment needed for your firm, you can carry out a cost-benefit analysis (CBA), ie evaluate the benefits offered by your risk management resource (see precedent Risk management—cost-benefit analysis).

General factors you should consider include:

  1. functions

  2. effectiveness

  3. benefits, and

  4. cost

Functions

Functions carried out by your risk resource may include:

  1. new client risk assessments (including anti-money-laundering, conflicts and sanctions checks)

  2. negotiation/monitoring of engagements deviating from your standard terms of business

  3. file reviews/audits

  4. professional indemnity insurance renewal

  5. insurance claims and complaints resolution

  6. data security