In Conversation

[The following is an abridged transcript of a live panel]

Pat: We've got a great panel today. I've got the easi-

est job — I just have smart people say smart things

and guide the dialogue. The panel is going to talk

about some of the drivers, the trends, things they're

seeing to give you a sense of a broad spectrum of

what's happening in this space. For one, things are

getting riskier out there. We're going to talk about

some of the risks and how people are responding.

We are seeing an increase in malpractice suits, con-

flicts of interest malpractice suits.

Out of Am Law 200, in 2007, 92 cents out of every

dollar was collected. By 2014, it went down about

8.5%. That's pretty significant. I don't want my in-

come going down 9% over that time frame. You're

seeing expenses rise, realization going down. On the

demand side, things are relatively flat. And over the

past four years pre-negotiated discounts and AFAs

continue to climb significantly. The price pressure in

most markets is very real.

What we're really going to try to talk about today is

not just the risk management issues, but the financial

issues. How do we start to help the firm really im-

prove financial performance as they look at the mat-

ter intake process in general?

What do we do about that?

October 2015

Focus on: Fresh Approaches to Intake and Conflicts

Pat Archbold Intapp

Head of Risk Practice

Pat Archbold manages Intapp's risk practice group. He has over 20 years of legal in-

dustry experience, including leadership positions with legal software, consulting and

publishing organizations. [Pat.Archbold@intapp.com]

Curtis Russell Aurora North Software

Implementation Engineer

Terry Coan HBR Consulting

Senior Director

Eric Mosca InOutsource

Director of Operations

Meg Block Intapp

Vice President, Risk Consulting

Our panel is going to give you some ideas on what you

should think about if you're going through intake projects.

As I was doing some research for this, I thought this was

interesting – Linklaters, on their website, lists 50 in-house

lawyers just doing risk and compliance. That's a pretty sig-

nificant investment. I'm not suggesting you all go hire 50

lawyers to do conflicts and intake, but it's happening in

proportion to the size of the firm, obviously.

Eric Mosca authored a recent ILTA white paper about cen-

tralizing conflicts. Some of the key questions firms are look-

ing more seriously at are: “Why do I have a lawyer that bills

at $600 an hour looking at a 52-page conflict report? She

doesn't typically do this? Does it make more sense to hire

that as a professional staff and start to build that out?”

A lot of you have probably already done, but, Eric, can you

talk about what you're seeing in that space and some of the

trends that might be relevant as people look at this?

Eric Mosca: Absolutely. Some of you in the room are in that

vanguard of firms that centralized conflicts early, but we

work with organizations all over the US and internationally.

There are still many firms that have not or are just putting

their toe in the water.

The prevailing view is that when you give that conflicts

report out, the lawyer that's receiving that report says:

“Yeah, we want to get this matter open. Good. Everything's

clear here,” and they hand it right back.

We're seeing many more firms that are looking at taking on

that investment of centralized lawyers or staff that are ca-

pable of analyzing conflicts, because we're not just talking

about the ethical conflicts, we're talking about the business

conflicts and more. I think firms understand, and this tech-

nology audience gets it, there's a lot to analyze there,

there's a lot of data. These reports can be complex to sort

and move through. It really takes an analyst to get through

this information. Many firms are interested in this move. But

taking the first steps can be a little daunting.

Pat: Can I ask you a clarifying question about approaches

to centralization? For example, some have centralized staff

that completely clears the conflict that the lawyer doesn't

see report. Some have staff conduct initial review that the

lawyer makes the final decision on.

We are seeing firms go to that total clearance model. I

think it's going to be an evolution. It's an investment, as

those that have done it can appreciate. There's a lot of dif-

ferent models that people might adopt. Centralized is a

broad term. Can you talk a little bit about how you see that

evolution and what's happening?

Eric: Probably the easiest way to understand this approach

is to ask: “What if I don't have a requesting lawyer? It's a

lateral; they're not here. I might have a sponsoring lawyer,

but not someone that is capable of clearing these conflicts.”

With many of our law firm clients, we recommend that as a

path to centralization. You can have someone that clears

the very voluminous lateral conflicts reports and works with

internal lawyers to coordinate whether there are, in fact,

conflicts of interest present. Once you've established that

and had some rapport with the lawyers on these topics, it's

easier to branch out into new clients and new matters.

We see it as a continuum that firms might be anywhere on.

Firms can make the argument in a variety of ways. Some

are looking at this just from the perspective of who can do

this job best. Many have conflicts staff in place that are

much more capable on a practical level than a lawyer that

took a single ethics course in their schooling — that under-

stand these professional responsibility rules much better.

We're also seeing the financial argument. In our article, We

recommend looking at time records, looking into how to

quantify what lawyers are doing. Another example one firm

shared is that they looked into this and found that for their

sizable firm, $3.5 million of recorded billable time per year

was spent on conflicts analysis. We know that the lawyers

are not diligent about recording that time. There's no bene-

fit to them. Is that 50% accurate? 20%? Who knows?

We've had other firms that have similar and even larger

numbers. Your lawyers are spending a lot of time. That

amount of money allows you to justify two, three or even

ten staff members doing centralized conflicts clearance.

Pat: Would any of our other panelists like to weigh in here?

Meg Block: I've seen exactly what Eric's described. And

that’s why most firms looking to make the transition start

with bringing a team in to evaluate the stack of paper that

is a lateral conflict check. It establishes credibility with sen-

ior partners in the firm while avoiding the day-to-day time

pressure required to clear conflicts associated with new

business. You can start with a relatively small staff.

www.intapp.com

On Conflicts Management Models

With a decentralized staffing model, a firm might have 1

conflicts staff member for 250 lawyers because the staff

searches and throws unanalyzed reports "over the fence"

for lawyers to handle. Once you start down the centraliza-

tion path, you're going to see that increase to 1 staff person

to 50 lawyers to meet analysis requirements and the time

pressure for decisions.

You might have a $3.5 million pot, but centralizing is a hard

sell. It doesn't mean it's not the right sell. The right job

needs to be done and there's real risk not doing it, but

tough based purely on the numbers.

Terry Coan: At HBR Consulting we've had a couple of large

projects at 1200 to 1500-lawyer firms. We did more of a

subjective analysis, putting numbers on the table in the

vicinity of $8 million to $10 million a year in lost revenue.

At one firm, one stakeholder pushed back and said: “Just

because we take an hour a week or 52 hours a year off of a

lawyer's plate not having to clear a conflicts does not mean

that that's going to translate directly to a billable hour.”

I said: “You're absolutely right, but I can sure guarantee you

it never will if we don't.”

It's something to look at, whether you can build a case

around time. Eric's example was great in terms of having it

be a legitimate time entry, but really then having the ques-

tion: is that really all the time? No.

What other subjective criteria could you look at to start to

quantify the lost revenue that's on the table? You look at

the added overhead or FTE as additional expense, but what

aren't we doing to try to drive the top line revenue num-

ber? Both numbers get us to a better financial outcome.

Pat: There are several ways to make the case, which really

leads into our next topic — How do you structure the

team? Meg, I know you've worked with a number of firms

on the structure and how to deal with business conflicts

and anti-money laundering and lateral hiring. There's are

several variables and maybe specialists that you want.

Can you talk about how you're seeing organizations struc-

turing teams in response?

Meg: I spent this summer working in the UK and believe

that the UK and EU are the "canary in the coal mine" for the

US. We have to accommodate the Know Your Client and

Anti-Money Laundering regulatory requirements the rest of

the world is facing.

This will affect how or conflicts-intake staffs are organized.

Today, they might sit under Finance, IT, or the Library. In

risk-mature firms they under a Director of Risk Manage-

ment or Loss Prevention who reports in-turn to the firm's

head of administration.

I think it's critical that the function also have dotted-line

responsibility to the highest management level of the firm -

the Office of General Counsel or Professional Responsibili-

ties Committee.

The function must be recognized as one with people who

have analytical skills and judgment and who are worthy of

retention. This means having clear career paths and profes-

sional training.

Meg: Internationally, there are 3 distinct areas that are be-

ing blended. The function is no longer called Conflicts, it's

called Risk and Compliance and includes the clearance of

legal and commercial conflicts, assessment of business risk

(typically reputational risk, sanctions, and politically ex-

posed persons), and due diligence research on client iden-

tity for anti-money laundering purposes.

With respect to conflicts clearance in global law firms, the

different jurisdictional standards must be considered. Does

a firm with international offices establish global or office-by

office standards? In the EU and UK, conflicts clearance is

situational. In the US it is a more straightforward duty of

loyalty and confidentiality." The answer to what standards

are applied affects staff qualifications and location.

The other key area is assessment of business risk. In the EU

and UK, there are regulatory requirements to know - and

document - who your clients are, to assess reputational risk

and sanctions based on client location and work location.

Again, should these requirements be met office-by-office or

globally?

www.intapp.com

On the ROI for Conflicts Enhancement

On International Considerations

On Staffing Models

Pat: We’re also seeing finance take a more central role. It's

interesting that intake originally started as a function of

finance, with conflicts add-ons to accounting software. And

then people said: “That's not good enough. I need a special-

ized application.” So risk took the lead.

Now it seems to be some sort of a blend. Terry, I know

we've talked about how firms are incorporating that finan-

cial review of the intake. Again, stepping away from the

ethical and the risk management angle. Questions like: “Is

this good business to take on and should we take it on?”

Can you talk about what you've seen there?

Terry: There’s definitely been an evolution. Historically, re-

cords and conflicts staff were often interconnected be-

cause it was all about getting a new matter open, getting a

new file created, and getting it to the lawyer.

Then we had situations where the new matter needs to get

set up in the billing system so that we can start to charge

time to it. It moved to the finance side. We still work with

clients today where the new business intake function does

in fact report up to the CFO.

Regardless, the entire lifecycle is all about trying to bring

together all the relevant constituents who have a stake in

this, including the GC’s office, the risk partner, the CFO, all

the key stakeholders. Which connects to Meg's point again,

around having this function, ultimately report to a COO.

At the end of the day, if an intake project is being spon-

sored by the CIO or the technology director because

there's a technology component to it, or it's being spon-

sored by the general counsel's office because there's a risk

component to it or it's being sponsored by the finance be-

cause there's a finance element to this, it’s key to bring all

the stakeholders together.

And that should happen from the get-go to make sure that

we understand what the business requirements, what the

strategic objectives for the firm are, so that we can be

thoughtful at how we design and implement the technol-

ogy. Sometimes what happens, too, is that the finance side

is really about collecting the right data at the get-go.

We see oftentimes that, in our matter and lifecycle review,

one of the big challenges we have is the delay it takes to

issue invoices. When we get invoices out, they're not fol-

lowing the rules or the pricing isn't right or something isn't

done correctly and the client gets it and rejects it.

When we have to follow up on it to try to do it from the AR

standpoint and they're not getting paid, the question is

why. You didn't do the invoice in the right format. You did-

n't follow the instructions that we agreed to during the

intake process.

A lot of times some of the process areas that are problem-

atic are because we didn't capture enough information or

we didn't capture the right information, get it coded cor-

rectly during the intake process. Finance always loves to be

at the table, so that we're getting that kind of information

collected the right way from the get-go.

Pat: Our audience poll showed about half the group looking

to start an NBI project. What tactical steps would you rec-

ommend they take to get all the stakeholders involved?

What key ideas, lessons and approaches should they take

back to their firm from this discussion?

Terry: We’ve had several recent projects start with conver-

sations with the COO focused on just this issue: “These are

the key stakeholders that we need to have at the table.

You need to be looking at who are the right representatives

from those business areas and make sure that they're part

of the kick off and part of the ongoing project team as a

key stakeholder.”

The last thing we want to do is get six months, nine

months, a year later, when we're going live on a new piece

of software and one of the business units says: “Wait a min-

ute. You didn't do this.” And everyone looks around and

says: “How did that happen?”

We really are trying to get firms at the beginning of these

projects to understand the key stakeholder roles, the per-

spectives that we need in these projects to be successful

and we get them to the table early on.

If they don't do that proactively then we're saying, “You

need so and so or you need someone with this perspective

to be at that table.”

www.intapp.com

On the Role of Finance

On Firms Looking to Enhance Practices

Pat: We’ve talked about people. Let’s shift and talk about

information. It’s critical to collect the right data and get it to

the right people during the intake process.

Curt, we've talked about the history of this before — It went

from ugly, old Word forms, to web HMTL forms. And now

there’s the potential for a much more elegant process and a

bigger view of the picture.

How are you seeing technology come into play to stream-

line efficiency, address some of the things the other panel-

ists have spoken about?

Curt Russell: One immediate example is connecting Dun &

Bradstreet data directly into the process. It used to be that

someone would have to manually access that system,

gather and re-key required data.

Now it can be seamlessly integrated directly into the main

form and process without having to leave the system.

We’ve worked on projects to integrate data from other

systems like Acuity and Equifax.

And beyond gathering data, there are really compelling

ways to let people interact with the process. A great exam-

ple of this is mobile access, including over email — just be-

cause someone is out of the office shouldn’t mean they

can’t respond to the process.

When I tell our law firm clients: “You have the ability now to

reply to this e-mail, and that will actually approve the proc-

ess for you,” their eyes light up. It's awesome. And lawyers

love it because there’s less hassle and overhead.

Another area technology is coming into play touches on an

issue Meg mentioned. What I’m finding with a lot of firms is

that they have a legacy system in place that they can’t ef-

fectively manage — they may not even be allowed to

change forms or questions themselves, they have to hire

someone.

Today, there are simpler more modern approaches that put

the power back in the hands of the firm, so they can be

agile and maintain control.

Pat: I think the data element is interesting. I've seen a lot of

firms do some innovative things. Does the panel have good

examples of incorporating detail you wouldn't necessarily

think about as standard conflicts data, financial informa-

tion? Any examples that firms might want to think about?

Meg: I think of the conflicts database increasingly as a busi-

ness hub. It's not just about the parties that are associated

with a particular matter or a particular client, it's also the

parties that are competitors, and it's a place to bookmark

strategic business initiatives for marketing purposes.

Eric: That’s a concern for many of our law firm clients: “How

do we get those prospects in earlier?”

In a lot of ways, it's a marketing effort. If they think of con-

flicts and new business intake, it's only something to do

when they're ready to open the new matter, it doesn't hit

your database. How do we surface a workflow that says,

“Prospective client research,” right?

You're doing the same functions to conflicts search. We

might be writing into your financial system with a new cli-

ent status, but it's luring them in and telling them: “Hey,

there's a function here.”

We've also surfaced for clients searching into the interac-

tion pitch and proposal information. If you have marketing

folks in business development that are involved in re-

cording that really important information well in advance of

potentially opening a new matter, you can search again to

that data for potential hits.

Something that's been really important, and we've seen this

in evolution over the last couple of years, is just making this

a consumer-grade experience. Nobody wants to fill out a

form that's ugly, that takes a long time to get through.

There are many things that you can do to draw people into

that processes instead of making it this onerous: “Oh, yeah,

I'm supposed to fill out this form?!” You need to get people

engaged if they're going to give you the information to put

into your databases.

www.intapp.com

On Driving Data Innovation

Pat: Okay. We're going to do a bit of lightning round. I’d like

to ask the panel: “What would you say is the number one

benefit of improving the process?”

Curt: Giving the firm’s owners true ownership. They get the

control and the power to make changes on their own.

Terry: I would say that it goes back to aligning the firm's

business strategy with how they bring in business. At so

many firms, it's the loud mouth, rainmaker partner who gets

to trump any other business brought in, and sometimes the

business they bring in isn't good business, it isn't profitable

business.

Or, to Meg's point, you get this one practice area who's out

cannibalizing all of these other client relationships to serve

their needs and losing out on much bigger, broader, more

profitable business elsewhere. It shines a light on that. At

least the way we do our engagements, we force lights to

be shined on this, so firms can make a better decision.

Meg: Two words: certainty and speed. So that the partners

can trust that they can take on the work with certainty and

they can do it more quickly than the firm down the street.

Eric: It’s getting the matter open more quickly. That is a

primary concern of our clients. We’ve got to get that mat-

ter open. I'd put a comma and then add “compliantly.”

It needs to get open quickly and then I put on my risk hat

and say, “We're going to do a really good job of it, too.”

Pat: Thank you all, it’s been a great discussion today. ■

www.intapp.com

Concluding Thoughts

Business Intake

Thriving in today’s competitive environment requires an

innovative approach to intake and conflicts — one that

allows firms to act quickly (while still rigorously evaluat-

ing matters), to delight lawyers (especially on mobile

devices) and to easily change processes as needed

(without outrageous cost or delay).

Whether as part of a strategic push to improve client

analysis and firm profitability, a program to reduce risk,

or an initiative to speed matter opening and improve

lawyer productivity (and satisfaction), Intapp Open

has something to offer every firm. Including yours.

Learn more: intapp.com/Open

(But Much Better)

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