From the President: Managing Risk in an Economic Downturn

By Peter Michalyshyn, QC, President, Law Society of Alberta

Why is the regulator of the legal profession taking additional steps to manage risk in an economic downturn? How does a global decline in business, industrial and retail markets increase risky behaviours in the legal profession?

The Law Society of Alberta recognizes that a declining economy has various negative impacts on lawyers and their clients. In addition to the general effect of reducing income, it may prompt lawyers to move into unfamiliar practice areas, reduce staffing and overhead costs, switch from multi-member firms to sole practices, and take on higher risk engagements, all of which may make lawyers more vulnerable to increased risk.

This May 2009 issue of the Advisory focuses on

the risk of practising in the midst of a severe economic downturn. In the following pages are articles on risk trends, what the LSA is doing to manage increased risks, current trends in mortgage fraud, invaluable information on monitoring the financial side of busy law practices, and trust accounting information. LawPro, Ontario lawyers' professional indemnity company, has outlined red flags, trends and tips for both real estate and bad cheque scams which we have been permitted to share with you.

The Law Society of Alberta takes seriously its goal to become a model regulator. As such, and in the public interest, the LSA is committed to managing the risk of lawyers practising in this economic climate.

Impacts of Current Economic Conditions

By Don Thompson, QC, Executive Director, Law Society of Alberta

The impact of the current economic climate presents risks to lawyers, their clients and the Law Society of Alberta. For the LSA, an economic decline may bring to light certain improper conduct that already exists or is taking place which may not have been identified in a booming economy.

Impacts on Lawyers

The general effect of a declining economy, particularly for most lawyers, is the reduction of personal and business incomes. With less income, clients may be less willing or able to engage a

lawyer. As a result, lawyers may:

Reduce fees to try to attract clients.
Move into practice areas outside their areas of expertise, becoming vulnerable to fraud.
See increased bankruptcy and foreclosure work.
Reduce employee costs through layoffs or delays in hiring staff.
Move from multi-member firms to sole practitioner status.
Take on higher risk engagements, possibly assisting unscrupulous clients.
Experience more personal problems and be less able to deliver competent services.

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From the President: Managing Risk in an Economic Downturn

By Peter Michalyshyn, QC, President, Law Society of Alberta

Impacts of Current Economic Conditions

By Don Thompson, QC, Executive Director, Law Society of Alberta

In this Issue