Equality impact assessment

Relationship management

Business unit: Relationship management, Supervision, Risk and Standards
Publication date:  October 2011

Introduction

This Equality Impact Assessment considers relationship management (RM), a form of supervision being trialled to assess the type of firm to which this level of resource should be allocated.

Key stakeholders

Our key stakeholders are:

• all individuals and bodies regulated by the Solicitors Regulation Authority,
• consumers of legal services, particularly clients of regulated firms
• the Law Society, Legal Services Board, the Legal Ombudsman and the Solicitors' Disciplinary Tribunal, and
• SRA staff.

Background to the equality impact assessment

In April 2010, the SRA issued a consultation paper on "Outcome-focused regulation - transforming the SRA's regulation of legal services". This was followed in November 2010 by a policy statement on "Delivering outcomes-focused regulation", which highlighted that the legal services market was experiencing a period of change driven by three main forces: Business-driver changes, changes in the regulatory framework and a changing SRA. The SRA is currently going through a restructuring period to enable it to become a risk-based regulator delivering outcome-focused regulation. This is a new approach to regulation for the SRA that is requiring a cultural shift within the organisation and also in our relationship with the regulated community. With the introduction of the new Handbook incorporating the ten overarching principles we will be looking to firms to demonstrate how they will achieve the mandatory outcomes for their clients.

The adoption of a risk-based approach to regulation will allow the SRA to target its resources to those risks which most impact on its key regulatory objectives, that is protecting consumers and the public interest. Targeting of regulatory resources will be achieved through the introduction of a revised organisational structure based on three key functions: authorisation, supervision and legal and enforcement.

How the relationship management engagement works

Relationship management is a form of supervision that we envisage will be applied to those firms that represent the most risk to the SRA's ability to meet its regulatory objectives. The aim is for the Relationship Managers working with a firm to have a close and continuous relationship with the firm over a period of time. Work done by the Relationship Managers will focus in a proportionate and risk-based manner on areas within a firm that represent the highest risk to the SRA and working with firms to mitigate those high-risk areas.

It is anticipated that firms will be rated for the impact that they pose to the SRA's ability to meet its regulatory objectives should anything go wrong at the firm. The precise methodology for the impact scoring is still being developed by the Risk Centre, but is likely to be derived from the size of a firm with some sense checking around client vulnerability and amount of client money held. For the purposes of this equality and human rights impact assessment we have therefore taken an approximation of the firms we may be working with in relationship management and have analysed the data for the Top 200 firms by turnover, as turnover is one measure of a firm's size.

The relationship management pilot

We have also been running a pilot of relationship management since August 2010, which has involved 19 firms representing a cross-section of the profession. In addition we have engaged with a number of firms on themed visits as well as on general engagement. There are four different stages to the engagement with firms under the relationship management pilot which will run as a cycle of engagement. The stages are as follows:

• Stage 1 - Risk Assessment - analysing the potential risk areas for the firm and SRA,
• Stage 2 - Initial Engagement - meeting the firm and establishing practice in risk areas,
• Stage 3 - Further engagement - following up on areas evaluated as representing risk,
• Stage 4 - Review leading to Stage 1 - re-evaluation of risks.

In working with the firms in the pilot we employed a standard initial agenda to focus on specific areas of a firm's operations, such as governance and control structures and mechanisms, risk and compliance processes and financial controls. Through discussion of these areas we were able to highlight areas for further discussion where we needed to further our understanding or where there appeared to be higher risk. As a result of our engagement with firms we have expanded our knowledge and understanding of the business models in operation and the commercial drivers that firms face. We found that many of the firms were interested in differentiating themselves by improving client experience and by recognising the value of diversity, both for their staff and their clients, as well as being involved in projects in the wider community.

During the pilot we have fed back our learning to inform the Risk Centre and the supervision function to enable them to assess the risks of equality and diversity issues and determine the nature of any work undertaken in the future.

Conclusions about equality impact

Engagement

The RM team engaged with a series of interest groups both directly through a presentation to the Lawyers with Disability Division and in discussions with representatives from the Black Solicitors Network, Society for Asian Lawyers and Association of Women Solicitors. Talks on relationship management were also given at two dedicated BME events held in Birmingham in association with the Black Solicitors Network. As a result of this engagement two firms became part of the relationship management pilot and a number of others expressed an interest. There were no concerns raised as a result of these meetings about the concept or application of relationship management as a mechanism for supervising firms. If anything the feedback was positive, as indicated by firms' willingness to participate.

The relationship management team has also engaged with the profession generally via the SRA programme of thirteen Roadshows held, from May to July 2011, at various locations around England and Wales. The feedback from these has been generally positive about relationship management. Some firms asked how RM would alter their relationship with the SRA. We have provided clarity on this through our communications and engagement events. Members of the relationship management team have also presented webinars outlining relationship management to audiences of several hundred and the feedback on relationship management as a supervisory approach has been positive. Firms have commented that this is a good approach to take and are potentially looking forward to building a closer relationship with us.

Data analysis

We have analysed the firms we have engaged with, and that we believe we will engage with going forward, in three groupings:

• the 19 pilot firms representing a cross-section of the profession, from sole practitioners to global firms and with diverse geographical spread,
• all firms engaged with including pilot, themed and general engagement firms,
• the Top 200 firms by turnover.

The data has been analysed as to the ethnicity, gender, age and disability status for all practising certificate (PC) holders recorded in the firms, and a comparison has been made to the proportions for each category found in the overall population of PC holders. The SRA does not currently have the data for the other protected characteristics.

Ethnicity

The ethnicity of firms engaged with and expected to be engaged with is shown below alongside the ethnicity of the overall population.

The current data shows that we will be engaging with fewer BME firms than the overall solicitor population. This is because there are less BME firms within the Top 200 firms by turnover. The low-impact firms we worked with in the pilot showed that intensive, long-term engagement was not required with low-impact firms. Potential areas of concern within low-impact firms were resolved quickly requiring less regular engagement. Where we will not use the relationship management model, we will still proactively engage with all sectors of the profession through our supervision function. This will be through desk-based supervision, thematic risk-based work as well as through visits to firms.

Gender

The gender of firms engaged with and expected to be engaged with is shown below alongside the gender split of the overall population.

As can be seen from the data, there is no adverse impact of relationship management for either gender group.

Disability status

The disability status of firms engaged with and expected to be engaged with is shown below alongside the disability status of the overall population.

The data indicates that relationship management will be interacting with firms that under-represent the population of solicitors with known disability status, thereby having a small adverse effect on this sector of the profession. However, we do not believe that this is a significant impact for relationship management as the variance is minimal and the data in this area incomplete.

Age bands

The age bands of PC holders at firms engaged with and expected to be engaged with are shown below alongside the age bands of the overall population.

The data indicates that the firms engaged with during the pilot period have an over-representation of PC holders in the 22-40 age bands and an under-representation of PC holders in the 51 and above age bands. The data also indicates that the Top 200 firms have PC holders more aligned to the age bands of the overall population. Given that relationship management is intended to be a positive supervisory approach to firms, we believe that this deviation from the overall population is likely to represent a positive impact on the younger age bands and an adverse impact on the older age bands. However, experience from our engagement with firms is that our interaction tends to be with the senior management of firms, who themselves tend to be the older members of the firms. We believe that it is likely to be beneficial for younger members of the profession to be involved with firms who have a close and continuous engagement with the SRA.

Complaints

There have been no complaints made to the SRA about the work of the relationship management team. However, we will continue to monitor the receipt (or non-receipt) of complaints and will revisit this area in our review of our equality impact in 12 months.

Conclusions about Human Rights impact

Relationship management as envisaged and based on the findings and experience derived from the pilot does not have a Human Rights impact. The processes and methodology adopted do not involve an adjudication function and contact will not be by means that infringe on an individual's rights to privacy and family, for example, contact will be by telephone, email or visits to the firm's office premises only.

We believe that relationship management will have a positive impact on the profession as we will have close and continuous engagement with high impact firms. This will include closely engaging with firms on compliance with the Principles, including Principle 9 on equality and diversity. There have been a number of reports published which have stated the difficulty for some groups, in particular BME, women and disabled individuals in obtaining training contracts, and senior roles within the profession. We envisage that where we focus on Principle 9 as part of the relationship management engagement work, this will be a positive move forwards.

Overall conclusions and action plan

From the data currently available, we do not consider that relationship management as an arm of the SRA's supervisory function will impact in a discriminatory way, either directly or indirectly, against the protected groups. We intend to revisit this impact assessment after 12 months, when more data, both quantitative and qualitative, will be available for assessment from all firms that will form part of the relationship management process. Although all firms are likely to feel the impact of our new regulatory regime in some way, it is our view that in the long term, our new approach will have a positive impact on equality within the profession as it will give firms flexibility to meet the outcomes in a way that best suits them. This flexibility is likely to have a positive impact on consumers of legal services, as firms will be able to run their business in a way which best suits their client base.