Identifying and Addressing Reputational Risk in a Law Firm

How well do most law firms understand and address reputational risks? Last week, I referenced the extreme example of Dewey & LeBoeuf, a bankrupt global firm that ignored reputational risk to the point where it now serves as the profession’s poster child for what-not-to-do.

This week, I’ll be more constructive.

Why pay attention to reputational risk?

It’s said that we’re now operating in a reputation economy where “who you are” matters more than “what you sell”. Across all sectors of society, transparency is now valued more than tradition, sharing more than showmanship and security more than sanctity. The same research shows that firms with good reputations are worth 150% more than those with weak reputations. Most new work in firms is still generated by word-of-mouth referrals. Perceptions of your trustworthiness and credibility will often tip the scale in your favour if a competitor’s expertise closely matches to your own.

Identifying reputational risk in your firm

Reputational risk is linked to behaviour. Will employees support firm strategy? Will they recommend you? Will clients value your skills and service? Will administrative decisions adhere to compliance standards? Review these indicators to see if they familiar…


  • Leadership that is unaware of or unwilling to find out the general reputational “health” of the firm
  • Inertia – partnership committees focused on minutiae rather than long-term strategies
  • Groupthink – a lack of diverse perspectives at the strategic level, stubborn or complacent attitudes
  • Bias – decision making based on old or false assumptions or narrow understanding of the issues at hand
  • Misunderstanding or ignoring environmental factors impacting reputation (e.g. social responsibility, generational differences, globalization)
  • Paying attention to the wrong data because the right data makes people uncomfortable
  • Confusing reporting structures


  • Silos that obstruct quick reactions to opportunities or threats
  • Behaviour aligned with rigid bureaucracy rather than inspired action
  • Narcissistic marketing communication focused on individual stars and egos, rather than broad client and employee values
  • A culture that assumes “bad apples” are an anomaly. Bad apples come from bad barrels; they tend to have a poisonous affect on the whole firm.
  • Pursuing opportunities that are misaligned with core values

Stakeholder perceptions

  • Compliance issues with regulators or courts
  • Negative media attention
  • Difficulties retaining quality employees
  • Clients who retain your competitors for services you could provide
  • High growth costs related to capital funding and acquisition of partners

If you recognized some of the indicators, don’t fret. No firm is perfect. But good firms have a disciplined approach to mitigating threats.

How to address reputational risk

  1. Understand your firm’s current reputation – what people perceive and why. Stakeholder surveys and reputation audits are commonly used to gather this data.
  2. Identify the biggest threats to your trustworthiness and credibility. Address them in your annual or strategic planning processes.
  3. Start at the top. Create a risk radar for your firm’s executive team to review. Some firms analyze scenarios at partner meetings; others make this a standing agenda item at the board level.
  4. Empower decision-making. Train managers to identify threats and opportunities and take appropriate action.
  5. Incorporate reputational risk factors into existing programs, such as succession planning
  6. Gather perspectives from diverse groups in the firm to reveal blind spots in your strategies
  7. Move continuously towards improving risk identification and mitigation

Managing these risks need not be overwhelming. Many of the indicators are interrelated; they can be addressed by making key decisions that affect one or more areas. For example, internal communication initiatives are a good place to start because they spur conversation.

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**I originally published this post on the Canadian legal blog,, on April 9, 2014