Lawyers and Risk

Lawyers are usually a rather risk-averse breed. That’s how they were trained, that’s what they think is expected from them. But is it really? Shouldn’t they rather be risk optimizers?

Key words: Lawyers, Risk, Risk Optimization

Image: Pexels / Ekaterina Bolotsova

Lawyers are a risk-averse Breed

David Maister, author of “Managing the Professional Service Firm”, comments on the relationship lawyers have with risk by means of the following example: «In any other business, an idea that was likely to work much of the time would be eagerly explored. This is not necessarily the case with lawyers.» He then continues: «If one partner says, ‘This works in the vast majority of cases,’ you can be sure that another will say, ‘Maybe, but I can construct a hypothetical scenario where it will fail to work. That makes it risky.’» He’s not alone in his observations. In a survey published 2018, law firm consultant and author Patrick J. McKenna observed that lawyers are extremely risk averse (which, according to him, is a major factor for why lawyers are hard to manage – but that’s for a different article).

This makes sense. A lawyer’s job very often involves minimizing risks: the risk of being sued, the risk of a breach of contract, the risk of losing one’s assets to a (future ex-) spouse or business partner, the risk of succession unclarities, the risk of taking over toxic assets or stepping in bad obligations in an M&A transaction or simply the risk of going to prison. But it’s more than that. The law is also a very risk-free career choice.

Law as a rather risk-free Career

Becoming a lawyer is a great career choice for risk-averse people. Why? Well, there are a number of reasons:

1. Lawyers will be around for quite some time. Automation and Robots will take over many jobs over the next years and decades. Lawyers, however, will most probably be around for a while – at least according to Richard Susskind.

2. There always seems to be a job for you. The number of lawyers has constantly risen over the past decades. While job numbers in law firms have only increased slightly (yet consistently), they have skyrocketed in in-house departments. And lawyers are not only in high demand in law firms or in-house departments, but also in the ever-increasing compliance departments or as tax or even business consultants.

3. You will most probably earn a decent salary – and the sky is the limit. Lawyers are generally seen as pretty well-off members of our society. And while by far not every lawyer sits behind the wheel of an Aston Martin in their Tom Ford suit or Chanel dress, most lawyers earn an above-average salary (with superstar lawyers being in the same league as hedge fund managers and CEOs).

There are more reasons to enter a career in law, such as the rather high societal status, the chances for management positions or political appointments and – not to understate – your knowledge of how the administration and the law in general works, which comes in handy in many situations.

Status Quo: Lawyers as Risk Minimizers

Do law schools breed risk-averse people or are risk-averse people attracted to the legal profession? It’s probably a bit of both (my guess is, however, that the second factor might be somewhat predominant). Nevertheless, law schools breed risk-minimizers and most law firms don’t do much to go out of their way trying to change any of that.

While business schools teach their students about efficiency, efficacy, optima and the Pareto principle, law students are lectured about risks and how to best avoid or minimize them. Extra clauses, contingencies, if-then-formulations etc. Just get that risk down as much as possible. But is this really the way to go?

Goal: Lawyers as Risk Optimizers

For some clients there surely are situations when risk minimization is the absolute goal – especially when either the government is footing the bill or money is no issue due to the size or the importance of the matter at hand.

However, lawyers should work more like risk optimizers. Talk to your client: what is their goal? What do they want to achieve? How much are they willing to spend? Because as with most things, the relative value per hour or the additional value created per hour of work is constantly decreasing. Don’t lose yourself in your professional strive for perfection. Take all the information you have about the clients goals and restraints and figure out the most adequate risk level for your client and act adequately. If not sure, ask more questions – you’re the expert.