Research carried out to look at the impact of the first year of outcomes-focused regulation (OFR) has revealed that perceptions of OFR have become more positive, but we still have work to do to embed the regime in the legal services sector.
The research was carried out to assess what influence OFR has had since it was introduced in October 2011. One thousand firms were asked about both the positive and negative impacts that OFR had had on the way they work in its first 12 months.
These impacts were both organisational in terms of how firms set themselves up to comply with the new regime; and financial, such as costs involved in setting up these new systems and carrying out training.
Key findings included:
- Perceptions of OFR are becoming more positive as firms gain more direct experience of working with it. Half of respondents indicated t they were relatively favourable to OFR, compared to 36 per cent found in a survey prior to OFR’s launch in 2011*
- More than half, 51 per cent, of respondents strongly agreed or agreed that OFR makes it clear what outcomes we expect to be delivered
- A significant proportion of firms stated that compliance with OFR costs too much time and money, with 44 per cent of respondents believing compliance with OFR “takes up too much time”, while 34 per cent felt it “costs too much money”
- Despite this, 85 per cent of respondents agreed that they would continue what they currently do to comply, simply in order to run their firm well and look after their client interests even if we did not require them to do so
- A fifth of firms recognised a need to improve risk management at their firm, or were currently in the process of making changes in this area. Fifty-nine per cent of respondents said their firm has made changes in the past 12 months to the way they manage risk
- While respondents indicated a relatively good understanding of the role of Compliance Officers for Legal Practice (COLPs) and Compliance Officers for Finance and Administration (COFAs) overall, a notable proportion still highlighted some uncertainty about their exact responsibilities (including 15 per cent of respondents who are themselves the nominated compliance officer for their firm)
- Fifty five per cent of respondents did not believe their firm had made use of the greater flexibility offered by OFR since its launch, and only a very small proportion felt that they had used this flexibility to a great extent. More than half of firms believed they would use this flexibility in the future – but still 28 per cent stated that they would not and 14 per cent did not know
The main changes reported by firms were the review of existing policies and procedures, creation of new policies and undertaking training. Firms also mentioned setting up or improving risk management and quality assurance systems.
Many of the changes appear to be one-off actions – for example, once a document or manual has been updated there are likely to be limited future costs involved. Firms also made reference to one-off costs like familiarising themselves with the new regulatory regime.