The newest report by Ames and Gough (here), outlines the current risk environment for lawyers. To summarize their findings briefly, while claim frequency remains fairly constant their severity is surging, driven by steadily rising defense costs which has been a constant theme year after year. Conflicts of interest continue to lead the list of wrongful accusations, fueled partly by a surge in M&A activity and an increase in lateral hiring between firms.

One of the more important takeaways however, is the emergence of Cyber security events, which is not unexpected. And while cyber events have undoubtedly wreaked havoc on BigLaw firms, an in depth search on public data breach databases reveals some interesting statistics that are a bit unexpected. Despite the PR damaging headline-grabbing breaches affecting the major law firms, the average sized law firm (at least at the moment) appears to sustain a lower frequency of cyber security incidents than might otherwise be expected...and considerably less than their CPA counterparts. While the risks to average sized firms may be on the lower side for the time being, it’s important that law firms not dismiss that risk entirely, especially with hackers beginning to target smaller companies. Events to date largely revolve around malware & ransomware, incidents affecting vendors, and human errors in the course of data processing, and document management. Privacy related e-discovery (and document management) failures are an emerging risk we previously discussed. In fact, the Ames report goes on to cite such failures as a driving factor behind the surge in defense costs. E-discovery and document management failures are not solely affecting the Biglaw firms either, a look at the breach archives reveals that such errors are affecting smaller firms as well – with cases of case files being lost or stolen and electronic files being stolen or damaged in transit.