Clients in the northwest are increasingly looking to their legal advisers to share the risks as well as the returns on their relationship. This move towards the lawyer as business consultant is shifting the emphasis away from 'technical' legal expertise to a more generalised service, focused on the commercial imperatives of the client's business.

Manchester is one of the UK's most competitive legal marketplaces. The firms that survive in the year ahead will be those that read changing market requirements and adapt accordingly.

Cost and risk-sharing arrangements work to the benefit of supplier and purchaser, providing both sides adhere to basic business principles – that is, a common understanding of the requirement, regular and open communication about how the requirement is to be met, and adherence to a clear programme of review and reassessment.

Both buyer and seller must understand the risk/reward structure, and any perceived advantage to one side must be regarded with the same critical eye as perceived disadvantage to the other. No matter how complex or stringent the procurement process, if the pain or gain is consistently one way, the relationship will sour with unfavourable consequences for both sides.

Faced with competition from outside the northwest, how can law firms in the region help share the risks and add value to their clients' businesses? It is perhaps useful to examine what steps can be taken from a sector perspective.

In the property and real estate sector, property management work is price-sensitive and some companies do not allow solicitors to charge on a time basis for routine property work. Fixed fees can therefore provide certainty to both sides. The trick is to get the right fixed fee through transparency, an understanding of the issues involved and positive demonstration that, where possible, efficiencies have been built into the process.

In addition, pension funds and listed property companies can achieve cost savings and the benefit of local knowledge by using firms in regional centres instead of London. There is also scope for developing technology-based solutions to reduce paperwork. Firms which embrace this approach are better placed when responding to local authority and other public body invitations for proposals.

In the corporate finance sector, there are significant opportunities to command expertise-based remuneration packages. However, with the greatest reward comes the greatest risk, and the issue facing purchasers and providers is to agree the assumptions on which fees will be based. This should ensure transparency, with no nasty surprises.

The client may expect its law firm to share the commercial risk, so the challenge is to determine the appropriate risk share. New businesses, particularly in emerging markets or areas of new technology, may be short of cash in the early days. There have been well-documented examples of firms converting their fees to shares or warrants in publicly-traded companies. Decisions like this need to be considered carefully by the law firm and made on a case-by-case basis.

Instructions are often received at very short notice and require priority treatment. A solution to this challenge may be an annual retainer with fees being called off as required. Quarterly reviews ensure certainty and allow time for negotiated adjustments, depending on the level of business undertaken and anticipated. This also helps in achieving 'trusted adviser' status through long-term relationships. In the technology sector, it is important not to underestimate the need for harmony between client and adviser. This is particularly the case in long-running, project-based work where agreed daily rates provide a degree of certainty for both sides. It is incumbent on law firms to accurately scope a job and to have an understanding of the client's internal procedures in this situation.

Staff costs represent the biggest single overhead in virtually every business. Employment law is a fast-growing area and one where law firms should work with clients to develop a philosophy of prevention rather than cure. One way to achieve this is through projects designed to reduce reliance on employment lawyers by equipping HR and training professionals with the skills necessary to handle more of the day-today challenges they face.

Executive briefings, staff training and roleplay exercises should form part of the partnership. Employment lawyers are recognised as having a high knowledge of the client's business, which is mutually advantageous when more complex strategic decisions have to be taken. Provision of legal training through e-learning ensures clients have a consistent and low-cost solution to their day-to-day training needs.

Insurers have traditionally been one of the largest purchasers of volume legal services on the claims side. As such, they were one of the first to develop the panel concept in which choice of adviser is determined, or at least recommended, by procurement professionals applying objective commercial standards in much the same way as would apply in any other market. Traditional 'cosy' relationships were jettisoned years ago. Technical expertise is a given, and responsiveness, as well as the ability to provide accurate claims management information, is paramount.

In areas of volume instruction, such as motor and liability claims, law firms should ensure an element of certainty over costs by preparing innovative fee proposals with a variety of fixed fee and tiered pricing structures. Risk identification and control, in partnership with insurers, play an increasingly important part, consistent with the philosophy of prevention rather than cure.

In the sensitive area of professional indemnity, where an insurer's reputation is an added factor, the concept of prevention is even more important. It is essential to retain the confidence of the insurer and this may be difficult to reconcile if the adviser is working to a fixed fee. In the future, achievement of savings against budgeted spend on individual or blocks of claims is likely to be a prerequisite.

The financial services sector is becoming more selective in its use of lawyers. Limited consumer confidence, mis-selling, increased regulatory over-heads, bluechip failures and competitive pressures from all sides are forcing the pace of change. Recent and forthcoming regulatory changes require law firms to field strategically astute lawyers who can provide practical solutions capable of immediate local implementation. To do this, legal teams must invest substantial time and effort in becoming more involved in the commercial aspects of a client's business to understand and, where possible, anticipate their needs.

If law firms have regular cashflow from one sector, this should enable them to be more entrepreneurial elsewhere. If they work in some areas where rates are low and opportunities for innovation are limited, managers in those areas have the duty to develop a low-cost business model. In areas where rates are higher and more complex expertise is required, additional costs must be directly reflected by market success.

In every sector, it is clear that there must be fair reward, balanced with fair risk for both parties. Naturally, to secure a bigger reward, the lawyer is expected to assume a higher risk. Over the medium term, prudent businessmen and lawyers will look to smooth some of the peaks and troughs of cashflow, and most will be prepared to make some sacrifices in return for certainty of income going forward.

Providing all parties communicate, understand what they are trying to achieve and how their success will be judged and rewarded, then the concept of no gain without pain should be relished rather than feared.

Iain Moore is the regional senior partner in the Manchester office of Beachcroft.