In Lewis Carroll's Through The Looking Glass, the Red Queen tells Alice "it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!". These words could just as easily apply to the way solicitors run their practices, now that the new Solicitors' Code of Conduct is in force.

In any race to gain and keep clients, there is always a chance that the competitors will stumble and fall. The new code seeks to prevent this by placing risk management at its core. It targets three risks in particular: poor client service; the prospect of a negligence claim; and professional misconduct. The antidote to these risks lies in the new business processes mandated by the code. In doing so, it also creates new risks for solicitors.

A classic risk management technique typically involves three stages: firstly, the risks are identified, then their consequences are mapped out and, finally, business processes are developed that use available resources to reduce the frequency of the risks and mitigate their effects.

Much of this has already been done for solicitors' firms by rules two (client relations) and five (business management). It is here that the code is at its most prescriptive. For example, a solicitor must now discuss with the client at the start of the retainer a dozen different matters in connection with the firm's charges (rule 2.03), and the principals in a firm must have regard to at least 17 separate management and supervision responsibilities. In practice, however, many of these provisions are merely reminders of good business practices. To that extent, they are welcome, although it leaves open the question of whether this degree of micro-management should really form part of the rules of professional conduct.

The best response to this new code is to write it into the DNA of the practice. All firms of solicitors will have systems in place for dealing with things such as the opening of new files or the taking on of new clients. These may need to be overhauled in light of the new code. For example, your firm's terms of business will need to be checked for compliance with rule two. If you do not already have one, you will need an equality and diversity policy (rule six). Do you have in place effective arrangements for the management of risk and the continuation of the practice of the firm in the event of absences and emergencies (rule 5.01(k))? Are your complaints processes compliant with rule 2.05 and are all your staff aware of their obligations not to hinder or prevent the making of complaints (rule 20.05)?

You can expect these new requirements to feature heavily on professional indemnity insurers' checklists upon renewal. Compliance with the code therefore offers the prospect of reduced risk and professional insurance premiums.

An overhaul of internal processes offers the opportunity to go beyond the new code in reducing risk. For example, this may be the time to introduce a liability cap into the firm's terms of business. Solicitors remain able to limit their civil liability by contract (rule 2.07), and paragraph 52 of the guidance to rule three provides that a firm is free to negotiate over its terms of business (although it also recommends that where the terms are particularly unusual it may be prudent to tell the client to seek independent advice). The recent decision in Marplace (No. 512) v Chaffe Street suggests that a firm should have in place a system to record how the liability cap is chosen, why it is reasonable, and that it was actively discussed with the client.

The new code is not just about implementing business processes that may serve to reduce risk. Some of its provisions can also be viewed as a source of risk for solicitors.

To start with, while rule 1.05 says you "must provide a good standard of service to your clients", basic contract law requires a solicitor to supply his services with reasonable skill and care. Is this the same standard? The use of the word 'good' suggests something rather better than 'reasonable' is to be expected, a point underlined by the fact that rule one sets out what are described as the 'core duties' of a solicitor.

A further trap for the unwary appears at rule 2.02. This requires a solicitor to "identify clearly the client's objectives in relation to the work to be done for the client". This suggests that it is no longer sufficient simply to understand the client's instructions: they must be placed in the broader context of the client's objectives. However, in exploring those objectives, the solicitor may be fixed with knowledge that, in turn, widens the scope of his duties and increases the risk of a negligence claim.

To illustrate the point, consider a request by an apparently sophisticated client to draw up a loan agreement. During the solicitor's exploration of the client's understanding of the broader commercial context of the transaction, it becomes apparent that the client has chosen, perhaps unwisely, not to seek third-party guarantees. On the one hand, there is recent case law that says a solicitor is under no obligation to offer unsought advice about the wisdom of a transaction, provided the client appears to be aware of what he is doing. However, rule 2.02 pushes in the opposite direction. By identifying the client's objectives, the solicitor is now aware that the client is, so to speak, running towards the cliff edge. This makes it more likely that a judge will find that the solicitor should have given a warning to the client.

Some of the changes in language between the old and new codes are slight but potentially far-reaching. Under the old Solicitors' Costs Information and Client Care Code 1999, a solicitor had to discuss with the client "whether the likely outcome in a matter will justify the expense or risk involved". This suggested that the solicitor needed only to focus on the likeliest outcome when advising on the cost-benefit of litigation. The new rule 2.03 (6) requires a solicitor to discuss with the client "whether the potential outcomes of any legal case will justify the expense or risk involved". The reference to "potential outcomes" suggests a more complex review of all scenarios, both worst-case and most likely, is now required.

This is not the only significant change in language between the new and the old rules. Under the old code, a solicitor's undertaking was defined as "any unequivocal declaration of intention addressed to someone who reasonably places reliance on it". The new code however says that an undertaking is "a statement made by you or your firm to someone who reasonably relies upon it, that you or your firm will do something or cause something to be done, or refrain from doing something". This later form of words appears apt to cover everything from the formal ('I shall hold the funds, once received, to your order') to the trivial ('I shall write next week with my client's instructions').

Some of the new provisions are double-edged. For example, rule 2.02 (2) (a) requires the solicitor and the client to agree at the outset "an appropriate level of service". The law demands that the solicitor provides his services with reasonable skill and care. Does this rule sanction agreements to offer less than that? Presumably not. What about ag standard reeing a level of service greater than reasonable skill and care? It is unclear how this provision will be applied by the Solicitors Regulation Authority.

It is not all bad news. Rule 2.02 (2)(b) requires the solicitor to explain the client's responsibilities. A firm may wish to consider asking the client to agree that he will provide information and instructions on a timely basis and that it is his responsibility to manage any other parties involved in a transaction. This offers the chance of redistributing some of the risk in a transaction onto others, whether the client or third parties.

In summary, the new code forces solicitors to concentrate on the business aspects of their practice. It means that we must all run that little bit faster now, so as to keep up with our competitors and out pace our regulator. However, the very proper focus on risk avoidance should not come at the price of suppression of other, more innovative aspects of solicitors' practices. The White Queen says to Alice that we must practise believing in impossible things before breakfast. Perhaps we should take her advice if it leads to creative new means of delivery of legal services to our clients.

Graham Reid is an employed barrister in the lawyers' liability group at Reynolds Porter Chamberlain.