Protecting the bottom line

Litigation is inherently risky and unpredictable as to cost, duration and outcome. For in-house legal teams, this blunt truth creates what we at Burford think of “money out” and “money in” problems:

• “Money out” problems: Companies have no choice but to spend to defend themselves from litigation but will think twice about setting aside the cash needed to pay legal fees and expenses to pursue even the most valuable, meritorious claims.
• “Money in” problems: Even when companies do decide to pursue high-value claims, they still face the challenges of multi-year delays until a settlement or judgment makes them whole—and even then they may face the challenge of enforcing payment by the judgment debtor.

The worse the economic climate, the more pronounced these problems become, and the more likely they are to serve as obstacles to the pursuit of valuable, meritorious claims. That’s bad news for in-house legal teams and the litigators at law firms that wish to serve them.

Fortunately, legal finance offers a solution both to “money in” and “money out” problems. In offloading risk and expense to a third-party, law firms and legal departments can pursue valuable, meritorious claims without putting their own money out the door. And in working with legal finance providers to monetize claims and awards as well as enforce judgments, law firm and in-house lawyers can bring cash in the door.

In an uncertain economy, legal finance is an essential tool to help companies and firms secure their bottom line.

The money out problem

If history is any lesson, we can expect that when a recession hits, legal budgets will be reduced, and companies will be asked to do more with less. While defending themselves from litigation is a given, companies often forgo pursuing valuable claims. 

In fact, Burford’s recent research reveals that 72 percent of in-house lawyers report that their companies don’t pursue strong claims due to upfront costs and fears of adversely impacting the bottom line. In short: Companies already reluctant to pursue meritorious claims will be faced with yet more claims in the event of a recession. This won’t just impact companies’ budgets, but also their law firms, which will be under added stress to generate business in a cash-restricted environment.

Partnering with a legal finance provider like Burford—who assumes costs, shares risk, and provides capital so that meritorious commercial litigation can proceed—companies don’t have to choose between pursuing litigation and protecting their bottom line and their law firms can continue to generate revenue.

The money in problem 

Companies that choose to litigate disputes and the law firms serving them then face another problem upon successful resolution: The unpleasant pursuit of collecting the award or enforcing the judgment.

According to the 2019 Legal Finance Report, 65 percent of in-house lawyers say their companies have unenforced judgments valued at $20 million or more. And if the economy turns, the crunch for cash will only worsen and companies risk missing out on millions in recoveries.

Legal finance is a transformative tool that can disrupt this pattern of hesitation. And two-thirds of in-house lawyers agree: By shifting the cost and risk of pursuing recoveries to a third party, companies can generate value and transform their litigation departments from cost centers (2019 Legal Finance Report).

By engaging a legal finance partner, firms and companies can offload collection risk by making use of monetization—and, because Burford has its own in-house asset recovery team, clients can take advantage of our judgment enforcement capabilities when dealing with uncooperative debtors. For appropriate high-value matters, Burford will advance a portion of the potential award on a non-recourse basis. The benefit to the client: Accelerated cash flows, advanced cash for flexible business purposes and removed risk from pending awards.

Conclusion

Legal finance is a solution for law firms and companies to protect their budgets and secure recoveries. Independent of the economy’s performance, legal finance is a tool that helps to protect the money out the door and help bring money in the door—for companies and law firms independent of the economy’s performance.