A CFO on legal finance: Keep your cash to invest in your business

Businesses finance all kinds of aspects of their operations. That goes without saying, because CEOs, CFOs and other c-suite leaders determined many decades ago that they can get the most ROI by investing in their core businesses rather than paying out-of-pocket for anything that can be financed, from real estate to corporate jets and beyond.

With the advent of legal finance, businesses can now finance their legal departments—and that’s a good thing, as Chris Halmy, an independent board director who was formerly CFO of Ally Financial, a top 25 US financial holding company, explained at an April 15 conference addressing the intersection of business and litigation.  

CFOs want to invest their cash in revenue generating areas of the core business, not litigation, Halmy explained at the ILFA New York conference. The simple but profound truth is this: Clients know how to make money by investing in their own businesses. Spending on the business is unquestionably more impactful than spending on non-core litigation events with unpredictable, binary outcomes. 

"CFOs live in a quarterly public reporting world," Halmy said. "So when it comes to cost, you really want your costs to be spent in places that drive the core business, not necessarily in places like litigation. And you want those costs to be really predictable."

Legal finance is growing in no small part because CFOs, GCs and heads of litigation at companies from startups to the Fortune 500 increasingly understand that legal finance allows them to do for the legal department what they do everywhere else in their businesses.

Nonetheless, Halmy argued that too few CFOs are aware of this. He urged the in-house lawyers in attendance to educate their peers in finance about legal finance as a tool available to unlock the value in their legal departments and reframe them from overhead to capital source.