Legal cost and risk management is a challenge with broad business implications. Despite this, many companies aren’t adequately prepared. They manage legal cost and risk in a siloed, reactive manner—and even big companies have millions worth of unpursued but meritorious claims and unenforced awards.
The 2019 Managing Legal Risk Report: A Survey of CFOs and Finance Professionals is a first-of-its-kind survey of over 500 Chief Financial Officers and other senior finance professionals that will help in-house and law firm lawyers more effectively partner with CFOs to tackle this urgent business challenge—all the more urgent ahead of a potential recession that will put pressure on companies to manage legal costs and use their cash wisely.
Selected key findings of the research:
How CFOs think about managing legal cost and risk
- CFOs see legal cost management as an urgent issue that requires innovative solutions.
- The overwhelming majority of CFOs understand that legal assets have value and can be financed.
- A clear majority of CFOs say that their companies have chosen to forgo claims due to the impact of associated legal expenses on the bottom line—and large companies are the most likely to have neglected to pursue recoveries for this reason.
- Over three-fourths say their companies have unenforced judgments valued at $10 million or more.
What CFOs think about the legal function
- With fears of a recession looming, a majority of CFOs and senior finance professionals (66.9%) report that in such an event they would advocate reducing legal budgets; an even greater percentage (67.3%) say that a recession would make them more likely to advocate using legal finance.
- The majority of CFOs cite managing legal cost and risk as a critical competency for GCs and legal teams—and recognize that managing legal risk and uncertainty is a critical challenge for the business.
- The inherent unpredictability of the GC’s job—that the legal department can’t predict how much it will cost or how long it will take to resolve expensive disputes—is recognized as a major challenge.
- As it pertains to decisions about the legal budget and how it is financed, CFOs wish neither to exercise control nor to seek control—but rather to work collaboratively with legal teams.
Why CFOs—especially at larger companies—advocate legal finance
- Most CFOs say that they are aware of legal finance, and an overwhelming majority say that they would recommend its use by their companies.
- The overwhelming majority of finance professionals expect their companies to use legal finance in the next two years.
- CFOs see legal finance as “corporate finance for law”—a tool that helps them bring value to the business, invest in growth and use their capital wisely.
- Finance professionals see legal finance as a solution to the persistent legal budget and risk management challenges companies face, and as a means of creating certainty around legal spend.