In an effort to better understand whether and how finance teams are working with legal to maximize the value of corporate litigation assets, Burford commissioned the 2021 Legal Asset Report—an independent survey of 378 senior financial officers of companies with annual revenues of $50 million or more in the US, the UK and Australia conducted in March and April 2021 for Burford by Bauman Research and Consulting.
The research found that companies are on the cusp of a paradigm shift in how they approach legal assets. Most financial officers understand that their companies have valuable legal assets—but they are not yet fully leveraging the tools available to unlock them.
Below, we highlight five steps finance professionals can take to unlock the legal asset opportunity that’s hiding in plain sight.
- Promote collaboration and innovation in legal
The significant number of financial officers reporting a need to improve affirmative recovery and legal cost management programs suggests that a shift in approach is needed. This shift should combine a numbers-driven finance approach with the deep understanding of commercial disputes that legal brings.
- Recognize that pending claims are corporate assets—and treat them as assets
Although most financial officers agree that pending claims are assets because they represent potential future cash flow, finance and legal teams need to take the next step—and utilize available financing tools that enable them to actually treat claims as assets, for example by better controlling the flow and timing of capital to and from claims and by utilizing quantitative analysis of litigation
- Work with legal to set value-add goals alongside cost-control goals
A surprisingly tepid majority (56%) believe that legal departments should have commercial targets. Companies will gain more value from legal departments when finance and legal leaders encourage more commercial thinking about litigation—for example, by designing affirmative recovery programs that return value to the business through meritorious litigation. With outside legal financing in place, companies can do so in ways that eliminate affirmative litigation cost and also offset litigation defense costs.
- Leverage quantitative modeling to make decisions about litigation—just as elsewhere in the enterprise
Quantifying legal risk is the bread and butter of legal finance, and the success of Burford Capital affirms the power of that expertise in generating real dollars. Yet very few financial officers are applying quantitative decision-making techniques to high-stakes litigation. Those that doubt quantitative modeling is possible for commercial claims can seek out this expertise from legal finance partners as needed.
- Fill in gaps in expertise, data and capital
Just as companies routinely seek outside expertise and financing for areas that are not core to their business, they should have the same expectations for their legal assets. Few companies litigate with enough frequency to have built expertise in key aspects of case budgeting and quantitative modeling for litigation costs and outcomes, and their data sets will by definition be limited to their own experience. Along with capital to finance affirmative recovery efforts, this expertise and data are available from legal finance partners.
Download the full report here.