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How GCs dial up certainty and control by financing their affirmative recoveries

  • Greg McPolin
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Greg McPolin

Greg McPolin

Managing Director

Former Chief Operations Officer, Thomson Reuters LMS

Most companies aren’t in the business of litigating, but they are acutely aware that litigation is a necessary part of doing business. Although large companies have traditionally focused on defense litigation, more and more in-house legal teams are recognizing the value of affirmative (plaintiff-side) litigation. According to Burford’s latest research, 2 of 3 GCs report that their companies have affirmative litigation recovery programs. This systematic approach to affirmative recoveries can help companies generate millions of dollars, but not without investing a significant amount and assuming a high level of risk. 

A financed affirmative recovery program eliminates those deterrents to pursuing litigation. There are different finance solutions depending on the company's business need. Fees and expenses financing reduces the budget for litigation to nearly zero dollars as the funder pays the law firm directly. Monetization capital, in which the funder provides and immediate infusion of capital, creates certainty around the timing of cash flows and guarantees the company a minimum recovery even if the case loses. 

Financed affirmative recovery programs provide legal departments with cash flow and timing certainty

An established affirmative recovery program indicates that a company recognizes the asset value of pending litigation. However, without outside funding, legal departments bear both the risk and cost of litigation. A financed affirmative recovery program offers companies a P&L solution (fees and expenses financing) and a balance sheet solution (monetization capital), helping corporate legal departments better manage legal budgets and litigation risk. 

As one GC puts it, “Our business loves risk management and certainty. So if you know going in that the risks are fixed in exchange for sharing some recovery, it would be appealing. It is all about certainty.” With a legal finance partner, certainty is improved and the legal department can contribute to the bottom line without adding expenses. And because the investment is non-recourse, the company’s risk of loss is eliminated.

In-house legal teams maintain control of the litigation and legal strategy

Many senior lawyers express concern about losing control of matters if they accept funding, but no such loss of control occurs. At its core, legal finance is simply a financing arrangement in which Burford takes a passive investment role, providing non-recourse capital to pay for fees and expenses or invest in the future proceeds of a claim outcome.

Conclusion

Although a majority of companies have affirmative recovery programs in place, there is opportunity to improve these programs’ effectiveness and efficiency. With legal finance, GCs can transform their affirmative recovery programs into revenue-generators. Capturing the sentiment of his peers, one GC of an electronics manufacturing company says, “Lawyers are by nature risk-averse, so I want to be fairly certain that what I have identified as an asset will bear fruit.” Working with a legal finance provider, GCs can be fairly certain that their legal assets will bear fruit.