Burford’s latest research looks at how finance and legal teams approach their companies’ legal assets. The findings reveal a significant opportunity for legal and finance departments to reevaluate how they approach and leverage these assets.
Opportunity #1: Identify actionable commercial targets for the legal department
Problem: Companies may miss opportunities to enhance liquidity with their legal assets
Financial officers are nearly unanimous in reporting that their organizations have cost management and affirmative recovery programs. Yet almost half (46%) say that their recovery programs could be better. One path could be to use quantitative financial modeling to assess the value of pending legal assets and prioritize opportunities. Currently, however, 39% of financial officers say that they choose not to conduct such modeling of litigation because they believe litigation variables don’t lend themselves to quantitative analysis.
Solution: Identify and pursue value-generating opportunities
Quantifying legal risk is the foundation of Burford’s business, and we routinely work with our clients to help them optimize their legal assets and portfolios. By working with a legal finance provider, companies can access third-party data and expertise that wouldn’t otherwise be available to them. As a result, they can use their legal assets to enhance working capital and improve results—turning legal departments from cost centers to commercial centers with assets to leverage.
Opportunity #2: Control timing of litigation outcomes
Problem: If duration risk of litigation is overlooked, capital may not be used efficiently
According to the research, financial officers are least likely to consider time to resolution as a factor in decision-making about high risk litigation. By overlooking duration risk—the length of time it takes to file, settle, litigate, appeal and actually get paid—CFOs may be unnecessarily reducing working capital by spending out-of-pocket.
Solution: Gain immediate access to capital through claim monetization
Financing litigation through monetization, in which capital is provided in a lump sum, effectively solves the duration-risk problem by reducing or removing costs to the business. CFOs can accelerate the payment of a portion of or an entire award, judgment or claim. In each case, capital is provided directly to the company. Monetization enables CFOs to preserve capital for investment in the business and control timing of litigation capital flows, both outgoing expenses and incoming recoveries.
Opportunity #3: Generate liquidity for the business
Problem: Companies are leaving money on the table
Judgments, claims and awards can be valuable assets. When affirmative recovery and cost management programs don’t meet a company’s needs, it may not maximize the value of these assets.
49% of financial officers said they decided not to pursue judgments due to cost in 2020, with half of those saying that the amounts at stake totaled $20 million or more. This and other research suggests that companies routinely neglect to enforce judgments due to budget concerns, but this should not be an either-or choice: They can utilize cost- and risk-shifting tools to both pursue and enforce valuable claims, with zero impact on budgets.
Solution: Work with asset recovery experts
Burford’s in-house asset recovery team helps clients and firms address enforcement challenges, transforming judgment debts from “legal paper” into cash. We provide asset recovery services on a financed basis in exchange for a share of whatever recovery is generated, removing the risk of pursuing assets for the client. We also offer a consultancy, fee-for-service approach, with the client retaining the full benefit of any recovery.
