New Research: CFOs Increasingly Aware Of Commercial Litigation Assets And Poised To Unlock More Value From Legal

Rhea-AI Summary

Burford Capital has released research highlighting CFOs' growing influence on corporate legal departments and the management of legal costs. Key findings reveal that 73% of financial officers have extensive recovery programs, with 75% of companies over $1 billion in revenue holding unenforced judgments valued between $20-$100 million. Notably, only 24% apply quantitative modeling to litigation decisions, indicating significant untapped potential for financial innovation in legal contexts. The report outlines a shift in recognizing pending litigations as valuable assets and the importance of integrating commercial strategies into legal departments.

Positive

• 73% of financial officers report extensive affirmative recovery programs.
• 75% of companies with over $1 billion in revenue have unenforced judgments worth $20-$100 million.
• 59% of CFOs view pending litigations as future cash flow assets.

Negative

• 46% feel their affirmative recovery programs need improvement.
• Only 24% apply quantitative financial modeling to litigation decisions.

NEW YORK, June 28, 2021 /PRNewswire/ -- Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research probing how CFOs and senior financial officers influence corporate legal departments, legal spend and their companies' success in recovering value through affirmative recoveries. 

Christopher Bogart, CEO of Burford Capital, commented: "CFOs bring a commercial mindset to other areas of the business—and the legal function should be no exception, particularly given the amount of working capital potentially at stake, measured not only in the many millions now spent on commercial claims but also the even greater opportunity costs of diverting corporate resources and the untapped opportunity to pursue valuable claims altogether."

The research suggests that companies are on the cusp of a paradigm shift in how they approach legal assets, and that financial officers understand their value and have new opportunities to more fully leverage tools to unlock them.  Key findings from the research include:

Affirmative recovery and cost management programs are extensive—and ready for growth

• 73% of financial officers report extremely/very extensive affirmative recovery programs, and 84% report extremely/very extensive legal cost management programs
• 46% report a need for improvement in these programs

Companies have extensive opportunities to enhance liquidity

• 75% of companies with over $1 billion in annual revenues reported unenforced judgments worth $20-$100 million in 2020
• Companies with inadequate affirmative recovery programs are 27% more likely to leave money on the table

Financial officers have new ways to apply the same financial approach to legal as other business areas

• Just 24% say they apply quantitative financial modeling to make decisions about litigation as they do in other areas of the business
• 39% say litigation variables don't lend themselves to quantitative analysis—revealing an untapped opportunity to utilize tools and partners to quantify legal risk

Bringing a commercial mindset to legal will reinforce more commercial behaviors—benefiting the business

• 59% believe that pending litigations are assets because they represent future cash flow, even if they don't show up on the balance sheet, and 56% believe that the legal department should have commercial targets
• However, a significantly large percentage of financial officers aren't yet bringing a commercial mindset to legal
• Those who conduct quantitative analysis of litigation are significantly more likely to say that their companies need to place greater priority on their affirmative recovery programs—suggesting the kind of appetite for improved performance and financial innovation that leading companies value 

The 2021 Legal Asset Report: A Survey of Finance Professionals can be downloaded on Burford's web site and includes snapshots of energy, food, healthcare and other industries. Its findings are based on the online survey responses from 378 senior financial officers of companies with annual revenues of $50 million or more in the United States, the UK and Australia, conducted in March and April 2021 by Bauman Research and Consulting. Over half of respondents hold CFO titles and all are in roles that include knowledge of their companies' litigation expenditures.

About Burford Capital
About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, Singapore and Sydney. For more information, please visit www.burfordcapital.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford.

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SOURCE Burford Capital

FAQ

What is the significance of the Burford Capital research released on June 28, 2021?

The research highlights the increasing awareness among CFOs regarding the value of corporate legal departments and their role in improving legal cost management.

How do CFOs influence legal spend according to Burford Capital's report?

CFOs bring a commercial mindset to legal departments, enhancing the potential for affirmative recoveries and better resource allocation.

What percentage of financial officers believe their affirmative recovery programs need improvement?

According to the report, 46% of financial officers report a need for improvement in their affirmative recovery programs.

What findings relate to companies with over $1 billion in annual revenue?

The report states that 75% of such companies reported having unenforced judgments valued between $20-$100 million.

What challenge do financial officers face regarding quantitative analysis in litigation?

39% of financial officers believe litigation variables do not lend themselves to quantitative analysis, revealing a gap in applying financial modeling.