Corporate counsel work under immense pressure to protect and advocate for the companies they serve. The decisions made in corporate legal departments must evaluate the legal merits of a case and weigh the best interests and financial risks or benefits to the company. Litigation funding can mitigate the risks of the legal process and allow companies to maximize legal assets without impacting the corporate bottom line.
Funding Challenges for Corporate Legal Departments
Companies generally do not pursue litigation likely to negatively impact a corporation’s bottom line. Legal departments often recommend settlement of cases against a business to avoid negative financial impacts, even if the company is not truly at fault. In either case, the corporation suffers a loss. Litigation funding, however, turns potential claims into assets and stabilizes the cost of defense by sharing risk.
Litigation Funding Allows Counsel to Pursue Valid Claims
When a corporation suffers harm from another party, some of the associated losses and potential recoveries can be difficult to establish. Additionally, impacts on reputation or future profitability don’t positively impact the balance sheet. The costs of litigation, however, are reflected as expenses. As a result, the value of corporate legal claims is not always apparent or quantifiable.
Unlike banks and other traditional lenders, a law firm funding company has the ability to assess the potential value of a legal claim. This turns meritorious corporate claims into assets rather than liabilities. Collateralizing these assets provides capital that can be used to develop the case, hire experts and specialists, or hire outside counsel to assist with or manage litigation of the case.
The underwriting process for the funding of legal claims also offers in-house attorneys an opportunity to reap the benefits of the unbiased opinions of experts in the fields of law and finance. Successful litigation funding underwriters must be skilled in the evaluation of potential legal outcomes. The insight of these professionals can provide peace of mind as well as additional support when discussing claims with company leadership.
Mitigating the Risk of Corporate Legal Defense
The costs of ongoing legal action have significant impacts on businesses. To help minimize damages and maximize profits, in-house counsel often determine that settlement is a safer alternative than the ongoing risk of fighting a legal claim from another company.
Litigation funding transfers the risk of an unknown outcome to the litigation funding company. Because the company has no obligation to repay the amounts advanced unless the case at issue resolves in the company’s favor, litigation fund helps the company hedge against potential losses. In this scenario, litigation funding is similar to insurance, but it fills a gap where insurance coverage wanes.
By establishing a measure of success for the case and ensuring that the corporation will not pay more than that predetermined amount, the litigation funding firm provides stability of expenses and peace of mind for company leadership and stakeholders.
Litigation Funding: The Bottom Line
Funding of corporate legal cases enables in-house counsel to positively impact the bottom line. In a competitive legal market, the ability of a corporate legal team to introduce novel business processes to improve the financial position of the company is valuable.
Litigation funding can provide the competitive edge a corporation needs to be more successful. In-house attorneys and general counsel who would like to learn more about the benefits of litigation funding for corporate legal departments should contact the leaders in litigation funding, Pravati Capital.