For Corporates

Mitigating Risk – Maximising Reward

Litigation is expensive. Whether you are an SME or a listed company, the cost of pursuing a claim has a direct impact on your bottom-line. When considering the costs of pursuing a claim, a corporate must budget not only for its own legal fees, but also the potential liability to pay its opponent’s costs in the event of the claim fails. There is therefore little surprise that legal departments are seen as a cost centre in many organisations as opposed to a revenue generator.

The development of litigation finance and dispute insurance has shifted the paradigm considerably in recent years. Litigation can now be viewed positively as an asset with an inherent value in itself. Through the innovative use of such dispute risk management products, corporates can avoid the need to set aside cash for significant legal spend and contingent liabilities, whilst potentially generating revenue from business that may otherwise have been written off.

They can also be used to balance the potential disparities in resources where you are faced with a significantly larger opponent, thereby providing you’re an efficient means of access to justice.

Factor Risk Management assists corporate clients in a number of ways. Whether it is to introduce you to specialist law firms that we feel will give you the best support or to aid you in finding dispute risk management solutions, we are here to help. We understand that our corporate client’s primary focus is running a business and litigation can be an unwanted distraction. Using our services, provides you with an exceptional informational advantage and an efficient means of exploring and managing your funding and insurance solutions.

For challenges faced in an M&A deal, we offer a comprehensive suite of transactional risk insurance solutions that can transfer a wide variety potential or identified liabilities to insurers, providing certainty and facilitating transactions.

Benefits of Third-Party Funding, ATE and M&A and transactional risk insurance for corporates

Risk management tool
the ability to limit a corporates downside risk as the financial risk is transferred from the claimant to the funder or insurer.

Cashflow assistance
the significant legal spend to pursue a claim can cause a drain on finances as well as presenting an opportunity cost, as vital cash resources are diverted away from revenue generating activities. In addition, by avoiding the use of traditional debt facilities, the claimant avoids further indebtedness.

Positive accounting recognition
Litigation costs are recognised as an expense on a company’s profit and loss account, thereby reducing its operating profits for as many years as the litigation or liability continues. This can have a negative effect on EBITDA, thereby reducing the company value. By using funding or insurance solution, legal costs can be taken ‘off balance’ sheet, thereby ensuring that a company’s operating profit is not unnecessarily reduced, and the company accounts will show a more accurate position of the company value.

An additional layer of diligence and oversight
Funders/Insurers only back cases that they consider are likely to succeed. After all, there is no money to be made backing losers. Most funders will also have significant in-house legal and financial expertise. Those skills can be useful to a corporate as they will have an interested, but dispassionate party who will stress-test the strength of your case and provide useful input over the life of a case.

The use of an ATE policy protects your business from the adverse costs it will be exposed to in the event the claim is unsuccessful. In an M&A scenario, transactional risk insurance policies can manage risk for both buyers and sellers, and protect ongoing commercial relationships by transferring the risk of financial losses from transaction parties to an insurer.

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