Edge International


Law Firm Resilience in a Crisis: Part One – Financial Resilience

Law Firm Resilience in a Crisis: Part One – Financial Resilience

Introduction to the “Law Firm Resilience in a Crisis” series

It hasn’t taken long for the statement that we live in unprecedented times to become a universal cliché – Covid-19 and the resulting financial crisis is impacting all businesses far and wide and it will certainly get worse before it gets better.

As consultants who work in the legal industry, located in multiple countries and continents and already building up a stock of real-life, often hands-on, experience of this uniquely challenging period, the Edge International team have an opportunity to observe, compare and consolidate what we see across the legal world.

Our “Law Firm Resilience in a Crisis” series of papers is the evolving output of that process. We have identified a number of topics that are at the top of the crisis agenda for legal leaders and will report on these, one-by-one, weekly from early April. We may well revisit some of the topics, as the crisis and recession develop and as we start to gauge the effect of different strategies. Part One focuses on Financial Resilience.

Edge International colleagues have also kicked-off a companion thread on “Remote Working” in the legal industry, and we will regularly cross-refer between these streams.

Financial Resilience

Financial Resilience in Context

Financial actions, even in the midst of such a fast-moving and impossible-to-predict crisis, should not be taken in isolation. There is a serious risk that apparently obvious corrective action on the financial dimension can have damaging consequences in other areas of the business, undermining confidence or the firm’s ability to compete or recover. Financial decisions need to be made more quickly than perhaps at any previous time in your firm’s history, but they need to be made in context and in line with a clear strategy and direction.

The need of the hour is strong and decisive leadership. Leaders need a “laser-like focus” on the direction they wish to set, and a clear strategy to navigate these troubled waters. The current situation is akin to being at war and leaders need to assemble a small group of experts that can provide strong direction and respond very rapidly to developing events and emerging information. In the current environment, the law firm cannot be run by consensus as it would in normal circumstances.

The key is not to panic, be resilient and rest assured in the knowledge that we can get through this. When we emerge from these troubled times the world will be different, generating new opportunities – many of which we cannot foresee at the moment. Whilst it may not seem to be the right time to be thinking about the future, the actions taken during this period will determine your future. So be Bold!

Business Continuity Planning

A word about business continuity planning. We will return to this topic in upcoming papers, but it has been a massive focus for many of you over recent weeks, and it would be wrong to dive into any discussion of resilience without addressing a few points on business continuity.

Many firms have probably thought about creating a business continuity plan (BCP), or reviewing and testing a dusty old BCP, in the recent past and have put it off in the “too difficult” box. Well, guess what? It’s here now and unfortunately many businesses are ill-prepared for the crisis we are enduring. If there is a lesson that can be learned from this unfortunate situation it is that a good, up-to-date BCP is like your most fundamental insurance policy and a must in all businesses.

Once the crisis is over, and before the next one emerges (and there will be a next one), we would urge you all to get the necessary expert advice and put in place a BCP suitable for your firm. As importantly, now is not the time to neatly pack away your BCP, thinking that it is only there for dealing with an immediate, very short-term and short-lived moment of crisis. A good BCP will help guide you through the next three to six months; your business continuity will be tested and could be permanently damaged as we move forward into the next stage of the crisis.

If there are three BCP learnings that we can take away from what we have seen already, we would highlight the following – each of which has a financial implication:

Financial Resilience Priorities

At this time, firms have to refocus their financial objectives and priorities. Resilience is the key. Pulling the firm through the immediate lock-down, economic crash and wildly fluctuating uncertainty is the first financial resilience goal. Reshaping the firm’s financials for the recession that has already begun is the second goal. Preparing the firm to recover as quickly as possible and thrive as conditions begin to improve is the third. These goals are achieved through:

We outline below some very basic steps in building financial resilience in these times.

Monitor Cashflow Daily

Bill, Accelerate Cash Collection and Accounts Receivable

Manage your costs

Build Your Cash Reserves & Credit Lines

Forecast & Budget

Six Takeaways

Yarman J. Vachha

Edge Principal is based in Singapore with four decades of experience in the professional services industry globally. He has run global legal business across Asia, Australia and the Middle East. He is a subject-matter expert in improving profitability, operations, remuneration structures and governance within law firms. Asia: [email protected]

Leon Sacks

Edge Principal is a trusted international executive with over 30 years’ experience in consulting and law firms. He is based in Miami and currently advises such firms on business strategy and operations with a focus on the Americas. He has worked extensively in Latin America and is fluent in Portuguese and Spanish. Contact: [email protected]

Chris Bull

Edge Principal is a strategy, operations and change consultant who has established himself as one of the leading advisors to legal businesses in the dynamic and innovative UK market, as well as working in the US and internationally. He has built a reputation as a legal market pioneer and innovator, having worked for all four of the Big Four accounting/consulting firms, been one of the first partner-level chief operating officers at a law firm and overseen some of the largest global legal process outsourcing deals at ALSP Integreon. Europe: [email protected]