Executive Guide
The CFO Guide to Litigation Finance
For a CFO, litigation finance is a capital-allocation tool: it moves the cost of pursuing valid claims off the operating budget and onto a funder, converting an uncertain expense stream into a contingent cost paid from recovery. The decision to litigate becomes an ROI decision, not a legal-budget decision.
Executive Summary
Finance teams routinely write off recoverable claims because the legal budget is capped and the timeline is unknowable. That is rational budgeting, and poor capital allocation, because the claim itself may be a high-return asset.
The CFO lens: what is the expected recovery, over what time, at what funded cost, versus the certain loss of a write-off? Funding turns that comparison live, pursuit no longer competes with operations for cash.
A CFO decision path for stuck receivables and claims
- 1
Inventory the claims
Receivables, contract claims, disputes, with values, ages and limitation dates.
- 2
Score recoverability
Documentation, counterparty capacity, forum and enforcement route.
- 3
Compare scenarios
Write-off vs self-funded pursuit vs funded pursuit, cash, P&L and time profiles.
- 4
Fund the viable ones
Eligible claims pursued with litigation costs covered under the funding arrangement; working capital stays in the business.
- 5
Report in portfolio terms
Track claims as assets with expected values, not as legal noise.
Three ways to treat a high-value claim
| Write-off | Self-funded pursuit | Funded pursuit | |
|---|---|---|---|
| Cash outflow | None | Legal costs for years | None upfront for funded matters |
| P&L today | Loss booked | Expense drag | Neutral until recovery |
| Risk | Certain loss | Costs lost if case fails | Non-recourse, funder bears cost risk |
| Upside | None | Full recovery minus costs | Recovery minus agreed funder share |
CFO litigation-asset checklist
- A register of all claims and stuck receivables above materiality
- Limitation dates mapped, expiring claims flagged
- Documentation quality graded per claim
- Counterparty solvency view per claim
- A standing decision rule: what gets assessed for funding, and when
Frequently asked questions
How does litigation funding affect the P&L? ▾
For funded matters there is no ongoing legal-cost drag; the funder's share is paid out of recovery. Specific accounting treatment should be confirmed with your auditors.
What is litigation ROI? ▾
Expected recovery net of the funder's share and any residual costs, against time and management attention. The assessment provides the inputs for that calculation.
Does funding signal weakness to the counterparty? ▾
Increasingly the opposite: it signals the claim has passed independent underwriting and the pursuit will not run out of money.
Can a portfolio of claims be assessed together? ▾
Yes, claim inventories can be triaged so the viable matters are identified and prioritised.
Related Guides
Assess your claim's recoverability
A free, structured, 5-step assessment of whether your claim may qualify for funding. Preliminary indication only, subject to due diligence.
Check Your Claim Eligibility