March 28 2022
Commercial News Roundup: Prices Pandemonium
Welcome to the first of what will (hopefully!) be a weekly round-up of commercial news and stories. Before we go into today’s stories however, it is important to understand what ‘commercial’ means and why it’s important for aspiring lawyers to be ‘commercially aware’.
Put simply, ‘commercial awareness’ means keeping up to date with all things business and the latest stories (whether they be political, economic, technological, social) relevant to commercial actors. Commercial lawyers in particular need to be commercially aware so they can understand the challenges their clients face when trying to achieve their commercial objectives. Prior to moving over to law, I studied economics as part of my degree and I enjoy applying my training to consider how law firms can capitalise on the commercial issues of the day in the most effective way possible.
Our commercial roundup is designed to be a short weekly summary of five key business-relevant stories across various sources so you can keep building your commercial knowledge, focussing on how these issues matter to the legal world. It will supplement your existing research and will not serve as a replacement, so do continue to keep an eye out for the changes affecting your future clients! There’s lots of great resources out there you can use (a lot will be used to write this blog) with my aim being to provide aspiring lawyers and legal professionals with a handy snapshot of the latest commercial headlines.
This week, we discuss the exodus of law firms from Moscow, rising food prices, commodities pricing and how that affects the supply chains, the price of petrol, and returning to the office (cue dramatic music)...
Law firms leaving Moscow!It’s beginning to feel almost like a daily ritual: checking to see which law firms have pulled out of Moscow. Several magic circle and silver circle firms have left, alongside key US players who have a strong presence in London. Russia is a key market for natural resources, but luckily the UK has a smaller degree of reliance on Russia than much of continental Europe.
However, think about firms who have a prominent natural resources practice (such as Vinson & Elkins) and consider how withdrawing can affect both the commercial objectives they have as firms, as well as the impact on their clients . Furthermore, from an ethical and PR perspective, consider firms that have remained in Moscow. What challenges might they face? Will clients want to keep working with them?
The Russian market has been engaged with tentatively, and given how unpredictable the situation in Ukraine has become it may not be re-engaged en-masse for a while.
Why is food so expensive?Retail is notorious for tight margins, meaning that even small market disruptions can cause significant financial pressure. Supermarkets in particular face the tightest of margins, and as food prices continue to rise many will be thinking about how they can mitigate the financial pressure. Supermarkets have worked on diversifying their commercial interests for a long time, and have branched out into clothing, telecommunications, and energy.
So what does this mean for law firms? Well branching out means fast-paced advice and versatility. Being able to collaborate with different specialists is key, and having a network to reach out to for expertise is important as a lawyer, especially for clients looking to diversify. As food prices rise, supermarkets may be thinking about closing less profitable sites, staff restructuring, leverage-financing new operations, carve-outs, acquisitions, and more strategies to remain profitable and stable. A good way to think about where lawyers can help is to imagine you yourself are the client - what would you want to achieve and where would you want your legal team to jump in? Remember, law firms are businesses and need to find work, so thinking commercially can really help you keep ahead of the competition.
Metal prices risingTechnology plays an ever-increasing role in our lives. Smartphones, tablets and computers are obvious examples, but all the ‘smart’ devices in our houses and the electric cars taking the market by storm rely on various precious metals that are often traded by commodity dealers. Global supply chains have long-faced logistical challenges, but as certain precious metals (such as palladium) and other more commonly used metals (such as aluminium) face unprecedented demand, prices are rising and scarcity is bringing production lines to a halt.
Tin, palladium, aluminium and uranium are all pricing extremely high in the commodities markets at the moment. So, where do lawyers come in? Well, if supply chains run aground, manufacturers relying on raw materials face the prospect of higher prices impeding production, but also risk being unable to meet contractual obligations. When clients risk breaching contracts, it creates an opportunity for law firms to step in. Whether it be to run negotiations, begin preemptive planning for litigation, or to help strategically, being aware of the latest commercial challenges facing clients is key to building long-term relationships.
Petrol prices are out of control!The theme of rising prices continues, as Brent crude oil rocketed last week. The challenges posed can be analysed in a similar way to the rising prices of metals. Think about who uses oil, quite literally everyone pretty much! Obvious examples include the transportation sector. Airlines, car-owners, train operators all use refined crude in varying forms. Think about how they can pass the cost on. Will the shareholders take a hit? Will the employees? Will the consumer? Well, we’ve seen petrol prices rise astronomically (sympathies to the readers who drive), but as European nations cut fuel duty is there a possibility the UK will follow suit?
For the aspiring tax lawyers out there, this could be quite an interesting one. More broadly, the cost of living crisis presents a diverse array of challenges. Think about it from a contracts point-of-view: if a fuel distributor agrees to supply fuel at a certain cost, and then prices rocket and the distributor sells at a loss, how might you as a contract lawyer mitigate the damage? What would you want to have written in a contract to limit the risk?
Back to the office!Covid no longer dominates the headlines, commuting has returned, and office fridge space rows return in force! The pandemic forced us to rethink how we worked, and great swathes of the workforce saw the benefits of hybrid working, and wanted them to last.
Whilst hybrid setups look here to stay, the sharp decrease in Monday-Friday schedules have presented challenges. The demand for office space has declined, and companies that signed up to long leases before the pandemic will likely want to revisit their agreements with landlords and office space operators. Commercial challenges to the cafes, shops, and bars that relied on trade from Monday-Friday workers will also face challenges. Perhaps they’ll want to slim down staff numbers, review supplier agreements, and maybe move premises. Where and when do you think they might need lawyers or legal advice?
Law firms themselves have also had to confront this reality, and whilst plenty responded to the pandemic well in terms of moving to 100% home working, there is a need to look at how often lawyers are really needed in the office day-to-day. As salary wars and the fight for fresh talent continues to heat up, more and more future trainees and associates are considering how they want to manage their work-life balance and the leverage they have to negotiate with the firm that employs them.
That’s it for this week! Remember to keep an eye out for stories that interest you and think about the firms you’re applying to, and how they can take advantage of the latest commercial updates.
- April’s Junior Lawyer Lunch: what does it mean to be commercial? - sign up to our next Junior Lawyer Lunch event, where Tarun Tawakley, Partner at Lewis Silkin, and Chloe Mason-Williams, Head of Legal at EDF Energy, will be talking to you about what it means to be commercial.
- Apply to become a Flex Paralegal - want to gain more legal experience in the real world? Well look no further! Click here to learn more about our interim paralegal roles.
- How can future lawyers develop client-centric skill sets? - take a read of this blog post to find out how you as a future lawyer can work on developing client-centric skills.