What is Commercial Awareness?

Law firms and other legal employers now put a great deal of emphasis on candidates being ‘commercially aware’ - but what does this mean?

Commercial awareness is about understanding how businesses work, why they make certain decisions and the kinds of pressures they face from the sectors they operate in.  Commercial awareness is important because lawyers must be able to consider the legal options available to a client and understand which of these are viable from a commercial standpoint.

For example, a company may have a claim for breach of contract but it may not be commercially viable to pursue litigation because of the costs, disruption to the business and potential for negative  publicity. Therefore, a lawyer may advise on alternative ways of settling the dispute out of court.

Typical interview question

A typical commercial awareness interview question will get you thinking about some sort of action a business wants to take and where a law firm’s services will come in.

“You are representing a pharmaceutical research company that wants to open a new facility to pursue a new line of cancer research, how can the various departments of our firm help?”

The departments that might come into play are:

• Finance: to secure funding or a loan for the project

• Corporate: if the company decides to set up a subsidiary company that will separately conduct the research then corporate lawyers will be needed to advise on this

• Real estate: to assist in finding a new site facility and negotiating a lease

• Commercial: to draft supply contracts with suppliers for the laboratory equipment and also purchase of machinery

• Employment: to draft employment contracts for laboratory staff

• IP: to advise on licensing if the company needs to use a technology that is patented or if the research leads to a patentable discovery then the company may need assistance in applying for a patent

• Tax: there are tax implications for everything so advice will always be sought from tax lawyers!

How to gain commercial awareness

1. Read the news

If you are interested in working in commercial law it is important to have an interest in the business news and the Financial Times is a good place to start for this. However, gaining commercial awareness is not all about reading the FT cover to cover!  

Any type of news whether legal, business, political or world will help to develop an overview of what sorts of pressures might affect businesses. For example, an impending election or change in law may affect whether a company wants to invest or open a new office in a certain region.

If there is a particular sector you are interested in then set up news alerts for that sector. In terms of interviews, it is impressive if you can show in depth knowledge on a topic that you are genuinely interested in, rather than having a rough overview of what is happening in various sectors but are not confident talking about anything in much detail.

• Follow a story in the news and be able to relate it to law

Find a story in the news you are interested in and follow it as it develops. Whether you are a law or non-law student, it is often helpful to choose something that is related to your degree or modules you have studied so that you are more familiar with the subject matter. For non-law students, this also allows you to demonstrate in the interview that you understand how the law ties in with what you have studied.

• Think about the commercial issues facing a company you have worked for

For example, if you have worked as a bartender at a pub, whilst you may not have been directly involved in running the business, there are likely to be lots of commercial issues which you will have been aware of while working there.

For example, the business may be dealing with the following commercial issues:

• Seasonal trends in business - often bars/pubs will experience seasonal fluctuations in the number of customers they get throughout the year. For example, there may be an increase in bookings in the winter, especially around Christmas and New Years Eve, and fewer bookings in the summer months

• Workforce - typically pubs hire lots of students and so they may experience a shortage or decrease in staff in the holidays when students go home

• Competitors - as with all businesses, the pub will be under pressure from competitors and so will have to consider how they differentiate themselves to customers. What sort of niche in the market is the pub trying to exploit? For example, is it a gastro pub mainly focusing on the quality of food or is it a pub which offers a range of entertainment such as pub quizzes and live music?.

The legal implications of the issues above:

• Supply contracts - the business will have to adjust their supplies according to demand to ensure they have enough stock when busy but are not overpaying for unused supplies when there are fewer customers - especially perishables

• Employment contracts - because of the nature of the workforce, temp/zero hours contracts will usually be the most appropriate and the business will have to ensure that they are complying with minimum wage etc.