Why your firm needs a finance director

In a legal firm, the finance director (FD) would be responsible for overseeing the firm's financial operations, including budgeting, forecasting and reporting. They would also be responsible for ensuring that the firm is in compliance with all applicable financial regulations.

Smaller firms may not have the need for a full-time FD but here are some specific examples of how an FD can benefit any legal firm:

• Help to develop a sound financial strategy that will help the firm to reduce costs, increase revenue, and improve profitability.
• Help to identify and mitigate risks, such as the risk of fraud or the risk of non-compliance with regulations, which is even more key in regulated businesses.
• Provide advice and guidance to the firm's management team on financial matters and have important input into overall strategy.

What has happened in the last few years is the need for focus on sustainability (environmental, social, and governance - ESG). Finance directors are going to be key in this and likely given responsibility for the overall ESG agenda of a business. It is becoming increasingly important for companies to be seen as being sustainable and responsible. This is because clients, supply chain and employees are all demanding that law firms do more to protect the environment and society.

Finance directors are responsible for managing the firm’s finances, and this is developing into making sure that the company is operating in an environmentally and socially responsible way. This means that finance directors will need to be familiar with ESG metrics and how to measure and improve a firm's ESG performance.

There are several ways that finance directors can help their business to improve their ESG performance. For example, they can invest in renewable energy, develop sustainable supply chains, and create more ethical workplace policies. By taking these steps, finance directors can help their firms to save money, attract new clients and quality staff, and improve their reputation.

ESG is a set of criteria used to measure a firm’s sustainability and responsibility. There are many ways that ESG can save your firm money, including:

• Reducing costs. ESG initiatives can lead to reduced costs in areas such as energy, waste and insurance. For example, by investing in energy-efficient equipment, you can save money on your energy bills. And by reducing your waste, you can save money on disposal costs.
• Increasing efficiency. ESG initiatives can help you to operate more efficiently by reducing waste and improving your supply chain management. This can lead to lower costs and increased profits.
• Attracting new clients and potentially investors if that is your firm’s aim. Clients and investors are increasingly looking to firms that are doing good for the environment and society. By demonstrating your commitment to ESG and building that reputation, you can attract new clients who are looking to support sustainable businesses.
• Improving employee morale. Employees are more likely to be engaged and productive when they work for a law firm that they believe is doing good for the planet. ESG initiatives can improve employee morale by creating a more positive and supportive work environment.
• Minimising regulatory risk. ESG initiatives can help you to comply with environmental and social regulations, which can save you money in potential fines and penalties. Improving the culture of a firm is generally accepted as having a positive effect on all aspects of risk.

Legal firms are no exception to this ESG trend. In fact, ESG factors are becoming increasingly important to legal firms for a number of reasons. They can have a significant impact on a legal firm's financial performance. For example, legal firms that are committed to sustainability can reduce their costs by investing in energy efficiency and renewable energy. They can also improve their reputation with investors and customers, which can lead to increased fees and profits.

ESG factors will help legal firms to attract and retain top talent. Trainees who then work up to partners are increasingly looking for jobs with firms that are committed to sustainability and ethics. By having an ESG focus, legal firms can attract and retain top talent - crucial in the current market - which can lead to increased innovation and productivity and improved cultural values.

Third, ESG factors will help legal firms to build a better reputation with the public. Legal firms that are committed to sustainability and ethics are more likely to be seen as responsible and trustworthy.

In summary, there are a number of reasons why ESG factors are important for law firms and now the firm’s FD. By incorporating ESG factors into their decision-making, law firms can help themselves to improve their financial performance, attract and retain top talent, reduce risks, and build a better reputation with the public. ESG will move quickly from 'nice to have' to something - quite rightly - firms should not be without.

Richard Singleton is finance and sustainability director at Menzies