Back to publication quoted Dmitry Magonya in an article titled “‘Catch the bottom’: how the Russian legal market is responding to the pandemic”

Urgent tasks have increased, and incomes have fallen.  When speaking about the effects of the coronavirus pandemic on the industry, lawyers in the Russian market unambiguously state that decline is the general trend.  According to the most optimistic forecasts, the market has shrunk by an average of 20 percent.  A decline in the economy, which is worsening the financial situation of clients, is unlikely to contribute to the market’s future growth.  While some are still optimistic, others are cautious in their estimates.  Expectations are that activity will increase in the summer, but recovery is unlikely until the end of the year.   Many companies, including those in the West, believe that withstanding another crisis involves preparing for the worst but preserving the main assets–the team and the clients.

Phased optimization

The urgent question of the legal business during a crisis is how to save money.  Lawyers agree that allowing the next batch of disturbing news to result in rash decisions is a bad idea, and that it is better to make choices that retain the team and the clients.  So far, it comes down to conservative measures that are typical of any business.

So far, leading law firms have not fired anyone and hope to come out of the crisis fully armed.  “The crisis will end, like all the others, and for us, the most important thing is people.  And we will do everything so that they and their families feel protected, ”according to Andrey Goltsblat.  At the same time, consultants are not ready to hire new employees.

Most market participants are trying to reduce the cost of office rental.  The attempts are mostly successful, and sometimes, it is possible to reduce the price by half.  The position of companies with many offices is tough.  “Negotiations are ongoing with landlords, and we are ready to move out if they don’t agree with us,” says the head of Intellect (the company has 80 lawyers in seven regional offices).  He gives another prescription–control: “Even though we have a CFO and three accountants, we don’t pay a single bill without my approval.”

Firms are expected to cut costs for internal corporate events and compensation for staff training.  One area of savings is in marketing budgets.  They either reduce naturally (due to the cancellation of events) or when a firm abandons a project that is not quite a priority.  Employee salaries are not yet being reduced, and firms are saving on bonuses, although there will be cuts in compensation in the future.  The global firm Hogan Lovells has postponed salary and bonus increases.  Saveliev, Batanov & Partners have the same approach.  Regarding possible savings, Sergey Savelyev, a partner in the firm, said that “it is possible that the annual bonus fund will suffer.  Then the annual bonuses for employees will be reduced.”  Some firms think about the future. According to Denis Litvinov, the company adjusted its budget, in favor of business development.  There is an understanding that, in the current situation, it is impossible to use only previously planned marketing tools.  Those companies whose customers include big businesses are more fortunate.  According to Andrey Timchuk, a partner at Delcredere Bar, the presence of continuously operating and systemically important or strategic companies among their clients allowed the firm to avoid cost cuts.  So far, the company has been satisfied with the natural reduction of marketing budgets, with conferences going online and with the cancellation of the St. Petersburg International Legal Forum.

Nevertheless, many companies, following their western colleagues, are ready to think about a safety net.  For example, they can replenish budgets at the expense of partners’ profits.  Usually this is part of “Plan B,” which, as experienced market players understand, is always best to have. 

“At the expense of part of their bonus, the equity partners will form a reserve fund, in the amount of at least a four-month budget for the company’s expenses,” says Dmitry Magonya, the managing partner of ART DE LEX, about his company's strategy.  Many market players are ready for such a step.

Author: Irina Kondratieva

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