As I have written on this blog on numerous occasions since March 2013, big international law firms need to consider – and account for – foreign exchange (FX) currency fluctuations – especially if their P&L is based in one currency – whether that be GB Pounds or US Dollars.
So it was with some amusement that I saw the following article headline in The American Lawyer today:
‘As Currencies Fluctuate, Law Firms Adjust Lawyer Pay and Billing Across the Globe’source
But, before we all get ahead of ourselves and start to think law firms have finally figured out that as they approach $2BN+ in global revenue with business operations – in many cases – in over 20 countries, they might want to think about currency fluctuation issues, the real reason this has all of a sudden now become an issue comes out in the article:
‘Firms are taking steps to minimize the impact exchange rates could have on partner compensation, associate salaries and other expenses’
Which itself raises another issue I have mentioned so many times previously on this blog, if currency exchanges do fluctuate over the course of a financial year, what does that do to your multiplier?
Do you go from a 3x multiplier to a 5x? Do you go from a 5x multiplier to a 7x?
And what happens if the FX fluctuation is as a result of a stronger local currency, do you go from a 5x multiplier to a 3x?
Cannot say they were not warned!
As usual, comments are my own.