Commercial Awareness Law: Crucial Insights

Nov 14, 2023

Written By Zara Arif

In a legal context, commercial awareness means being able to understand how business, industry and economic factors impact legal decisions and strategy making. Commercial awareness plays a central role in the day-to-day work of lawyers as clients often will expect them to anticipate and react to business changes.

What is Commercial Awareness in Law?

Commercial awareness is a broad understanding of how different economic and political factors influence each other and provoke certain changes in legal and financial markets. This includes understanding economic indicators like inflation and interest rates as well as having an understanding of specific industries and their regulations.

This knowledge allows lawyers to understand a client’s business operations, meaning they’re more likely to choose them over lawyers from other firms. Commercial awareness is also intimately tied to the legal industry itself, as factors such as the rise of AI technology and cost of living crises can impact the inner workings of a firm.

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The Pillars of Commercial Awareness

There are a range of economic factors which may affect legal transactions. For example, geopolitical conflicts and the pandemic have caused rapid inflation in recent years. In response to this problem, interest rates have risen. Higher interest rates mean that taking out loans becomes more expensive and there is less economic activity, meaning there may be less work for law firms which focus on M&A and financial institutions. UK M&A deals even decreased by 21% in the first half of 2022. However, employment lawyers may be taking on more cases, as economic challenges lead to increased layoffs and furloughing.

Industry knowledge is also just as critical as awareness of economic changes. This depends on the clients a firm may have. For example, when dealing with pharmaceutical clients it would be important to have a basic understanding of pharmaceutical regulations.

Similarly, it is important to understand a client’s business, including their current position in the market and where they would like to be in the future. This allows lawyers to support their clients through current and future challenges. Law firms tailor their advice based on the financial health or strategic goals of their clients by carrying out initial in depth analyses and liaising with in-house counsel.

Developing Commercial Awareness Skills

There are a plethora of sources available to students and aspiring lawyers looking to deepen their commercial awareness. Some helpful resources include the ‘All You Need to Know About’ book series, the Commercial Law Academy, and the FT News Briefing Podcast.

It is important to regularly consult relevant sources to develop and refine your knowledge on a long-term basis. Some legal and business associations also offer resources and events related to commercial awareness. Securing membership of relevant societies can also be highly beneficial, as talking through what you know in a group can help you consolidate a developing skill.

It is also worth networking with other students and professionals via LinkedIn who may be in both the legal and business fields. This will allow you to have further conversations with people who are more knowledgeable about topics which you might be interested in.

Demonstrating Commercial Awareness in Applications

You’re likely to be asked to demonstrate commercial awareness in applications. For example, you could be asked to cite a recent news article that interests you. It is a good idea to always link your commercial interests back to the firm you are applying to, by demonstrating how a certain trend may affect their clients.

Commercial awareness can also be demonstrated at the interview stage in questions relating to your motivations and reasons for wanting to become a lawyer or applying to a specific firm. Some firms (especially ones which focus on commercial law) have a separate commercial interview. You’ll be given an article and have to analyse economic or political trends, so it’s key to have existing knowledge to enrich your answers.

Conclusion

Commercial awareness plays a key role at all levels within the legal profession. It’s something that cannot be developed overnight; so it's a good idea to consult helpful resources (books, articles, podcasts) on a regular basis in order to keep on top of your learning.

It is a type of knowledge that requires you to be proactive in your development of it as the markets are constantly changing and different factors can affect different business and law firms in different ways. Staying updated and adaptable in this ever-evolving area is crucial for lawyers who are working in a rapidly changing world.

Commercial Awareness