Baker & McKenzie Revenue Suffers Due to Exchange Rates
According to Chicago Business, fluctuating exchange rates have caused Baker & McKenzie's revenue to drop.
Because it is a global practice, the firm bills clients in 35 different currencies. Typically, such billing practices protect against currency variations, but this year, that did not happen.
When measured with a constant exchange rate, the firm's 2015 revenue grew by two percent. However, when the dollar appreciated against most other currencies, revenue actually dropped four percent to $2.43 billion.
Such numbers may influence American Lawyer rankings, which lists profits per equity partner for a number of law firms. Such rankings are listed using the dollar, and they are often called the "stock price for law firms."
CFO Paul Eichelman commented, "It was a very one-way street from a currency perspective."
For global corporations and firms, handling currency fluctuations is part of the practice. It is often a factor for the Big Four accounting firms, and it is also often noted by executive search giants. For example, Heidrick & Struggles commented in July that a 2 percent decline in second-quarter net revenue could be linked to currency variations.
For Chicago firms, consultant Kent Zimmerman noticed that the only ones that should feel an effect from currency fluctuations are Baker, DLA Piper, and Dentons, all of which have a global presence.
Roughly 70 percent of Baker's revenue is earned from overseas work. The firm protects its currency positions in certain areas to facilitate revenue neutrality.
The value of receivables can also be tricky for professional service firms if there are fluctuations in currency, particularly because, according to one report, many firms take at least two months to collect their debts. Baker reminds its partners to quickly collect on their clients' accounts.
Eichelman commented, "The longer it's out there, the more you're susceptible to exchange rate fluctuations."
Source: Chicago Business
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