Agefi Luxembourg - décembre 2025

AGEFI Luxembourg 38 Décembre 2025 Droit / Emploi Part 2: Why is the objective valuation of litigation important and howto achieve it? ByAlainGREC, Profile Investment W e saw in the previous articles what an objective analysis of litigation must consist of, to provide a useful monitoring tool, as well as a reliable instrument for external and internal communi- cation, among others. Inanybusiness, litigationhas to beunderstood through its legal rationale, but at the same time through its economic and businessmeanings. The accurate language for this becomes the accounting, financial and commercial grammar. In the article “The Valuation of Litigation”*, it is clearly stated that: “The value of litigation (also re- ferred to as the value of a litigation claim or the value of a lawsuit) differs from the value of dam- ages in that the former encompasses not only the potential damages expected tobe awarded, but also the risks of losing, the legal costs involved with lit- igating the case, and the time a party would have to wait before damages, if any, are received”. If the valuation ismade for the claimant, the follow- ing questions arise: what is the effective value de- stroyed or vanished? What are the costs at stake to have the dispute resolved?What is the realistic time frame for the result to materialize, and what is the foreseeable outlook for the post-verdict phase (en- forcement) if no settlement is reached beforehand? If thevaluation ismade for the respondent, theques- tions are symmetrical with one exception relating to enforcement: the valuer will not consider, as a valid option, non-compliance with the final judgment (after consideration of possible appeals or requests for annulment if accurate). All this provides the elements to confer a value to the matter under litigation: thevaluationwill encompass all the items elaboratedupon in theprior articles, tak- ingintoaccounttheirrespectiveimpactonthepresent value.Here, it is important to convert the issues iden- tified and qualified in the preliminary assessment of the litigation into the appropriate risk-related dis- counting rates, either factored or added, applied in accordancewiththemilestonesidentifiedandwithin theglobalexpectedtimeframe.Separately,proprietary scoring-based scale ladder and time-drifting multipliershavebeenbuiltandadjustedover the years at Profile Investment to adjust the valuation with respect to external elements which are not inherent to the litigation itself (predictabilityof the jurisdiction, solvencyof the respondent, for example). Naturally, the valuation needs to be substan- tiated under each parameter and is pro- vided on the basis of the information made available to the valuer: accord- ingly, any incomplete information may distort the result, but the val- uation also evolves along with the material developments or disclo- sures of the litigation. The valuationprocess In Profile Investment’s experience, it is essential to define and keep a full-fledged procedure which covers all items to be addressed, and to make the process traceable (all variables, factors and rates have tobe supportedbypointsmade andexplained in thepreliminary litigationassessment), andappli- cable to all types of commercial matters, including white-collar crimes or commercial cases involving criminal law elements. In essence, the valuation process considers thefive followingmain riskareas: jurisdiction/competence, legal merits/causation, substantiated quantum, recoverability (for claimant), and the calendar/timeline, to which the ethical backgroundmay be added. Thefirsttworiskareasarerelatedtothecriticalissues identified: the probability of them turning to a nega- tive assessment by the court or the tribunal is con- verted intoadiscounting rate. Subject towhether one critical issue is (or is not) considered able to directly triggeranadversedecision,orneedstoconvergewith other points to be decisive, the discounting rate will be added or factored into the other discounting rates of the procedural phase. In the economic universe, time is of the essence in order to determine both the adequacytobusinesscyclesandthepropercapitalal- location that fitswith the company’sbusinessprofile. Any litigation is considered and addressed as anun- expected business event. The projected timeline are important inorder tounderstand its anticipated cash flows (in and out), its present value and the pre- dictable forks in the road, all with a view to feed and enlighten the monitoring decision-making, similarly toa typical projectmanagement. Theduration is split between (1) the procedural part (all that is before the final decision) and (2) the recovery phase (enforce- ment). The first part is assessed on the basis of an es- timateprovidedbytheappointedlawyerofthediffer- ent procedural phases. This is further adjusted based on amultiplier related to an efficiency ranking of the jurisdiction at stake (i.e. Profile Investment’s internal model aggregationof relevant criteria). For the second part (recovery phase), duration is as- sessed based on the characteristics of the respondent (ifthevaluationismadeforaclaimant),encompassing its location (jurisdiction), its assets in and outside its home country, and various debt collection criteria listed inProfile Investment’s riskmatrix. The economic understanding of the litigation outcome Thefinal decisiondetermines thedamageor liability at stake (possibly stating that no damage or liability is established and that therefore no sanction nor compensation is dueunder thematter at stake): this is in effect the issuance of a debt title to the defen- dant in favor of the claimant,whichat the same time details the value accordingly destroyed in its ac- counts. Seen from the valuation date, the key is to determine what amounts in the heads of claim are matching the level of substantiation and evidence required by the court/tribunal. The monetization of the entitlement (recovery/en- forcement) is the second essential phase: an entitle- ment that nevermaterializes into the accounts of the winning party (be it in cash, in kind or in a contrac- tual arrangement providing economic substance) is worth nothing, i.e. it reflects a zero value. If the val- uation ismade for the respondent, it is clear that the amount asserted in thedecisionunder consideration will be assumed, in the valuation scheme, to be 100% compliedwith immediately. Quantumand value assessment All the parameters (discounting risk rates, conserva- tivedurationassessment) definedaboveare tobeap- plied on amounts which reflect realistically and conservatively(1)thequantumwhichthecourtorthe tribunal are expected to consider substantiated (in- cludingoncausation) and (2) theamount tobe realis- ticallyrecovered(i.e.incertainsituations,thewinning partywillbeunabletorecovertheentireentitlement). The quantification of the expected amount to be awarded to the claimant in the litigation must be based on facts, on evidence strongly supporting the allegeddamage, or/andwithwell-matching ‘compa- rables’ (case law supporting references are useful there): this assessment does not correspond to the quantum that the lawyer will fight for and claimbut rather to the conservative realistic expected outcome. Only this enables a cold-blooded monitoring and a long-runvisionof thematter at stake. This amount becomes the “Reference Amount” for the case outcome. Subject to the characteristics of the adverse party, and of the external risks identified for the enforcement phase (suchas the solvency riskand geopolitical threats), the Reference Amount is to be deflatedbasedonascoringoftheseelements(propri- etary scoring template fine-tuned and back-tested overtheyears).Theresultingglobalscoreconvertsinto ascaleladder,whichindicatestheminimumrecovery thresholdwhichcanreasonablybeexpected:thispro- videstheFinalAmountattheveryendoftheduration calendar. Further identified external risk factors are computed to provide a discounting risk rate strictly for the enforcement phase. The third part of the financial flows consists of the costs incurred by the dispute resolution (lawyers or expert fees, tribunal costs, expenses): these estimates are to be provided by the lawyers appointed by the partywho requested the evaluation andvaluation. All the above-listed and substantiated elements are aggregated into a detailed present value calculation template. In case of a respondent, the Reference Amount is used, andpresented as a cash-out, aswell as the costs incurred. In case of a claimant, the Final Amount is used, andpresentedas a cash-in,whereas the costs remain cashouts. Only when the legal system at stake provides clear rulesfortheallocationofcostswillthecalculationtem- plate integrate this at thefinal verdict stage, as theob- jectiveistoreduceasmuchaspossibletheunknowns. Conclusion This valuation tool has been elaborated in the late 2000s and has benefited by aggregating many cases (nowclosed) so that regular back-testing incurred by ProfileInvestmentbringsusefuladjustmentsandad- ditionalcriteriatotheproprietarymodel.Onthisbasis and experience, Profile Investment can nowprovide a useful economical understanding of any business litigation and a present value of suchmatters, which can be appreciated under various aspects under the logicofprojectfinance.Thistoolisdynamic.Itevolves with various inputs, including material events, find- ings or decisions, andoptions takenat any fork in the road throughout the litigation. *https://miniurl.be/r-6jzq ,March/April2006 External Assessment and Valuation of Litigation By JeremieHOUET, Legal andCorporateGovernance Expert, CorpEdge Sarl I n away, they’re translators—be- tween regulation andpractice, be- tweenmanagement and the board, between compliance and culture.” This sentence captures the essence of the modernCorporateGovernanceOf- ficer. In a fast-evolving regu- latory environment, their value lies in turning com- plex requirements into clear, workable guidance across the organisation. Translation, in this context, is not simple rephrasing. It means interpreting rules, adapting expectations, andhelping people who do not naturally speak the same lan- guagework together. Regulations are drafted broadly and rarely translate directly intodailyprocesses. Boards think in terms of governanceandlong-termrisk,whilemanagersfocus on execution and constraints. Compliance, if seen as heavyor external, caneven clashwith culture. This is exactly where the translation role becomes essential. ThisarticleexploreshowCorporateGovernanceOffi- cersactastranslatorsinthreekeydimensions:turning regulationintopractice,aligningmanagementandthe board,andembeddingcomplianceintoculture.Italso outlines the skills that make this function indispens- able in anywell-governedorganization. The Translatormetaphor inGovernance Atranslatordoesnotmerelycarrywordsacross;they carrymeaning. They adaptmessages todifferent au- diences while preserving intent. In governance, this means taking legal, regulatory, or strategic material andmaking it understandable and usable for opera- tional teams, executives, and boards. Three realities make this role necessary. First, laws and regulationsaredraftedforgeneralapplica- bility, not for the specific processes of a given entity. They require interpretation and contextualisation. Second, different layers of an organisation rarelysharethesameviewofrisks,priorities, or time horizons.Misalignment is common. Third,complianceonlyhasrealimpact when it shapes behaviour, not just procedures.Poortranslationleadsto unreadable policies, ineffective re- ports, and cultures that treat com- pliance as a tick-the-box exercise. Good translation reduces friction, clarifies expectations, and supports better decision-making. Effective translation is therefore a bridge — one that reduces friction, fosters mu- tual understanding, and helps align multiple stake- holders around commongoals. Translating betweenRegulation andPractice One of the greatest challenges is bridging the gapbe- tween high-level rules and daily operations. Regula- tory texts often rely on broad concepts such as “adequatecontrols”or“reasonablemeasures,”which mustbeconvertedintoconcreteprocesses.Managers, however, needclarity:What doweneed todo?What changesmust bemade?What is proportionate? This iswhere theCorporateGovernanceOfficer steps in. An example comes from the 1915 Companies Law and CSSF governance circulars (such as 12/552 or 18/698)whichsetprinciplescoveringinternalcontrol, segregationof duties, and independenceof key func- tions. Corporate Governance Officers translate these intocommitteecharters,documentedresponsibilities, conflict-of-interest procedures, and practical gover- nance arrangements. The success of regulation de- pendsonthistranslation.Iflegalrequirementsremain abstract,theyfailtoinfluencerealbehavior.Ifpractices ignore the spirit of the rules, organizations invite reg- ulatoryattentionandreputationalrisk.TheCorporate Governance Officer translator ensures alignment by makingcompliancebothintelligibleandworkable— bridgingtheexpectationsoftheCSSFandlegalframe- workswith the daily realities of operational teams. Translating between Management and the Board Management and the board operate at different alti- tudes.Managementfocusesonexecution,day-to-day operations, and detailed metrics. The board focuses on strategy, oversight, long-term risk, and account- ability. Corporate Governance Officers translate in both directions. Upward, they turn extensive opera- tional data—risk registers, incident logs, audit find- ings—into clear, decision-ready insights. Boardscannotprocessraw,highlytechnicalinforma- tion; they need synthesis and context. Downward, they convert board expectations—risk appetite, gov- ernance priorities, ethical standards—into actionable guidance formanagers and teams. The challenge lies inbalance.Toomuchinformationoverwhelmsdirec- tors; too little leaves themuninformed. Differences in timehorizonalsomatter: boards think inyears,man- agers in weeks or quarters. Cybersecurity is a good example.Technicalteamstrackpatchcycles,intrusion attempts,andsystemlogs.Theboard,however,needs to understand resilience, exposure, and adequacy of resources. Translation reframes technical data into a business-orientedrisknarrative.Whendonewell,this translation maintains alignment, avoids misunder- standings, and strengthens overall governance. TranslatingbetweenCompliance andCulture Compliance is about rules and controls. Culture is about values, behaviours, and informal norms. For governance to work, the two must reinforce each otherratherthancollide.Ifcomplianceisviewedasa constraintoranexternalrequirement,employeeswill do the bare minimum. The Corporate Governance Officer’s role is to make compliance meaningful by connecting it to the organisation’s purpose, values, and reputation. They help design training based on real situations, encourage a consistent tone from the top,andsupportmiddlemanagersinday-to-dayde- cisions where ethics and compliance intersect. They alsohelpaddressscepticism—“complianceslowsus down”—by showing how responsible behaviour protects the business. Practical translation makes a significant difference. A whistleblowing channel framed purely as a reporting tool may be perceived negatively. When framedas amechanismfor transparencyand protection, it becomes part of the organisation’s cul- ture.Anti-discrimination rules, when tied to shared values of respect, becomemore thana regulatory re- quirement. When compliance is translated effec- tively, it becomes natural in daily behaviour, and reliance on corrective controls decreases. The Translator’s Skillset Effective Corporate Governance Officers bring to- gether a distinctive combination of skills. They are bilingual in the true sense of the term, able to un- derstand the language of regulation as well as the practical realities of business operations. They com- municatewith clarity, turning complexity intomes- sages that different audiences can absorb and act upon. They show empathy and adapt their ap- proachdepending onwhether they are speaking to board members, executives, or frontline teams. Their credibility rests on integrity and indepen- dence, especiallywhennavigating sensitivematters or challenging established views. Increasingly, they also rely on digital tools—data analytics, dashboards, and automated reporting systems—to support transparency and enhance governance processes. When these abilities come together, Corporate Governance Officers gain in- fluence well beyond their formal position, helping organisations navigate complexitywith confidence and make decisions grounded in clarity and trust. Market recognition of this role is already growing, and one can hope that formal legislative acknowl- edgment will soon follow to give this function the concrete standing it deserves. “In a way, they’re translators” The evolving role of Corporate Governance Officers