You might think that in an interview at a City law firm, your interviewers will be most interested in what you know about law. Wrong. Of course, any legal knowledge you have isn't irrelevant, but generally as an applicant for a graduate role at a law firm, your interviewer will be much more interested in how commercially aware you are.
What is commercial awareness? It's a difficult term to define, but broadly speaking it means an understanding of the business world and how it does things. Why is testing your aptitude in this area important to law firms? First, you're unlikely to have studied the law used by City law firms in much depth, particularly if you haven't done a law degree. So asking you about broader businesses issues is a better way to test your powers of analysis and interest in the work they do.
Commercial awareness is also very important to law firms in its own right. As a City lawyer, most of your work will be for business clients. You'll need to understand how they do things and why, and what wider business or economic issues are affecting them. This is because when you advise them, you won't just be telling them what the law is, but giving them business advice that takes the law into consideration. And it's important that you do so in a commercial way, giving advice that's concise and to the point, and that takes account of commercial pressures, such as deadlines, the need to keep costs down, and the sensitivity of some business information.
Commercial awareness is also important to City law firms because they're large businesses themselves. The best City lawyers are as much corporate strategists and entrepreneurs as legal experts. Even as a trainee, you'll be expected to play a role in marketing the firm's services to clients and, as you become more senior, this part of your role will become more important.
So how do you acquire commercial awareness? Law firms understand that students might not have had much exposure to the commercial world and they expect those they recruit to build up their knowledge and skills in this area as they progress. But you probably have more commercial awareness than you think, and there are plenty of ways to boost your expertise at university.
Regularly read a business publication like the Financial Times or the Economist, or the business pages of a quality national newspaper. You should be finding yourself drawn to these already - if you're not, consider pursuing another career. You could also dip into the coverage of the work of City law firms in the legal press - try The Lawyer and Legal Week. And don't forget about other media sources too - there are a wealth of TV shows, radio programmes, podcasts and websites full of business information out there.
You can supplement this knowledge by thinking about your own experiences. If you've ever had a job in a shop, bar or call centre, you'll have learned about how businesses make money, how they function, and the kind of pressures they face, particularly in today's difficult economic climate. Any insights you've gleaned are likely to interest your interviewers as much as your views on an M&A deal that's making the headlines.
What are interviewers looking for?
1. Genuine enthusiasm for the commercial world
You don't have to know everything about business yet, but you should find it interesting and want to learn more. And why not find out about the business dimensions of a sector you're interested in - for instance, are you a fashion fiend or sports fan? Doing so will make the whole process easier and more enjoyable, and ensure that your passion for the business world really comes across at interview.
2. Ability to explain complicated things
Your interviewers don't expect you to provide a definitive answers to big questions like "Why did the financial crisis happen?" or "When is an IPO a good idea?", but you should be able to have a go at summarising multi-faceted issues clearly, which is at the core of what lawyers do.
3. Ability to link issues together
Your interviewers want to see you've read broadly over a number of news sources and thought independently about how a particular event or issue fits in with other stories in the business news, or with political or economic processes.
They're also interested in your views. How would you solve the eurozone crisis? Is that merger deal a mistake? And if you can politely defend your opinions when challenged, so much the better.
5. Ability to relate business issues to the work of City law firms
How will lawyers be advising the parties involved in a business event in the news? Could a particular news story affect the business of City law firms in any way?
Worked example - Why did the financial crisis happen
- Global cash inbalances led to huge flows of cash into Europe and the US, fuelling a consumer boom.
- Low interest rates in the US to counter bursting of dotcom bubble and effects of 9/11 attacks encouraged excessive borrowing.
- Excessive lending by banks to individuals and businesses often on very lenient terms.
- Credit ratings of market participants and financial products on which investment decisions based not always objective.
- Excessive unmanaged growth of the financial services industry, particularly of unsustainable business areas. In particular, the rise of debt derivatives - designed to manage risks of making loans - but the market grew so extensively that they introduced more risk into the system.
- Regulation sometimes excessively complex.
- Regulation sometimes not complex enough to deal with rapidly developing new financial products.
- Regulation overdependent on subjective credit ratings rather than actual financial positions.
- Regulation too light and punishments for breaches not effective deterrents, particularly in the UK.
- Some key markets, e.g. some derivatives markets and the hedge funds market were barely regulated or not at all.
- Regulation of banks too procyclical - amount of reserves banks required to hold calculated on basis of potential losses, which decreased as asset prices rose in global economic boom, thereby reducing reserves as likelihood of a crash increased.
- No global regulatory authority, despite financial services being a global business.
- Insufficiently rigorous auditing of banks and corporates.
- Culture of finance and corporate world extremely competitive and driven by short-term results, leading to excessive risk-taking.
- General culture of consumerism encouraged excessive property-backed and credit card borrowing.
- General lack of interest on part of politicians, media and general public in monitoring or critiquing financial services industry.
- So, in a nutshell, the overheating European and US economies fuelled the rapid development of the financial services industry in a number of unsustainable ways that were not sufficiently monitored or constrained by governments, other regulators, or any other parties.