In litigation funding, alignment is often reduced to one phrase:
Skin in the game.
The phrase is useful. A claimant should remain invested in the outcome. A law firm should show conviction. A funder should not carry all the risk while everyone else becomes indifferent to the result.
But skin in the game is not the same as alignment.
The real question is not whether pressure exists. Litigation always involves pressure. The better question is whether the pressure created by the funding structure produces discipline or distortion.
Some pressure is necessary. Without it, discipline can disappear. But pressure placed in the wrong part of the structure can create the very risk the funding was meant to reduce.
That distinction matters.
At the start of a funding process, everyone can look aligned.
The claimant wants the claim funded.
The lawyers believe in the case.
The funder wants disciplined exposure to a meritorious claim.
The documents are being prepared. The budget is being tested. The economics are being negotiated. Everyone is focused on getting the transaction over the line.
But litigation does not test alignment on signing day.
It tests alignment later.
After delay.
After fatigue.
After the first budget pressure.
After the first difficult settlement conversation.
After the claimant has lived with the matter for another year.
After the law firm has carried more risk than expected.
After the funder realises that the protections in the agreement may be legally sound, but commercially incomplete.
That is when the real structure of the deal starts to show itself.
Funding does not only change the economics of a claim.
Funding changes behaviour.
And behaviour changes risk.
A funding structure is not neutral. It changes how people think, wait, negotiate, respond, and endure pressure.
A legal claim does not become stronger simply because money arrives. It becomes stronger when the capital is structured in a way that improves decision-making, preserves discipline, and allows the matter to progress without the wrong pressures taking control.
The opposite can also happen.
A structure can look aligned on paper while creating execution risk in practice.
Take the claimant.
A funder may not want to monetise the claimant out of the claim. That is understandable. If a claimant receives too much value upfront, they may lose interest in the outcome or become less engaged in the process.
But the reverse is also true.
If the claimant receives no support at all, despite being under real financial pressure, that pressure does not necessarily create alignment. It may destroy it.
The claimant’s life outside the litigation does not disappear when the funding agreement is signed.
Rent still needs to be paid. Businesses still need to operate. Families still need certainty. Personal pressure does not pause because the claim has become a funded asset.
A claimant under that pressure may become more settlement-sensitive and more focused on immediate certainty than long-term claim value. They may lose focus. They may struggle to assist the legal team. They may start making decisions through the lens of personal survival rather than litigation strategy.
That is not a criticism of the claimant.
No party makes decisions in a vacuum.
It is a recognition that human pressure becomes litigation risk when it is ignored.
Support does not always mean monetising the claim upfront. Sometimes it means creating enough structure, information, and financial breathing room for the claimant to make decisions properly.
The same applies to law firms.
Risk-share arrangements can be powerful. They show the funder that the lawyers believe in the case and are prepared to participate in the outcome.
But risk-share only works if the retained risk is sustainable.
Law firms still have salaries to pay, counsel to brief, experts to manage, overheads to carry, and other clients competing for time. If a law firm agrees to carry risk beyond what it can sustainably resource, the structure may look aligned while weakening execution.
The warning signs rarely arrive as one dramatic failure.
A step takes longer than expected.
A response is delayed.
An expert is briefed later than planned.
The claimant becomes harder to manage.
The law firm’s attention starts moving elsewhere.
The settlement conversation becomes more about pressure than value.
Each issue looks manageable on its own.
Together, they change the matter.
By the time the problem is obvious, the structure may already have done the damage.
Sophisticated funders do consider these issues. The problem is not that sophisticated funders ignore these risks. The problem is that some risks only become visible once the parties are living inside the structure.
That is why funding is not only a capital decision.
It is also a pressure-allocation decision.
Every funding structure allocates pressure.
It decides who carries cost, who carries delay, who carries uncertainty, who has control, who has information, and who has enough economic interest to remain engaged.
The best structures do not remove pressure entirely.
They place it deliberately.
A claimant should remain invested in the outcome, but not be left carrying a level of personal pressure that makes rational litigation strategy difficult to sustain.
A law firm should have conviction, but not be pushed into an arrangement that makes proper resourcing commercially unrealistic.
A funder should have protection, control rights, and a return that reflects the risk, but not terms that merely move risk into another part of the transaction.
This is the part that is easy to miss.
The human risk visible during the funding process is only a snapshot.
A claimant may appear engaged at the point of diligence. A law firm may appear willing to carry risk at the point of negotiation. A funder may believe the protections in the agreement are sufficient at the point of signing.
But the agreement itself is not a snapshot.
The agreement is not just the record of the deal.
It becomes the environment the parties must operate inside.
The deal made at the beginning becomes the pressure system everyone lives with later.
If that structure later produces frustration, delay, resentment, under-resourcing, or distorted settlement behaviour, it is not enough to blame the people living inside it.
This is not usually a question of bad faith.
It is often a question of good parties living inside a structure that created the wrong incentives.
The better question is whether those risks were built into the structure from the start.
This is why the hard conversations matter before the agreement is signed.
Can the claimant realistically carry the remaining pressure?
Can the law firm properly resource the matter on the proposed risk-share?
Do the funder’s protections reduce risk, or do they move risk into another part of the deal?
Is the claimant sufficiently informed to make settlement decisions?
Will the structure still work six, twelve, or eighteen months later?
These questions are uncomfortable because they force each party to look beyond the terms they want and ask what the transaction needs.
That is where many deals become fragile.
Not because anyone is dishonest.
Not because the legal merits have changed.
Not because the budget was obviously wrong at the start.
But because the parties negotiated a structure for the moment they were in, not the pressure they would later have to endure.
There is a difference between getting a funding agreement signed and building a funding structure that can survive the litigation.
One gets the transaction done.
The other keeps the claim alive when the transaction is tested.
In litigation funding, a one-sided win often becomes a long-term weakness.
A funder may secure strong terms on paper, but if those terms leave the claimant resentful, desperate, or disengaged, the risk profile may worsen.
A claimant may negotiate more upfront support, but if that support removes too much continuing interest in the outcome, discipline may weaken.
A law firm may agree to carry more risk to get the deal done, but if that burden cannot be sustained, the matter may lose momentum.
The objective is not for one party to win the negotiation.
The objective is for the transaction to survive the litigation.
The funding agreement may record the legal structure. The budget may record the expected cost. The waterfall may record the economic sharing. The reporting obligations may record the information flow.
But none of those documents, by themselves, answer the deeper question:
What will this structure do to the people who have to live with it?
Will it make the claimant more disciplined or more desperate?
Will it make the law firm more committed or more stretched?
Will it make the funder more protected in form, but more exposed in practice?
Those questions should not be left until warning signs appear.
They should be part of the funding analysis from the beginning.
Because behavioural risk is not separate from litigation risk.
It is part of it.
When the pressures are balanced properly, funding can restore leverage, discipline, and endurance. It can give a meritorious claimant the ability to continue from a position of strength rather than desperation.
When they are balanced poorly, funding can solve the immediate capital problem while creating a different kind of risk: a claimant under the wrong pressure, a law firm carrying too much, or a funder protected on paper but exposed in practice.
That is why alignment needs to be understood more carefully.
Alignment is not created by leaving everyone under maximum pressure.
Alignment is created by understanding which pressures produce discipline and which pressures produce distortion.
The question is not simply whether the claimant and the lawyers have skin in the game.
The better question is whether the funding structure has created the right kind of pressure, in the right places, for the right period of time.
Because when pressure is misallocated, alignment can quietly become execution risk.
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