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Insights / March 13th, 2020

COVID-19 in Business: "It's nothing to sneeze at"

Trump: “We have it so well under control. I mean, we really have done a very good job”.

The global implications of COVID-19 on health, disruption to business operations, travel, lifestyle, supply chains and debt and equity markets are far-reaching, there is no quick fix but apparently Trump, the leader of the free world, has it all under control!

What a load of sh*t (oops… in an equal pandemic of toilet paper shortages, let’s not go there). Now whilst I’m sure many of us have had a laugh at Toilet Paper-Gate and at Trump, the reality is that the effect of this pandemic is far wider reaching than any one of us could have predicted and beyond issues concerning our health. No one can claim to be immune, in health or in business.

So how can you get it “well under control” and do a “very good job” in business?

Although obvious, start with controlling what you can.

The two main areas that businesses can immediately focus on are Health and Safety and Business Operation Risk Management.

Health and Safety

The most important legal obligation for businesses is to protect, to the extent possible, the safety of their employees, stakeholders and any visitors to their premises. Clearly, unless and until the spread of the virus is contained and hopefully eradicated, there will be no relief of the other factors impacting business. Australia’s work health and safety legislations are some of the most stringent in the world to ensure safe workplaces across the country. To ensure that you are meeting your Work, Health and Safety obligations and also protecting your employees from the dangers of COVID-19, consider the following:

An office closure management plan

Consider whether or not at its worst you will need to close the workplace and have measures in place to enable business continuity without a physical presence in the workplace.

Working from home policy

Many workplaces already have in place flexible work arrangements to enable employees to work from home. You also need to bear in mind that the home is considered a workplace when an employee chooses to work remotely. Ensure that the home work place is also safe and that the employee has the infrastructure to support working from home in circumstances where it may be necessary for working from home to be mandatory.

Education

It is important that any health messages or expectation of hygiene practices for employees are communicated to them. This includes sending out emails or erecting signage around the workplace about best hygiene practices.

Amenities

Ensure all amenities are regularly cleaned and also that hand wash and sanitiser are readily available.

Travel

Travel should be limited to only necessary work commitments and even then should be reconsidered against the risk associated with the travel. Employers will need to review this particularly for employees across different jurisdictions and where different laws may apply.

Remain vigilant and informed

Identify legitimate sources of guidance on the pandemic and ensure that the advice is regular and up-to-date. This should be communicated to all employees. The frameworks being provided particularly from government organisations on how to respond to this situation should serve as the minimum requirements for business to adopt. A demonstration of alignment with official government sources will be an important safeguard for business in the event of any claims being made. Cowell Clarke follows the World Health Organisation and Government recommendations within our workplace.

Business Operation Risk Management

Most investors understand that there is always a risk in business. The pandemic of COVID-19 is not one which investors would reasonably turn their minds to when assessing business risk, yet we are already seeing the impact and consequences of those risk, which have unlikely occurred in business before.

Things to consider:

Communication

Communication in business has always been paramount but none more so in times of crisis or alarm. Prepare regular and informed communications to shareholders and stakeholders about the foreseeable impacts on the business from the virus, and protocols or responses to those impacts that can readily be put into action if those risks come to bear.

Protocols and Strategies

Prepare strategies and measures to limit those impacts even though they may not necessarily need to be implemented as yet.

Prepare a business continuity strategy

Prepare a strategy for prevention of foreseeable risk and recovery from potential threats should they come to fruition. It will be necessary to identify key people, processes and technology that will enable the business to operate with continuity.

Core Operation for Viability

Identify the services/products which if disrupted would be detrimental to the viability of the business, its market integrity and potentially to its clients. Consider levels of disruption that could be mitigated and for how long the disruption could be sustained. In doing so it will be necessary to set tolerance levels for operation and this should be set against the businesses appetite for risk.

Review Finance Commitments

If business operations will be impacted such that banking covenants and financial commitments are likely to be breached, then such foreseeable impacts on meeting those commitments should be discussed with financiers early to devise a plan to manage any defaults before they occur.

Contract Performance

Review all key contracts and identify any risk on the performance of those contracts whether that be by the business or the other contracting parties. Questions have already been asked as to whether the concept of a force majeure will come in to a play or used as a mechanism to either excuse a party’s non-performance or justify a termination of a contract. This question of whether COVID-19 will constitute force majeure will be one no doubt that will be a live issue in the near future and business needs to turn its mind to how and whether litigation on that point can be prevented.

Contract Variation

Consider whether it is appropriate to vary any agreements where it is apparent that the terms are not able to be fulfilled because of the impacts that COVID-19 might have on its performance.

Spreading Risk

Whilst the medical experts concentrate on preventing the risk of further spread of the virus, it is always good practice (COVID-19 pandemic or not) to spread risk in business. Whilst sheltering from risk in business entirely is not realistic, ensuring that risk is spread rather than concentrated can be the difference between those companies which remain viable and not. For example, consider supply of core materials from various suppliers both locally and overseas, rather than just one source. Contract with several service providers within the same industry and seek to supply a wide range of customers rather than to several larger customers.

There is no one-size fits all solution on how to manage the impacts of COVID-19, but it is imperative that business does turn its mind to how it will (…and it will) be affected by this pandemic and take steps within its control to keep business under control!

If you need assistance in navigating any concerns of the impacts of the virus on your business, please Contact Us.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.