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Identifying and managing risks in a global pandemic

Posted: 17/03/2020

Now declared a global pandemic, Covid-19 has disrupted supply chains, rocked the markets, and put businesses in uncertain and unfamiliar territory. And the situation looks set to worsen before it improves. While the risk to health in such a pandemic is paramount, businesses and the economy are suffering and the landscape is ripe for legal claims as the risk profile rises and cash reserves fall. However, there are steps that businesses can take now to minimise risks, including the risk of legal claims.  

What are the risks?

  • Companies being in breach of a duty of care by failing to take adequate steps to protect the health of customers, staff and visitors to premises.
  • Shareholders may sue companies/boards for failing to act effectively in response to the outbreak and/or not having sufficient contingency plans in place.
  • Manufacturers may sue over missed deadlines.
  • Suppliers cannot meet contractual obligations due to lock-downs and forced quarantines.
  • Insurers may increasingly seek to decline cover to businesses, resulting in litigation.

What can I do?

  • Ensure that an individual or team (depending on the size of your organisation) is responsible for following the Government and WHO guidance in relation to Covid-19 on a daily basis while the situation continues to escalate.
  • As a minimum, Government and WHO guidance should be followed. This should be contained in a company policy and effectively implemented.
  • Create/update a business continuity plan (BCP) to ensure the business can continue to operate in the event that parts of the UK/overseas are placed in lock-down; staff are required to work from home; and/or a significant number of staff are unwell at one time.
  • The BCP should cover the following: personnel, equipment, business commitments, line management and accounting and include:
    • remote working of staff
    • remote meetings, including board meetings and AGMs
    • access to company files/emails (more than one person should have access)
    • resolution of IT issues when working remotely
    • attendance at conferences/business travel
    • who will manage teams if managers are unwell
    • plans for back up staff/overtime
    • identifying legal implications for company contracts (and seeking legal advice where required)
    • ensuring continued payroll and accounting.
  • Where possible, it is recommended that the BCP is tested to ensure it is workable in practice. For example, are staff set up to effectively work from home, can IT issues be resolved remotely, can you gain access to all company files/emails, do you have the technology in place to hold meetings, including board meetings/AGMs remotely, do staff require any additional training or access to resources?
  • Holding companies should ensure they are aware and approve of their subsidiaries’ response to the threat and risks, as holding companies can owe a duty of care in relation to the acts of subsidiary companies.
  • Review legal contracts and identify risks in advance. Seek legal advice before issues arise and problems escalate. Where it is impossible to perform a contract due to the issues caused by Covid-19 such as supply chain issues/staff unwell/cities in lock-down, the contract may have a get-out clause, often referred to as a ‘force majeure’ clause. 
  • Insurance policies should be reviewed and risk coverage widened if necessary or possible. See here for more information.
  • Employee risks and guidance are contained in this article.
  • Immigration guidance issued by the Government is contained in this article

In summary, early identification of risks and collaboration with stakeholders are key to working effectively through this short term period of significant change.

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Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP