Coronavirus: managing business risk
Coronavirus (COVID-19) has been classified as a pandemic, and the Government has announced that the UK has stepped into the “delay” phase.
Now that anyone with “symptoms” (persistent cough and / or a high temperature) has been told to self-isolate for 7 days, there will be an inevitable knock on impact to many SME businesses.
Organisation owners and directors must now consider how best to mitigate the effects on their businesses, put plans in place if they have not already done so, and keep them under review.
Here are a few points to help business leaders ensure their team are prepared, and to ensure directors comply with their ongoing directors’ duties and obligations:
- Minute key decisions – it may not be a formal board meeting, but it is easier to prove compliance with duties if there is a paper trail.
- Coordinate the response – set up a team to take responsibility for assessing and managing the impact of the virus.
- Manage the impact on staff – you need to comply with health and safety obligations and duties of care owed to workers. How can the business protect staff and ease any resulting burden? Consider remote working.
- Manage contractual risks – consider and evaluate implications for customers and suppliers. How will the virus affect the business’s ability to perform obligations? What rights does the business have against third parties in these situations? Are terms and conditions up to date and appropriate?
- Manage financial arrangements – review finance documentation and arrangements, and evaluate consequences of any delayed payment. Prepare short term cash flow forecasts and keep them under review. Engage with lenders.
- Maintain data and documents – continue to ensure compliance with GDPR, particularly regarding enhanced protection areas such as health. Be aware of your obligations.
- Review insurance policies – are policies up to date? Do you have policies which might assist in the event of business interruption?
- Evaluate wider operational risks – consider any logistics of halting business activities such as minimum staffing levels, lack of ability to hold physical meetings or events? Does your business have one director and what about if an authorised signature cannot be obtained?
- Consider the impact on any key asset or share sales and acquisitions – consider whether delay is an option. If not, how is a target business affected? What is the knock-on effect to the buyer?
- Consider potential insolvency risks – always keep considering the financial position of the business, its customers and suppliers. Prepare.
- Review the guidance – visit the following links:
If it is accurate that up to 80% of the UK population could be infected at any one time, it is not too far to say that the situation could have a catastrophic impact on SMEs across the UK. It pays to prepare.
It is never too early for businesses to seek to mitigate potential losses which the virus may bring. If you require advice on the impact of Coronavirus on your business contracts or operations, please get in touch with Ben Ironmonger, Commercial Solicitor at Scott Bailey LLP in Lymington, Hampshire.