Legal Risk Management for Companies during COVID-19

author A&A

calender April 30, 2020

Legal Risk Management for Companies during COVID-19

Covid19 has managed to have an overwhelming impact on all sectors of industries, bringing a lion’s share of enterprises to a standstill. There is ample reason that merits concern for the future and specific consideration needs to be given to legal risk management for companies, to dilute as much as possible, the effects of the inevitable slowdown.

Across the board, departments within organizations such as hiring, procurement, logistics, research and development, human resources, administration and other similar functionaries are predisposed to take the brunt of the ill effects of the pandemic, such as suspension of production & supply, confiscation or reallocation due to the pandemic control measures forced by the government, loss of jobs or mandatory salary cuts, demand uncertainty, amongst others. It is by and large accepted that the government-imposed COVID-19 control measures trigger a Force Majeure event, however, whether in such circumstances it legitimizes the exemption of ‘termination of contract’ is the question that needs to be addressed as well as the planning and structure of handling of various issues arising from such contracts. These may rely upon factors such as agreed covenants, contract terms, the gravity of the COVID19 effect and others. The conclusion ought to be examined and put forth case-by-case as per legal guidelines on Force Majeure or circumstantial changes.

For most small and medium-sized enterprises (SMEs), the prolonged quarantine is bound to bring about labour disputes. Such challenges are required to be circumvented by legally sound options as well as putting strong strategies in place to deal with not just the disgruntled workforce, but cater to the continuous operations of the business, even if limited, during the pandemic and the instability that will follow once the global lockdown ceases. Some employees may not be able to report to work due to travel bans and sealed residential areas, while others may not have the optimal facilities to work from home, this could further escalate the issues relating to salary payments, leave policies and compensatory working days off. The entirety of the above will sabotage the security of existing employment contracts between the workers at different levels and the company. Further, while adhering to government-forced guidelines, companies also need to address the contentions between production costs and compliances. In such a situation, employers will have the hard job of justifying the compensation framework in accordance with costs. For a solution in its entirety, fair and adaptable employment contracts need to be put in place along with a detailed employee handbook that caters to the more unpredictable circumstances in a legally sound manner.

A watertight legal framework of an enterprise coupled with consistent legal updates on governance and management may prove to be the only solution for business during these troubled times. Presently, the government has also set in motion many pro-business policies, particularly in terms of credit, finance, taxation and company relaxations to ease the COVID-19 effect. In view of these, companies with viable legal solutions will have the advantage to build up a serious competitive edge and be able to cater to the needs of the market as well as gain the trust of investors.

The risks attributed to the COVID19 pandemic go above and beyond the one’s insight, it is progressively about the dangers that stay obscure in the midst of the pandemic. While the immediate need of the hour is legal risk management of businesses, it is equally important to pay heed to anti-fraud policies, intellectual property protection, personal information protection, cybersecurity enhancement and contract management.

Particularly with respect to cybersecurity, some of the most notable worldwide organizations have faced major digital security emergencies, such as IT giant Cognizant which was hit by a Maze ransomware attack and video calling app Zoom was hacked leading to violation of data protection. The progressing pandemic will drive more businesses to advance their plan of action to include effective functionality via computerized or digital transformation, thus making it imperative to put legal systems in place that shield their work from such threats.

It is extremely beneficial that the current government understands the importance of IP rights, protection of invention and trademark irrespective of the size of business. During the pandemic many Intellectual Property Offices have indicated that they will be empathetic when considering extension requests in the wake of Covid19, however, it would be wise to make effective and early arrangements to resolve IPR related issues and enhance intellectual property security and protection. Preparation of applications for licenses and other registrations will not be in vain during this pandemic.

A company should pay immediate attention to the legal loopholes in its management and various contracts to mitigate the severity of the economic slowdown. For most organizations, the COVID-19 pandemic has come as both a test and a chance. The legal safeguards will be a driver of business for sound and efficient advancement in the near future and much attention needs to be paid on the same.



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