Prior to COVID-19, I spent an awful lot of my time educating business owners on the importance of having a robust legal infrastructure. Often, budgets for contracts are small to non-existence and when the going’s good, it’s all too easy to overlook having agreements with our business associates in writing.
The COVID-19 pandemic has highlighted how important it is to protect our businesses – whether that’s because clients are terminating contracts with us because we didn’t have suitable termination clauses, clients are not paying us for services delivered because they are struggling financially and we didn’t have our contract structured correctly to prevent against that, suppliers are not delivering goods or services after we have paid for them and we have no recourse because the legal contract didn’t protect us – or something else.
One thing we all have in common right now is COVID-19, and robust business processes can aid businesses to work through this crisis and recover on the other side.
Using my legal expertise and knowledge, I have put together a handful of questions for you, as business leaders, to be considering right now as you prepare your business for after COVID-19…
- Are you currently adequately staffed?
If not, what do you need to do to get people on board quickly to maintain your reputation and deliver your goods and/or services?
- What’s the post-pandemic version of your company going to look like?
No doubt your plans for 2020 have changed. You need to have a sense of how your company will look in the future, so you can work backward and act accordingly. You may have to come up with more than one scenario here. What does your ‘new normal’ look like and how will that impact your business in the months and years to come? Consider what might happen and plan for these scenarios.
- If you have got people on furlough, which team members will you bring back, and in what order? Most businesses will not be able to, and/or not want to, bring everyone back right away, which is why you need to think about the order in which you’ll ask people to return.
- What is your plan in case some people choose not to return to your company? Do you have a contingency in this event?
- How will you release people who you no longer wish to employ?
Will you wait until the pandemic has passed or will you do this now? This needs to be a key factor in your plan so you can continue to deliver your goods/services to the standards you require.
Another critical question to consider is what paperwork must you assemble to prevent future claims?
And with all of this in mind, now is a good time to also review all your contracts. This is important as we come out of the pandemic as it helps to ensure that:
- Your contracts with your suppliers are easily terminated without penalty to you.
- Your contracts with your clients contain force majeure (also known as events beyond your control) clauses and termination rights that work to your favour. Remember force majeure is not an automatic right, so it must be written into your contracts.
- Your payments to suppliers are, or can be, staggered based on deliverables being received (so that you are not paying suppliers on account before receiving the good or services in case the supplier goes bust and you can’t recover your payment).
- Your clients are paying you upfront so that if your client goes bust you don’t have unpaid work in progress or unpaid for ordered items that will be unrecoverable.
- You don’t have more than one client accounting for more than 15% of your turnover. Spread your risk.
- You are not too reliant on clients in any one sector, particularly if it is a high-risk sector following the pandemic.
- You have back up suppliers / sub-contractors for all key goods and services so that you are not overly reliant on any one supplier.
- If you have pivoted to a new business model (for example, online) you have all the legal documents in place to protect your business. Think about collecting data; what data do you collect, where do you store it, who has access to it and how long you keep it for.
- Update your data protection policies and processes to ensure you are correctly processing data where staff are working from home.
- You have appropriate insurance in place – including business interruption and, where commercially possible, cover for pandemics to cover a second or third wave of the Covid-19 outbreak.
Hopefully, you have already used this recent ‘downtime’ to reflect on your next moves. If you haven’t already, now is as good a time as any.
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Associate tutor of In Professional Development