Coronavirus (COVID-19): 4 Steps for your Business Contingency Plan

Covid-19 is a public health challenge that already impacts businesses across the globe. The measures adopted by governments and regulators to tackle the pandemic are sudden and vary widely by country and severity. It is crucial to develop a long-term, multi-aspect crisis plan to ensure your company’s resilience and well-being in these challenging times.

1. Assemble a crisis team that will harmonize your company’s response to the pandemic.

The first impact of the Covid-19 outbreak is often on the employees of the company. Your HR’s expertise is crucial in this period, in order to establish the pandemic’s effect on your workforce.  

• Covid-19 may have an effect on the demand of the company’s product and thus affect its revenue. Your accountant is an indispensable part of your crisis team in order to evaluate the potential stress on the company’s revenue, as well as the optimization of any expenses, including the relevant tax aspects. 
• Many news outlets hail the coming of the remote office era. Due to government regulations, part of your employees might be forced to work from home. You need your IT specialist to determine whether shifting to remote work is possible in the first place. Desktop computers may have to be substituted for laptops but digital security and GDPR compliance are of paramount importance. 
• Speaking of GDPR and regulatory compliance, it is key to have your legal team on the crisis team as well. Due to the unpredictability of the pandemic, government regulators are introducing new rules on a weekly, sometimes daily regular basis and it is extremely important to keep up to date with the legal developments. 
• The most common aspects are employees’ rights, tax breaks and government assistance schemes. Any companies that process personal data, whose business processes are disrupted due to the Covid-19 outbreak may have to identify and to re-adapt  prioritize their GDPR compliance procedures. Due to the disruption in supply chains, it is crucial to examine any contracts with suppliers, distributers and other third parties. It is important to assess your own contractual obligations and your ability to perform them.
• Communication is key. Make sure to have a dedicated team member who is responsible for communication. The successful navigation of the crisis depends on the proper communication within the company, as well as having a communication strategy with your employees, stakeholders, consumers and suppliers. In a public company, the way your company reacts to the crisis and communicates its response can have a direct effect on the value of the company and the business continuity plan.

2. Focus on the employees.

Your enterprise may be fined if it does not comply with newly-imposed government regulations regarding the Covid-19 outbreak. It is key to go through all health and safety measures adopted by the government alongside with your legal team and HR and determine what is required and how to achieve it.

• Make sure your employees are instructed not to travel to any restricted or virus-hit areas.
• Establish a reporting procedure for all employees who may exhibit symptoms of Covid-19, or are at risk of transmitting the disease. Employees might be reluctant to share with their employer that they are ill, but it is imperative to the business that any potentially ill employee is isolated before the virus spreads.
• Comply with all government recommendations and requirements regarding employees who have been to infected zones and have to self-isolate.
• Determine if you have any employees who are particularly vulnerable to Covid-19. Remember that the elderly and people with pre-existing conditions are extremely susceptible to the effects of the disease and their fatality rate is significantly higher. It is absolutely imperative to put a plan in place to guarantee their well-being, because the legal and business repercussions of them going ill could be severe.
• Make sure you have a procedure in place in case there is a mandatory disinfection requirement on your premises.
• Go through your scheduled business meetings in the coming months and determine whether it is possible to have them online. Different sectors have varying attitudes towards online conferences, however, in light of the present circumstances, you will likely encounter more tolerance towards going online.
• Determine how many days your employees have in sick leave, paid and unpaid leave. It is key to determine whether your company can withstand the financial or work-flow shock of your employees going on leave for a prolonged period. 
• Put in place a contingency plan in case a significant part of your workforce is on a sick leave. Make sure you meet your contractual obligations with your customers with minimal disruptions. 
• Dependent on the damage Covid-19 has done to the demand of your company’s services or products, employees may have to be laid off. Make sure your employees’ labor files are in order and all expenses related to any potential lay-offs are accounted for.

3. Next, your customers and suppliers. 

It is time to assess the impact of Covid-19 on your customers and suppliers and make the necessary adjustments. The first aspect of the virus outbreak is the slowdown of business activity. Covid-19 will likely disrupt the timeframe of the delivery of your services and the services of your suppliers, as everyone is planning their emergency response to the pandemic. Everybody is in this together, so make sure to communicate to all sides any possible delays. Meanwhile, here is what you should do internally:

• Go through all your contracts, alongside your legal team, and determine whether you might be liable for any defaults. Assess the risk of legal enforcement and any potential liabilities. Plan your budget accordingly and immediately get in touch with your trusted suppliers and clients to communicate with them the situation.
• Make sure that your contracts contain a force-majeure clause. If they do not, it is imperative that you go through the applicable law of every contract and determine whether the law provides for any statutory force-majeure clauses.
• Review the termination clauses in your contract. The Covid-19 pandemic could inevitably lead to termination of some contracts, such as employment or lease contracts. 
• Remember, everyone is in this together. Taking legal action could not only be time consuming and expensive, it could be impossible in some jurisdictions under the extraordinary measures legal framework. This could be the right time to renegotiate some contractual terms with your customers and suppliers. Think long-term, the crisis might not be over anytime soon and it is good to plan even beyond that. The pressure that the pandemic exerts on some businesses might be an opportunity for your enterprise to renegotiate some contractual matters that will apply even after the crisis ends.

4. Financial health of your enterprise. 

The financial health of your company has to be monitored strictly. Dependent on the nature of your enterprise, a sudden market shock may not endanger your company’s revenue immediately, but the disruption could be felt several months ahead. Without taking any measures today, your company might be at risk of folding in the near future. It is key to assess the risk that the Covid-19 pandemic poses on your future revenue and take all possible measures as soon as possible in your financial management plan.

• Your team has to get a clear overview of your company’s available capital and your available buffer. Assessments have to be made for how long that can last in various risk scenarios, and contingency plans have to be put in place. Your company can then easily follow the pertinent plan, given the circumstances, and avoid losses.
• If your financial lifeline is short, it might be a good idea to examine all government subsidy schemes enacted under the emergency legislation. Applying for such schemes will take some time and involves bureaucracy. It is imperative that your team is a step ahead of the other applicants and is able to produce all necessary documents as fast as possible.
• Various tax relief measures are being implemented by governments across the globe. Stay up-to date with the current tax developments in your jurisdiction and act accordingly. 
• Restructuring your company might be a drastic, but necessary measure during the pandemic, in order to protect your company. Compartmentalizing the different activities of your company into separate legal entities could minimize the risks and ultimately save your capital.
• Dissolving a business before it goes bankrupt is a way to protect your earnings and preserve your company’s buffer for future investments or restarting the company. Company dissolution is a matter that greatly varies dependent on the jurisdiction under which your enterprise is incorporated, but it universally involves a significant amount of paperwork. Some jurisdictions impose a requirement to deposit any outstanding obligations into separate newly opened bank accounts. 

Danailova, Todorov & Partners is advising clients on all business aspects of the Covid-19 outbreak. If you have any questions regarding the impact of the pandemic on your business, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it..