Business Lookouts During COVID-19 (PART 1)
August 14, 2022 हिंदी में पढ़ेंTable of Contents
Businesses are experiencing unprecedented challenges and market disruption due to the Covid-19 pandemic and a consequential economic meltdown seems inevitable. Economists predict that economy is now dealing with a situation far worse than the global recession of 2008. We are not prepared to deal with this situation since no business has anticipated or predicted a menace of this extent, where globally national borders are locked down halting global market and business operations.
Importantly, we are dealing with a war waged by the unknown, and nations are fighting to safeguard and protect their people and economy. In this context, businesses/ entrepreneur has to operate sustainably, and it is important to set up and administer certain proactive measures to mitigate financial and business losses. These special circumstances require special measures to sustain and thrive, and this article covers some measures that companies may imbibe to thrive over the crisis and to sustain.
“Pragmatic ideation and proactive resolution will mitigate the impact of impending problems”
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WORK FROM HOME
“Work From Home is not an exception but has become a Rule”
Legally, the success of a business and its sustenance depends on how well it protects its confidential information and trade secrets. Especially, in times like now, it has become imperative not only to have a sustainable business modus operandi to thrive and succeed during bad market conditions but also to protect what has been already built through years of hard work. This sounds simple yet very difficult to implement and execute in the frontline.
Employees are key to every organization. Their performance and conduct in operating the business decide the company's future. Good employees build a successful business and the bad ones ruin the organization. A simple claim or lawsuit will change the future of the company or drag the company into darkness (third-party infringement and damages suits), so the company should explicitly set out the framework within which the employees have to function within the company.
With a large number of employees working remotely in the comfort of their houses, the management is now grappling with the management of infrastructure to facilitate employees with work-from-home access and to keep the business running. While companies are dealing with infrastructure difficulties, protection of confidential information and trade secrets should be set on high priority in order to avoid future uncertainties and to govern the way the organization continues to operate within the uncontrolled environment of the homes of the employees.
Measures: Implementing effective policies and conducting awareness training programs so as to how to operate and function while working in the comfort of home. Data Protection Policy, Information Technology, Security Policy, and Work from Home Policy are a few policies that companies should implement and effectuate measures for the protection of data and confidential information.
Consult: Top Corporate Lawyers in India
STRUCTURE BUSINESS CONTRACTS
Business doesn’t operate in silos but is reliant upon clients, service providers, and customers (the list may vary from business to business). It is important to evaluate and strategically secure and retain the existing business connections. Practically, retaining old clients is a cost-effective measure, since securing new clients is a costly affair during this market meltdown. The business relationship with the client is regulated by a document called “Agreement” and this provides how to govern and operate during the subsistence of the agreement.
The agreement may be implied or express contract. Where the terms of an agreement are explicit, the business should evaluate the risks and be prepared for any foreseeable risks that may arise in the current market circumstances, and protect itself from unforeseen risks (Force Majeure Clause). For implied and unwritten business arrangement, the company will be operating in an uncontrolled and ungoverned territory and may cost the company irreparably, if things don’t operate the way they are supposed to, and the legal binding of the implied agreement depends on external factors and burden of proving the transaction and losses are high. So, the management should focus on dealing with the governing business through the Agreements.
“Agreement decides whether you have a falling business or scope to rise above the troubled water.”
It is imperative to work along with a legal team to overcome the uncertainties and operate within a controlled business environment. In the interest of economies of scale of business, as a rule, litigation should be the last resort. When agreement provides for business certainty why take long shots with regard to the company's future.
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As such, in case a client (or a set of clients) is important for the survival of a business, then the business should take proactive measures to re-negotiate, re-design, or structure the transaction to make it sustainable to both the business and the clients. If you are expensive to your client, your dealings with them are bound to fall to the ground. Importantly, be the first to make a proposal of restructuring a transaction before your clients make a decision against you and it’s too late.
“Change is constant, adaption is a rule, and knowing when to adapt will decide the success”
Conventionally, business teams are oriented to gain business, finance to control costs, and project profits, so they pay no heed to transactional risks. Inevitably, in order to succeed, the leaders have to take decisions that involve exposure to risk. However, it is important to take calculative and informed decisions with regard to such a risk exposure and the same has to be documented through an agreement to avoid uncertainties and ambiguity. Drawing up an agreement is not just a good-to-have measure, but it is a tool to resolve conflicts in case of disputes.
To be triumphant, all teams should collaborate and structure a workable business transaction for the clients. Overpromising-Underperformance and low promises and overperformance are both strategies that kill the business, but a sustainable, performable and achievable business agreement works well for all and leads the business to a successful path. In this, the legal contribution would be to enlighten the business with unbiased views of the nature of risk and consequences that may arise therefrom.
Notably, business conglomerates are successful in a way they are, since they operate and function by making informed decisions knowing their exposure and risks, and on the contrary, start-ups can’t afford legal costs and hence fall prey in the hands of business eagles who specialize in acquiring businesses at low cost (or no cost). As a result, start-ups rise and fall overnight.
Consult: Top Corporate Lawyers in India
Measures: Evaluate your business agreement and understand the cost-value proposition as the deal/ transaction stands. In essence, restructuring your business agreement to the current market will help companies to retain clients. This task also helps companies to evaluate high-cost clientele and to allocate funds to sustain the business or make the decision to let go of a client for larger good.
SUMMARY
“Pragmatic and proactive measures make to business sustainable and keep it afloat.”
This article outlines legal measures the business managements have to evaluate and reconsider under the Covid-19 crisis. It aims to highlight the common areas of lacuna in business operations. Pragmatic and proactive measures make the business sustainable and keep it afloat. Introspection into business processes, models, operations, and business flow, and the results of such analysis help to strategize and acclimatize to the current business environment. Change is inevitable so the factors are key to thrust and success. Having enforceable and sustainable contracts is vital to governing the way the business operates and understanding obligations and liabilities. This will help to plan, strategize and execute business in an informed way during the time of change in the business environment, and to stay out of troubled waters. These measures may mitigate the disaster and helps to survive and succeed in the long run.
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