Coronavirus Crisis Management

Given its increasing impact on the global supply chain, the economy, and the people who make the world turn, it is less about whether organizations will be affected, and more about when and how?

Legal departments in all organization types must be proactive to mitigate the effects of this crisis.

What We Are Seeing

Our global clients across the spectrum of industries are facing an almost unprecedented impact or threat to their global operations. Factories in China either remain closed or are working at a fraction of their total capacity, frequently less than 10 percent. Shipping containers are stacking up at ports or are facing rerouting as dock workers stay home. Trucking routes across China are severed due to quarantine measures. Many countries have suspended flights to and from virus-hit regions, reducing air freight capacity. Factories in Vietnam, Thailand, Japan, Korea, Mexico, and the United States are also reducing capacity due to shortages of input parts from China, a trend likely to continue as the crisis continues.

Further, retail, restaurant, and tourism industry are devastated as people stay home to avoid the virus.

Regardless of sector, our global clients are impacted by delayed or aborted corporate transactions (and a general slowdown in M&A and IPO activity in certain regions); sharp decreases in corporate earnings; increasing concerns over commercial viability of contracts; increase in the use of force majeure to cancel orders; cancellation of major public and private sector leisure, cultural and sporting events; and public relations issues.

We have set out below how lawyers in global organizations can implement a thoughtful and streamlined approach to leading through a global public health crisis.

Legal Risk Emanating From a Public Health Crisis

Global public health crises such as Covid-19 are, thankfully, relatively infrequent—SARS (2003) and the Ebola crisis (2014-2016) are the most recent similar examples—but this can mean that response protocols within organizations receive less attention than those for more frequent crisis types and that companies lack experience in responding to these incidents.

Even the most prepared organizations may face significant challenges managing these events because staff, including lawyers and senior leadership, are unable to work effectively because of remote work protocols or they are unwell, quarantined, or stranded overseas.

As a result of Covid-19, organizations face significant potential legal issues, including:

1. issues arising from the closure (temporary or indefinite) of factories, sites or stores, giving rise to contractual and other disputes;
2. workplace health and safety;
3. employee grievances related to work and health privacy/data protection matters under local laws;
4. increasing travel restrictions;
5. a myriad of supply chain risk (including risks associated with air and sea shipping); and
6. consumer concern regarding goods/materials originating from virus-hit regions leading to breaches of contract.

If Covid-19 has or might have an impact upon an organization’s people or operations, the organization should take swift steps to assemble an incident response team and, where necessary, external legal advisors, to best adapt to the rapidly-developing situation.

Strategic Leadership Considerations

Employees, customers, and the public all expect competent leadership in tough times. To achieve this, organizations should ensure that they:

1. have the policies and protocols in place to promote the health and welfare of their employees and representatives—including appropriate dissemination of key medical information and updates regarding Covid-19 and, where necessary, emergency medical treatment and travel/evacuation protocols;
2. activate regular and clear internal reporting channels;
3. are able to communicate to clients, customers, and vendors the current status of factories based on localized information;
4. deploy business continuity plans throughout their operations—particularly those exposed to supply chain risk or where site closures are required—including increased use of technology to support business function;
5. have a clear understanding of the terms of any contracts which are impacted by Covid-19;
6. understand local employment and data protection laws with a view to understanding: (i) how to implement protective measures in the workplace; (ii) the potential need to report employee information to local health authorities; and (iii) mandatory quarantines, as well as long-term shutdowns of offices and stores;
7. where necessary, maintain key lines of communication with relevant government departments, both home and overseas; and
8. deploy public relations and reputation management procedures including internal and external communication protocols—particularly involving social media.

By devising and following a strategic plan that covers these steps, lawyers in affected organizations have the opportunity to lead them through this crisis and to ensure that they are equipped to emerge stronger, more resilient and better prepared for the next unforeseen event.

Lillian Hardy is a Partner at Hogan Lovells in Washington D.C. where she heads the firm’s multidisciplinary, global crisis management practice, the HL Crisis Leadership Team. Benjamin Kostrzewa and Byron Phillips are attorneys in the firm’s Hong Kong office.