- within Law Department Performance, Real Estate and Construction and Finance and Banking topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Property industries
The following content was presented by Dorinda Peacock during a live webinar
on March 13, 2020. To view a recording of this presentation, please
click here.
COVID-19 will disrupt companies on both the supply and demand side,
and the ability to react to decreased supply or demand will be
constrained by the rights and restrictions in commercial contracts.
In the near term, companies must make an accurate assessment of the
biggest potential disruptions to supply and demand, then take steps
to mitigate those disruptions as permitted by its contracts.
- Constantly monitor the situation
- Understand geography of customers, suppliers and employees and stay abreast of news in those areas
- Understand pressures on customers and suppliers to anticipate potential issues
- Review contracts with key suppliers
and customers to understand company's obligations and rights
- Payment and reporting obligations
- Minimum delivery requirements
- Covenants
- Notice obligations
- Force majeure
- Breach, defaults and cross-defaults
- Review contracts with key suppliers
and customers to understand restrictions and requirements to make
alternative arrangements
- Notice
- Mitigation
- Request for assurances
- Exclusivity
- Termination rights
- Analyze insurance policies to determine whether damages may be covered, e.g., under business interruption or trade disruption insurance
- Maintain current contact information
of key suppliers and customers and proactively communicate
- Request assurances of performance from suppliers
- Discuss potential grace periods or leniency
- Renegotiate agreements
- Prioritize / allocate resources based on strategic and financial needs, within contractual constraints
Going forward, companies should take steps to increase contractual flexibility to react to disruptions.
- Review form customer and supplier agreements and revise as necessary to increase flexibility in the event of disruption
- Ensure contracts coming up for renewal are renegotiated to include more flexible terms if possible
- Develop and maintain backup plans
- Diversify the supply chain and create redundancies
- Avoid exclusive supplier relationships where possible, or allow exceptions for extenuating circumstances
- Analyze insurance policies to determine whether the right types and levels of coverage for crisis situations are in place
- Keep track of "lessons learned"
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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