Top legal risks COVID-19 poses to business

By Jerome Doraisamy|14 April 2020

Coronavirus is having a “significant impact” upon businesses of all stripes, exacerbating legal risks across the board, says new research.

In the wake of COVID-19, US-headquartered international law firm Morrison & Foerster surveyed 110 in-house general counsel from global corporations to understand how this unanticipated health crisis is impacting their businesses now and over the long term and what they perceive to be their biggest business challenges over the next 12 to 24 months.

The survey found that the global pandemic is causing an average impact of 7.2 on a 10-point scale, which will continue for at least the next six months.

Legal counsel expect that the impact level will decrease to 5.7 over the next 12 to 24 months, “but do not see it completely dissipating”.

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When asked about the top legal risks posed to their businesses as a result of the pandemic, respondents overwhelmingly identified employment and human resources issues as the biggest risk, with 85.5 per cent selecting this option.

The next two biggest risks identified were contracts (67.3 per cent) and supply chain disruption (56.4 per cent).

According to Morrison & Foerster partner Jennifer Marines, companies that supply goods and services will need to be thinking more not only about their own operations but also their entire supply chain and customer base.

“In this economic environment, all companies should be closely monitoring their significant business partners for signs of distress. In addition to monitoring press coverage and public securities filings where available, companies should also closely review their customer accounts for abnormal payment activities,” she said.

“Often, one of the indications a company may be getting ready to file for bankruptcy is when trade terms are stretched without consent. There are several levers a company can exercise to mitigate risk in these circumstances, but it requires continued vigilance so that the company is not caught flat-footed.”

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By contrast, legal risk issues related to data security (29.1 per cent) and privacy (18.2 per cent) came in lower on COVID19-related legal concerns.

“Security appears to be lower on the scale likely because the other risks are paramount at the moment. Unfortunately, the number of data security incidents is likely to rise in the near future which may impact many organisations,” said Morrison & Foerster partner Miriam Wugmeister.

Other legal risks identified by in-house respondents include: security/shareholder issues (20 per cent), public disclosure (4.5 per cent), bribery and corruption (2.7 per cent) and product liability/tort (0.9 per cent).

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Top legal risks COVID-19 poses to business
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