In light of the recent situation with COVID-19, FLI has taken a proactive approach to providing legal support to its clients seeking up-to-date advisory support relating to force majeure, but more importantly direct action and takeaways for global supply chains. Compliance officers and Risk Managers have seen the end to a relatively stable period of regular growth in risk-adjusted returns and steady year to year growth due to innovative and emerging markets, the proliferation of technologies, enhanced globalization, as well as the popularity of arbitration as a means of hedging risks in the engagement of suppliers in jurisdictions where national legislation may not be an effective means of contract execution. With the BRIC and next-eleven economies seeing high levels of innovating output – in patents and GDP per capita for example – as well as large influxes of foreign direct investment, global economies have seen an unprecedented rate of inter-dependence until the repercussions of the COVID-19 outbreak.
In speaking with various transnational clients from a variety of industries, some general comments have appeared to be popular points of discussion, these include the following elements of crisis management.
1. Credit Control
In reducing credit and default risks, clients are to seek for ways of increasing their credit control practices in order to offset risks with trade-credit and defaulting clients.
2. Supplier Panel and Contract Review
Given the systematic nature of the COVID-19 outbreak, most supply-chains will have seen disruption in their traditional structure. Many firms have felt exposed in overseas operations and the potential risk of just-in-time inventory mismanagement and in some cases, the lack of futurity, troubleshooting, or contingency plans. Inside counsel may be forced to review their supplier panels and diversify their potential risks by reviewing agreements and if applicable, hold a portfolio of suppliers both in foreign, but also in domestic markets.
3. Cash and Proactivity
Many clients may wish to revisit their debt obligations and capital structures, as well as inventory and crisis-provisions. With a greatly reduced supply and an increased price-elastic consumer/client, revenues are set to continue to face shocks, which can put a strain on meeting obligations. In addition, firms may wish to include inventory provisions to meet demand as needed in case of suppliers become insolvent or cannot meet contract performance-obligations.
FLI regularly advises corporations on legal and strategy, with a key focus on global roll-outs and investments, as well as providing a standardized approach to multi-jurisdictional projects. With over 17,000 lawyers worldwide in over 100+ jurisdictions, FLI benefits its clients by providing access to local industry and jurisdictional.