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Supply-Chain Review: COVID-19 Debrief

Daniel Casares-Lauritsen
Daniel Casares-Lauritsen
May 21st, 2020

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FLI comments on recent consequences of COVID-19 on companies with large international supply-chains. These principles have implications for in-house counsel, investment officers, and portfolio management.

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.

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Daniel Casares-Lauritsen

Daniel Casares-Lauritsen

Daniel has significant experience in advising clients’ corporate portfolios and optimizing multi-jurisdictional legal projects. His mission is to enhance clients’ leverage in complex multi-stakeholder deals through the power of FLI’s business model. He has also supervised the development and roll-out of FLI’s LegalTech Apps/PWAs, including FlightOne and FLInstitute in order to retain counsel in various jurisdictions, as well as promoting client co-creation and corporate compliance. These elements may include, but are not limited to: M&A, Entry/Expansions/Restructurings, VC/CVC/PE/Family Offices and Wealth Management, Compliance & Investigations, FDI, Import/Export Trade Regulations, Tax, Corporate Governance, and more.

Daniel regularly provides insights on industry trends, economic and legislative opportunities and threats, as well as strategic avenues for FLI accounts in conjunction with its subject-matter experts.

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