Risk Management in the Midst of the Coronavirus Outbreak: What Do Companies Need to Know?
As the novel coronavirus (COVID-19) continues to spread, the domestic and international risks for U.S. companies continue to grow. So, what do you need to know in order to minimize the immediate and long-term effects on your company’s bottom line?
As of March 1, 2020, there have been two confirmed deaths in the United States linked to the novel coronavirus (COVID-19), and the total number of confirmed cases is knocking on the door of one hundred. Globally, nearly 100,000 cases have been confirmed, and more than 3,000 people have died from COVID-19.
While the risk to human life is obviously the greatest concern linked to any type of outbreak, companies need to think in practical terms, and this means consciously assessing the risks of the novel coronavirus for their bottom lines. Stock prices are tumbling across the board; and, while the market will eventually recover, some companies will undoubtedly fare better than others.
How Can Companies Curtail Their Financial Risk Due to the Novel Coronavirus?
With this in mind, what can companies be doing – what should they be doing – in order to curtail their financial risk due to the novel coronavirus? How can companies protect their shareholders from financial loss due to the market effects of COVID-19, and how can they mitigate the risk of contract defaults and litigation arising from the outbreak?
10 Key Strategies for Managing Corporate Risk During the Coronavirus Outbreak
1. Relying on Current and Accurate Information
First, and perhaps most importantly, it is absolutely essential for company leadership to make decisions based on current and accurate information. The number of confirmed cases of COVD-19 infections is increasing daily, as is the geographic scope of the outbreak. At the same time, it is clear that many news outlets are overplaying the risk – or at the very least omitting pertinent information that individuals and companies need in order to make smart decisions. While companies in the U.S. cannot afford to underestimate their risk, they cannot afford to overestimate it, either.
2. Managing Risks Associated with Contracted Suppliers
When assessing risk, companies in the U.S. must look beyond their own walls. In particular, they must examine the risks associated with their contracted suppliers. This includes not only suppliers in countries such as China and Japan, but in the United States as well.
If a supplier’s employees get sick, or if trade or travel restrictions prevent a supplier from conducting business in the ordinary course, this can have direct downstream impacts for your company. While there may be nothing your company can do to prevent these issues from arising, there are steps your company can take to plan ahead and execute a contingency plan if and when the time comes.
3. Managing Risks Associated with Second-Tier and Third-Tier Suppliers
In today’s global economy, risks associated with second-tier and third-tier suppliers (or indirect suppliers) can have significant impacts as well. If one of your company’s key suppliers cannot get the components or services it needs from one of its own vendors, this can have the same practical impacts as if your company’s supplier had an issue internally. In order to assess the level of this risk, you must identify all of the entities in your company’s supply chain, and you must assess the potential risk linked to the coronavirus outbreak at every link in the chain.
4. Maintaining Appropriate Internal and External Transparency
As a corporate citizen operating in a volatile global environment, transparency is crucial. However, too much transparency has also been more than one company’s downfall. If your company encounters an issue linked to COVID-19, maintaining appropriate internal and external transparency can be critical to maintaining morale and preserving your company’s hard-earned reputation.
When evaluating possible disclosures related to supply chain or personnel issues arising out of the coronavirus outbreak, it is imperative to assess the market, financial, and legal implications involved. You need to be able to foresee the potential consequences, and you need address them at the outset so that they do not cause unnecessary, and perhaps irreparable, harm.
5. Executing Pre-Established Risk Avoidance and Disaster Management Protocols
While no one had the opportunity to specifically plan ahead for the worldwide spread of the novel coronavirus, most companies should have risk avoidance and disaster management protocols that they can execute (or adapt and then execute) in response to COVID-19. From responding the risk of an infected employee spreading the virus within your company’s walls to addressing the very real possibility of global suppliers being unable to deliver on time (if at all), if your company has a plan that it can execute, now may be the time to do so.
6. Staying the Course with Respect to Statutory and Regulatory Compliance
Critically, when responding to a global crisis such as the novel coronavirus outbreak, companies must be careful not to lose sight of their ongoing statutory and regulatory compliance obligations. Even under extraordinary circumstances, maintaining compliance at the local, state, and federal levels needs to remain a priority.
7. Making Decisions with the Necessary Breadth of Perspective
In this same vein, when making decisions related to COVID-19, companies must maintain a perspective of appropriate breadth. While responding to potential health risks is undoubtedly the absolute top priority in any scenario, decisions still need to take all relevant factors into account. If an employee is exhibiting symptoms of the novel coronavirus, what should you do? If a supplier cannot deliver, should you terminate the contract, or find a temporary solution? These questions, among many others, require strategic thinking and clear insight into all of the various implications involved.
8. Being Prepared to Make Changes Quickly
While it is important to have a plan that you can execute, it is equally important to be prepared to adapt in the event that circumstances change. With a situation such as the novel coronavirus outbreak, change is inevitable, and what worked a few months (or even days) ago might not work today. In order to make the right decisions to protect your company, shareholders, and employees, you must be willing and able to nimbly address new circumstances as they arise.
9. Responding Immediately in the Event of an Actual or Potential Crisis
Thus far we have largely been focused on planning; but, what should you do in the event of an actual or potential crisis? With something like COVID-19, your company’s response needs to be immediate, and it needs to be imminently effective. Failing to respond appropriately could mean that your customers and shareholders suffer, it could mean that your company is at risk for state or federal law enforcement action, and it could even mean that people’s lives are at risk. You cannot afford to take chances, and a wait-and-see approach simply is not going to work.
10. Maintaining a Long-Term, Growth-Oriented Perspective
Finally, regardless of how widespread the novel coronavirus outbreak ultimately becomes, it will end. When it does, your company will need to be in a position to resume the status quo and continue on a long-term path toward sustainable growth. With this in mind, decisions made during the outbreak must not be made in a vacuum. Once again, maintaining compliance is critical, and companies cannot afford to make rash decisions that expose them (or their owners or executives) to civil or criminal liability.
Corona Virus Risk Management Consulting: A Team of Former FBI Agents with Decades of On-the-Ground Experience
With a proven record of success helping companies mitigate risk and avoid liability, our former FBI agents are available to assist U.S. companies with proactive and reactive response to issues linked to COVID-19. Our practice is nationwide in scope, and our former FBI agents are available to provide strategic advice to company owners and executives across the country. The risk management and crisis response consultants on our national team include:
- Chris J. Quick, Former Special Agent with the FBI
- Kevin M. Sheridan, Former Supervisory Special Agent with the FBI
- Ray Yuen, Former Supervisory Special Agent with the FBI
Ultimately, if your company is facing risks due to the novel coronavirus outbreak, the key to mitigating these risks is to make strategic and informed decisions. Our former FBI agents have decades of experience advising private companies in circumstances involving the potential for significant liability and loss of goodwill, and we can utilize this experience to protect your company’s short-term and long-term interests. Whether you have active concerns or you are seeking to prepare for the future, we can help you, and we encourage you to contact us immediately to get started.
Contact the Former FBI Agents at Oberheiden P.C.
Are you concerned about what the novel coronavirus outbreak could mean for your company, now or in the future? If so, we encourage you to contact us promptly to speak with one of our former FBI agents in confidence. To schedule an appointment as soon as possible, call us at 888-680-1745 or tell us how we can help online now.