22 September 2020

Company contracts and processes in the new normal

Adapting your T’s & C’s to the new normal

Companies should focus their attention on risk management within their businesses and revisit their contracts and relationships with third parties in light of the coronavirus pandemic.

Whilst the disruption to staffing and supplies has calmed, the future for companies remains fragile and uncertain. Staff have had to adopt to new methods of working and suppliers continue to face pressures beyond their control.

The coronavirus pandemic has impacted all aspects of business, and therefore it is important that companies review their processes, practices and policies to ensure they are in line with the new normal.

The recent negative media surrounding fashion retailer Boohoo following reports of poor working practices in their supply chain, demonstrates how failing to review business practices can result in financial liability. It was reported that a factory in Leicester supplying clothes to the fashion retailer was paying their staff less than the minimum wage and had neglected to adopt COVID-19 safety measures. The media backlash resulted in a fall in Boohoo’s share price.

In addition to uncompliant suppliers, failures by operational providers, in technology for example, can be just as detrimental to businesses.

Howell Jones Solicitors explained that “The risks posed by third parties must be taken seriously by companies and all staff should be aware of the importance of this to the future of the company. On-going due diligence is vital in times of crisis and companies will suffer if they do not anticipate and identify issues in their own operations, supply chains and business partnerships.”

He/she added: “Companies should review new proposed contracts and existing contracts with their suppliers and customers to ensure that they offer the maximum protection. The situation we are in is novel and unforeseen circumstances are likely to arise. Therefore, ensuring that your business has the right terms regarding the waiver of rights, contract variation, indemnities and damages can make all the difference.  In the event that problems do arise, understanding how to invoke force majeure and termination clauses, and preparing to do so, can be pivotal.  It is better to anticipate and plan for potential problems than to try and deal with them after they have occurred.”

Companies should consider the following:  

Data protection

Have our processes for data security been updated and adapted to reflect new working practices and sensitive data protected?

Have our suppliers addressed how intellectual property will be protected with respect to home working?

Third party relationships

Is our process for vetting new partners and suppliers robust enough?

What processes are in place to ensure that warning signs with existing partners and suppliers are not missed?

Are our suppliers able to provide proof that they are complying with standards and regulations where work is being undertaken outside the normal working environment, e.g. with staff working from home?

How would the business adapt if any third-party relationships were to temporarily shut down due to COVID-19?

If any existing relationships were to permanently close, are there alternative suppliers or partners in place?

Employment practice

Are we and our suppliers responding and complying with the government’s current guidance and safety practices with regards to staff who are in the working environment?

How can we ensure that the third parties we work with are complying with their local, national and international mandatory requirements relating to lockdown for example?

How are we monitoring and managing remote staff to avoid breaches of working practices and standards?

Managing operations

Do we or our suppliers need to adjust our supply chain timelines?

How will cash flow be affected if we or our business partners are unable to sell stock for an extended period or have to hold more stock than normal?

Do we need to review our payment terms?

Are our accounts up to date and is a close eye being kept on performance to ensure that any potential difficulties are identified in advance?

In the event that we need financial support, what are our options and is our corporate documentation and reporting up to date?


Legal Content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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