Considerations for Small and Mid-Sized Businesses in Responding to COVID-19 Pandemic

Many small and mid-sized businesses are facing unprecedented challenges in dealing the COVID-19 pandemic.  In many states, “non-essential” businesses have faced complete shutdowns.  In the face of COVID-19, small and mid-sized businesses face myriad challenges and it can be overwhelming to try to tackle them with limited human and capital resources.  The below is a list of key risk-mitigation items that should be priorities for small and mid-sized businesses as they face remote working challenges and capital crunches.

  • Protect the workforce: if the business is currently operational, implement travel bans, social distancing and/or work-from-home policies.
  • Protect the IT Systems: with personnel working remotely, consider IT issues, such as the effect on network reliability of a dramatic increase in employees working from home.  Also, check your privacy and remote-work policies to determine if updates are needed to prevent data breaches.
  • Check insurance policies: business interruption insurance may cover losses, although some policies exclude pandemics such as COVID-19.
  • Review commercial contracts for performance “outs”: your contracts with suppliers, customers and collaborators may contain “force majeure” clauses which could excuse performance. General principles under contract law (impracticability, frustration of purpose) may also excuse performance.  Review these contracts so that you can anticipate the likelihood of non-performance of counter parties and to what degree your own non-performance will be excused.
  • Manage the supply chain:  significant disruptions in supply chains have resulted from the pandemic. Consider new or backup suppliers, availability and rationing of parts/ingredients, and delivery logistics.  Also be sure to review your contracts with existing suppliers and vendors for exclusivity requirements, minimums and termination rights.
  • Consider anti-takeover protections: for public companies, especially those with stock prices that have plummeted over the past few weeks, engage with stockholders, monitor trading in the stock, and consider implementing anti-takeover protections such as a poison pill.
  • Manage expenses: consider implementing targeted (e.g., management) or across-the-board compensation reductions or adjustments (but consider the law); explore seeking rent concessions from landlords; evaluate whether physical locations should be closed or mothballed.
  • Maintain cash: consider requesting forbearance or refinancing options with your lenders. Federal banking regulators have issued proclamations that should make it easier for companies to obtain loan modifications.  For companies that have cash investments, review the investment policy and make necessary changes.
  • Explore alternate financing: There are programs at the federal, state and local level providing for low-interest loans and grants.
  • Keep updated on changes in the law:  The federal, state and local governments are moving quickly to address the effects of the pandemic.  Laws, rules and orders are being issued at what seems like a record pace.

Finally, try to consider longer-term issues.  For example, what does it mean for the business if there is a long recession?  Are permanent shifts in the supply chain or customer behavior likely?

About Duane Morris

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information.

For Further Information

If you have any questions about this blog, please contact  Darrick Mix, Sandra G. Stoneman, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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