Among businesses in India, the risk pertaining to natural calamities or infectious disease is rarely included in their considerations. The appetite for risk and the affinity to “jugaad” is all pervasive. COVID-19 has changed the world in more ways than one. It has left many businesses paralysed in the absence of a risk management plan.
The pandemic has forced businesses to see the importance of a risk management plan as they undertake drastic changes in business operations and even business models within a very short timeline. Change has been forced by the nature and spread of the pandemic and also by the change in government regulations due to extraordinary circumstances.
The ability of a business to undertake changes to survive the crisis has been dependent on the team’s ability to do impact assessment and take decisive decisions. In-house legal teams have had a crucial role to play in managing legal compliance, undertaking contractual risk mitigation, enabling alternate growth opportunities and also working with law enforcement agencies to provide support to the online community of traders and consumers to ensure continuity of business of small and medium enterprises in a safe manner.
The pandemic causes loss of life, but economic loss suffered by the community arises out of human behaviour and reaction. In the highly networked word today, “informational contagion” is widespread. World Bank, in one of its estimates, suggested that only 39% of economic losses from outbreaks are associated with effects on infected individuals.
The traditional risk management life cycle consists of four stages: prevention, detection, response and mitigation. Given the fast spread of COVID-10 and large scale information contagion, the traditional escalation procedures have proven to be less effective.
This period has undeniably brought out a clear need to establish a cross-functional crisis management task force. The crisis management task force and programme are there to get a grip on things, so that the rest of the organisation can continue with daily operations i.e. business as usual. The first priority of the task force should be the safety of people, closely followed by cash management and cash flow optimisation. With the gradual lifting of restrictions, the focus has to be shifted to supply chain and operations.
Communication is the key. The in-house legal team has to regularly communicate with the internal as well as external stakeholders, and after evaluation of certain risks, should strategize, implement and monitor a robust risk management plan in an organization-friendly manner. The legal team should aim to strike a balance between risk management and enabling the business to ensure minimum disruption.
In-house legal teams have delivered value by creating and adopting technology to deliver solutions. For example, in-house teams have built customised solutions to track government notifications, orders and directives on a real-time basis to enable more predictable business operations. They have also been instrumental in identification of containment areas and the permitted activities in such areas. This has multiple benefits. There is more predictability and transparency for the sellers, logistics partners, as well as customers.
A sound digital contract management system has been invaluable in identifying key/material contracts in a short span of time to set out a strategy to manage cash flow. The fast and easy access to contracts through document management systems and integration with ERM systems has been core to the successful implementation of cash management and cash flow optimisation.
Technology has enabled us to adopt fast and effective communication with all stakeholders to build trust and collaboration through transparent communication. As the law made it imperative for businesses to ensure compliance with COVID-19 regulations and SOPs by its employees and partners, the in-house legal teams have had to deliver correct, concise and timely legal advice to its network and to ensure that systems and processes are in place to ensure compliance to a reasonable extent.
Businesses leaders play a key role in positioning their organizations to avoid exposure by building the capabilities of a cross-functional crisis management team that is equipped with technology to collect and analyse facts on real time basis, and disseminate information consistently and regularly across its employees, partners and customers.
Potentially catastrophic outbreaks may occur every few decades, and are highly disruptive. As businesses and policy makers remain unprepared to respond to outbreaks, they cause more economic damage. As businesses and access to justice move online, the need for development of law tech solutions and their adoption by in-house teams has become business critical in an uncertain future.
Managing the crisis and its risks properly also creates more time to see beyond the crisis and build resilience for a better future.
Prankur Chaturvedi is Associate Director- Legal and Compliance at Snapdeal Private Limited.