The rapidly evolving novel coronavirus (COVID-19) pandemic is raising for all of us a number of new and uncharted issues and challenges. For business enterprises, it can impact company culture, business operations and reputation. For most companies, the crisis likely will have more significant ramifications if it’s not managed well. While the issues and answers will differ among companies of different sizes, in diverse industries, and across varied geographic reaches, one common thread is that boards of directors/managers (boards) have oversight challenges in effectively overseeing management’s response. Below are some of our suggestions all boards should consider in facing the COVID-19 pandemic.
- ERM. Does management have a program/plan to respond to this crisis – an enterprise risk management plan? If so, follow it! The board can and should ensure that management’s plan is sound and that it has the personnel (internal and external) and resources necessary to react to and quickly recover. Help management to clearly define roles and responsibilities to effectively run the ERM plan. Make sure there is in place an adequate reporting and communications plan so that all stakeholders are in the loop in real time.
- Risk Management. Whether under a pre-existing ERM plan or “on the fly”, boards must understand and stay current with management’s fluid plan to identify and mitigate associated risks. In reporting up, consider adopting a matrix approach – identify functional areas of the business and assess what risks are attendant to each. For larger, far-flung businesses, insist on geographical segmenting where appropriate. And this is a great time to review D&O policies to make sure they are in place and protecting the directors as they get more involved with how the company faces financial and other crises.
- Staffing. What is management’s plan on staffing changes, if any? Insist on solid business justification for its positions, particularly around layoffs and furloughs. Ensure that all staffing plans have accounted for fast-evolving legislative and regulatory developments.
- The Government’s Response. Our local, state and Federal governments are moving quickly, often in a disjointed and uncoordinated fashion, to address the pandemic – e.g., restrictions on public gatherings, travel and emergency restraints, work-from-home and “shelter-in-place” requirements, and mandatory business closures. Management must track and react to the impacts these actions have on operations and strategy. And ensure that management is regularly assessing whether any regulatory actions might offer other avenues of relief – such as the presently discussed economic stimulus and employment protection packages.
- Cash Remains King. The present economic uncertainties and market volatility are reeking havoc with efforts to plan with certainty. Boards, in particular audit committees, must collaborate with management to understand the extent of cash conservation needed, stress-testing the ERM plan as it relates to finance, and the company’s near- and longer-term financing needs.
- Material Contracts. Board may need to get more granular than usual in understanding key commercial and financial relationships to ensure they’re maintained. In material commercial agreements, are therThere are many other ramifications to boards in discharging their oversight responsibilities, from dividend payments, to extant defensive strategies, to cybersecurity preparedness. As we collectively face these stressful and unprecedented challenges, lean on us – we can help you manage this crisis now, while planning for the future by providing the latest “need to know” ideas and strategies to guide you through the challenges you and your business face, now and in the future. We are all about “amazing clients” – and today, that means “whatever it takes.”e (or are there likely to be) breaches? Does COVID 19 excuse the parties’ obligations to perform? And pay close attention to key financing provisions to track risk of noncompliance, and take steps now to avoid, or at least mitigate, through waivers or re-financings.
- Annual Shareholders’ Meetings. Should it be made virtual? Should the date or location be moved? The key is the viability of a traditional in-person meeting. We are already seeing many companies considering, or that have already moved these meetings to an online format.
There are many other ramifications to boards in discharging their oversight responsibilities, from dividend payments, to extant defensive strategies, to cybersecurity preparedness. As we collectively face these stressful and unprecedented challenges, lean on us – we can help you manage this crisis now, while planning for the future by providing the latest “need to know” ideas and strategies to guide you through the challenges you and your business face, now and in the future. We are all about “amazing clients” – and today, that means “whatever it takes.”
About the Author: David Amidon
David Amidon has almost 30 years of experience helping a wide array of clients, serving as both general counsel and transactional counsel to a broad and diverse group of entrepreneurs, start-up and emerging ventures, middle-market companies, private equity and venture capital funds, investment banking firms, private investors, and public companies. He can be reached at email@example.com or 617.345.3578.