Where a business has commercial contracts which are likely to be impacted by the Coronavirus outbreak, the first step should be to assess the business’s rights and obligations under those contracts. This will likely involve:
- Identifying the performance obligations, covenants, indemnities, termination clauses and other material provisions in all contracts which are likely to be impacted by the Coronavirus
- Analysing the potential consequences of breaching the contract
- Flagging any notice requirements which may need to be actioned and the related timescales
- Reviewing the financial history of the contract and running a range of financial projections (from ‘business as usual’, through to ‘worst case scenario’) in order to assess potential exposure
- Considering whether there are ways in which identified risks can be mitigated
- Identifying where any proactive steps can be taken to address potential future problems
Once a business has carried out an assessment of its likely exposure, it can use this information to formulate an action plan and decide how best to manage communications with customers, suppliers and lenders.