The Coronavirus-caused illness, (Covid-19) has spread rapidly across the world, creating an unprecedented challenge due to the severe health and economic setbacks caused in the immediate aftermath, with an anticipation of getting worse with the passage of time. In a regular scenario, directors are skilled at handling critical corporate decisions, but there is perhaps no existing handbook on what steps to take in situations like the ongoing pandemic, with its ensuing lockdown and the uncertainty of business disruption. Despite thoughtful planning, directors’ actions in times like these might prove to be inadequate, or in some cases could even backfire. Here is a quick checklist of some important steps to help you get through these testing times.
- Prepare and execute your BCP
The BCP (Business Continuity Plan) must attempt to comprehensively describe the risks to the company due to Covid-19 and also the commensurate actions being taken by all the departments. Having a BCP in place is the first important step, and its execution should ideally be regularly tracked by the management team.
- Compliance with statutory activities and necessary disclosures
Statutory activities including board meetings and regulatory disclosures or filings must be completed in time. Communication channels (including electronic ones) need to be kept open at this time.
- Managing working from home (WFH) and dealing with its related risks
Directors must ensure that in the lockdown phase, employees work from home and do not gather at any place for work-related activities, especially without the requisite permission from the authorities. Furthermore, WFH can increase the probability of data breaches and other cyber risks in an organisation. Adequate safeguard measures must be in place to mitigate/deal with these risks. This is especially applicable for businesses in financial services or those handling sensitive third-party data.
- Loss of management and disclosure-related risks
Corporate revenues have significantly reduced today, or are at near-zero levels due to Covid-19, while fixed costs aren’t proportionately reduced for most firms. Shareholders expect directors and management to take adequate steps to ensure the minimisation of losses. Furthermore, shareholders and stakeholders, including regulators, may expect accurate estimates of the extent to which losses are expected. Inaccurate estimates may have legal implications on directors alleging incompetence or inadequate disclosure. This is a real risk.
Again, lawsuits pertaining to employment practice may arise if salaries are cut or if people are laid-off. These situations are covered by the EPLI (Employment Practices Liability Insurance) cover which is also referred to as a Side C cover in the D&O policy. Directors need to ensure that their D&O policy includes this cover.
To sum it up: directors and key officers of a company today bear several additional responsibilities on their shoulders due to the Covid-19 pandemic. Any error or omission on their part can have far-reaching consequences, including future allegations, possible lawsuits and fines.
Having the coverage of a good D&O insurance policy is hence more critical for directors in today’s situation than it is during regular times. A good D&O policy covers the liability and any legal costs if any actions, even taken for the benefit of the organisation, go wrong, or if expected or required actions are inadvertently missed. Finally, even in a lock-down or work-from-home situation, there are additional risks such as the risk of missing statutory activities, or of losing data to cyber criminals.
In case you are not already covered by a D&O policy and are working remotely today, it is best to choose an online D&O product where you can understand the product features, make your choices, and get instant quotes easily. Once you have made your selection, a good online product also allows you to easily furnish all the necessary information electronically, pay online, and buy the insurance cover that you need.
A good online D&O product will finally provide you with instant confirmation of your coverage against risk. Ensure that you are protected and do stay safe!