Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” This statement holds true today, in the midst of the COVID-19 pandemic, as it did when he said it over 300 years ago.
The impact of COVID-19 is being felt by the majority of world. The way forward will be difficult and affect everything from supply chains to cash flows. Companies may not be able to mitigate all the risks posed by COVID-19 – inevitably resulting in disputes.
As Franklin aptly points out, preparation now is critical to mitigating and resolving these disputes. A significant challenge will be how to quantify the losses and damages incurred. Preparation now, in the midst of the crisis, will be worthwhile when assessing the overall COVID-19 impact. Regardless of whether the result is a contract dispute or an insurance claim, the need for support and documentation exists. Here are a few things to consider when preparing for life after COVID-19:
Retain and Preserve. Retaining and preserving documentation for the impacted business activities is critical and can include:
- Revenue and cost data for the periods before, during, and after COVID-19;
- Loss of production or inability to perform contractual obligations;
- Historical business trends; and
- Contemporaneous forecasts and estimates.
Document Aggressively. Detailed, real-time accounts of the cause of disruption and losses will be instrumental when assessing the impact of COVID-19.
Mitigate. Efforts to curb damages are often claimable. Documenting the decisions made helps outline the thought process at that point in time. Preparing an analysis that quantifies the financial impact of “not mitigating” can be critical when claiming these costs.
Increased Costs. This crisis has increased the cost of doing business. From added costs to maintain employee and customer safety to increased “costs of delivery” through higher inventory spoilage rates, longer shipping times, and business development challenges. Maintaining simultaneous and detailed accounts of these costs will strengthen the case to claim them in the future.
Holistic Approach. Reviewing the relevant insurance policies and disputes clauses will identify the constraints claims need to abide by. One should revisit or revise these terms as practical. Cast a wide net when considering the current and potential impact of COVID-19 – your CEO, accountants, salespeople, and janitorial staff will likely have valuable input when considering the real impact of this crisis.