The Commercial Effects Of Coronavirus : Consequences For The Technology Industry

In more than 100 countries and territories, the coronavirus (also called COVID-19) has now been reported. As the coronavirus epidemic continues to wreak havoc on markets and industries in the U.S. and around the world, companies are now facing major and specific challenges.  Though and thorough preparation would be required to overcome these challenges successfully.

Wuhan, China is the world's leading manufacturing hub at the coronavirus epicenter. Recently spread to other major manufacturing centers, which have not been seen since the SARS epidemic in 2003, further affects the global economy and supply chains.

Now is the time for the technology industry to consider response steps to minimize its risk, as the coronavirus outbreak continues to evolve, and how they can cope with the coronavirus outbreak. An interdisciplinary crisis management team should be effective in recognizing, evaluating and mitigating risk. A plan should be effective. The team will include personnel from acquisitions, sales, efficiency, finance, personnel and legal.

In recent days, technology firms have closed shops and offices, barred managers and staff from the affected areas and warned of their future supply chains. Manufacturers in China and Southeast Asia are the main suppliers to numerous technology companies around the globe. For instance, Chinese companies produce a large number of solar panels, batteries, silicone components and commodities used by renewable technology companies. A number of these manufacturers have suffered from the coronavirus and have reported significant coronavirus incidents to their customers.

In order to recognize the coronavirus impact and mitigate risk, technology companies should take the following steps:

Communication Between Critical Supplier:

Companies will determine the possible effect on the production of vital materials and components of any delays or disturbances.  Companies will contact these suppliers to assess their inventory level and steps to ensure that supplies of parts and/or components are least interrupted. In particular, this refers to companies with vital suppliers in the most pandemic-nations, in particular China. In order to build additional parts banks and/or on-board alternative suppliers to reduce the effect caused by the delays in the delivery of essential components, the companies should consider re-use the capital seriously.

Contracts analysis to determine what "Force Majeure" rights and requirements can apply:

Force majeure applies, if conditions outside the control of the party impede the Party from performing its obligations under the contract, a legal doctrine that a party may be excluded from liability of failure to comply. Although it is not unlikely that the majority of force majeure laws include illnesses, epidemics or prohibition, others contain general clauses dealing with issues such as natural disasters, "acts of God," government actions or "such unregulated circumstances." The epidemic of coronavirus poses a very peculiar circumstance in that both the natural factor (the virus itself) and an active component of government intervention (including quarantines and other steps enforced in response to the epidemic) are involved. In deciding if they are valid, the Parties may carefully analyze force majeure clauses in their contracts.

Recognize the Place and Government Regulations:

In China, the finance ministry has clarified that coronavirus is a major force phenomenon and a natural disaster. Similarly, the Indian National Solar Energy Federation recently asked coronavirus to be deemed a force majeure event to the Ministry of New and Renewable Energy. However, in addition to investigating applicable force-major laws and any decrees released by government agencies, companies may also be expected to demonstrate that they can not function as a result of the force-major situation.

Contract analysis to assess the rights and conditions of the "Material Adverse Change":

A standard Material Change Adverse ("MAC") provision is used to assign liability during the signing and closing between the two sides of a contract and to include it in other sections in an agreement (e.g. in the representations and warranties portion stating the absence in aMAC from the specified date). MAC clauses generally describe a MAC as "any event, event, event, pattern, condition, or change which has had or can reasonably be expected to have substantial adverse effects, whether individually or in an aggregate, on business, financial conditions or the outcomes of the activities or in any other respect of an objective's business and its subsidiaries, in their entirety." Whether a firm is entitled under any particular contract to rely on MAC would depend on its authorization, (ii) it's understanding of contract law provisions and (iii) its effect on the enterprise under question. Since the full effects of the outbreak of coronavirus remain unclear, an estimation of whether MAC has been caused is probably still too quickly. The ongoing impact of the coronavirus outbreak on the organization in question will also be assessed by businesses.

Monitor All The Demands Of The Customers:

Companies will track customers to ensure compliance, including the timely payment of the component given to a customer, with their obligations under the contract. Taking into account that strategic consideration may be involved in determine whether such measures are taken in expectation of disturbance, technology companies will establish a strategy to handle interactions with counterparties. Companies will evaluate contract payment terms for those consumers who are at higher risk of non-payment. However, businesses are usually expected to determine whether circumstances and applicable law allow either party to claim some justification under its contracts for the avoidance or delay of performance and to evaluate the possible effects of the failure and/or loss of performance.

Companies will also warn their workers against through use of targeted phishing attacks by malicious actors. This could include e-mails intended to provide medical alerts or "relevant reminders" for those who work remotely.

In addition, policies regulating the appropriate use of enterprise systems and devices as well as client data transfer and storage are important. Remote workers prefer to forward business data to personal email accounts or store details on insecure laptops or mobile devices. Training or restoring policies of this nature is therefore critical. Finally, when gathering the information about workers or customers that may not have been previously collected, businesses should be mindful of relevant data security laws, such as health records and travel routes.

Take a look at the video that how coronavirus impact on technical business:

Video Source: Beebom

In summary, further steps will now be taken by the technology industry to minimize the potential for harmful coronavirus effects. Please contact your Foley partner for more information on the suggested steps. You may want to visit the CDC and the World Health Organization with additional web-based tools available to help you track the spread of the coronavirus globally.