It is no understatement to say that the coronavirus (COVID-19) pandemic has had, and continues to have, a major impact on the majority of industries across the globe. From an industry perspective – particularly the services industry – three major considerations have arisen from the pandemic, which organizations need to address:
- How to protect its people
- How to protect the business and revenue
- How to deliver business continuity with no or minimum disruption.
While most organizations are cutting down and evaluating spend on non-essential requirements, some severely impacted industries are not only looking to delay certain payments, but are also invoking force majeure provisions to excuse performance, suspend or terminate contracts.
If your organization finds itself in a similar situation, here’s my advice from a contract management perspective:
- Back to basics– read and understand your contract to see what your rights and obligations you have
- Contract auditing – map your delivery and payment process against the contract. Identify activities that are performed outside the contract and which may lead to dispute. Prepare a mitigation plan and endeavor to deliver on those plans as per the contract
- Document change – don’t change your delivery model outside the contract, but document all changes through the formal channel. It’s a huge risk to assume things right now, and over formalizing at this stage is the right thing to do
- Remote working – seek formal approval if your people are working remotely unless the contract already permitted you to do so. Document and seek formal approval if certain stringent security requirements need to be relaxed
- Force majeure – if either party has invoked force majeure, ensure this is done formally by adequate notification and understand the legal and business implications. As force majeure is a temporary measure, prepare and plan to restore services after the force majeure period expires, unless the contract is terminated after a certain suspension period. It should be kept in mind that an extended force majeure period may give termination rights under some contracts
- Business continuity planning (BCP) (i.e., in the event of any disaster or pandemic such as COVID-19) – if your contract allows you to invoke BCP, it should be done within the defined levels and timelines of the contract. If you are unable to comply with these levels and timelines, seek formal approval to change these timelines from the other contracting party. In addition, if the contract has a relief event clause (i.e., a clause waiving or reducing responsibility in the event that one party does not perform their obligations due to default by the other party) and a hardship clause (i.e., a clause covering unforeseen events that would make performance of the contract more difficult or onerous and may allow renegotiation by the parties), these clauses should be given due consideration while evaluating your options during this time.
- Respect the law – local law and regulations takes precedence over all contracts. If any government body has issued a direction or notification that prevents or disrupts your ability to perform your obligations under the contract, notify the other party immediately, while fully complying with the law.
Most importantly, know your contract, understand your rights, identify the challenges, and openly discuss them with the other party. Given the fact that we are all in the same boat, we need to ensure we get through this temporary situation with empathy and compassion.
More than anything else – stay safe!
Capgemini helps Fortune 100 companies drive meaningful intelligence out of their thousands of contract documents. Learn more about how Capgemini’s Contract Compliance & Optimization (CCO) solution provides a broader and deeper solution to your compliance, cost reduction and spend protection goals, from an often-overlooked area – the written contract.
To learn how Capgemini can provide the correct contract management platform for your organization, contact: firstname.lastname@example.org
Mani Agarwal advises clients on commercial and contract management transformation initiatives. He helps organizations to transform their contract lifecycle and contracts portfolio by implementing the right AI and ML tools. He also uses his expertise in optimizing the performance of contracts to ensure maximum value through all contractual opportunities and avoid any revenue leakage. Mani is a qualified lawyer and an elected member of the prestigious IACCM Council for IT and Outsourcing Networks.