Covid-19: pandemic forces major shift for global business community
Following the first reported cases in Wuhan, China, in December 2019, Covid-19 – a new illness caused by the coronavirus – has been carried by travellers to almost every country in the world. The impact on business has already been significant, as Joanne Harris reports.
On 11 March the World Health Organisation (WHO) declared the outbreak a pandemic. Many countries have closed borders and enforced a lockdown of citizens.
The impact on global business – and on law firms serving those businesses – has been rapid and significant. British airline Flybe went into administration in early March, before the pandemic was confirmed, citing Covid-19 as one cause. Many other airlines are grounding planes and cancelling flights. Retailers, culture and hospitality companies are facing a similarly uncertain future as they are forced to halt trading.
A global recession is now seen as a certainty by economic experts, as all the major stock indexes have seen values plummet from previously record highs.
In terms of the global economy, it shows us that globalisation has made our supply chains vulnerable to a supply shock
CEO of BlondeMoney
‘I’m afraid we are headed for the worst recession in our lifetimes,’ warns Helen Thomas, Chief Executive Officer of London-based financial risk consultancy BlondeMoney.
‘The market reaction has confirmed our expectation that it was vulnerable to a shock. There are now embedded options structures in markets which mean volatility feeds on itself,’ adds Thomas. ‘In terms of the global economy, it shows us that globalisation has made our supply chains vulnerable to a supply shock. Trade is now of the utmost importance for every single country.’
A wave of insolvencies worldwide is expected. Some jurisdictions are already trying to mitigate this, through measures including slashing interest rates and introducing economic stimuli.
Germany’s federal government is suspending the usual three-week deadline to file for bankruptcy until 30 September 2020. The aim is that companies in trouble will have extra time for financial help to reach them. Germany has said it may extend the law for a further six months if needed.
Law firms are already having to adapt to a changing flow of requests for help from clients.
‘The establishment of new companies and new business has diminished to a very low level,’ says Jonás Bergstein, Vice-Chair of the IBA Healthcare and Life Sciences Law Committee and a partner at Bergstein Abogados.
For the time being this has been replaced by other work. Bergstein reports queries about employment law, contracts, insurance and taxation issues.
‘We anticipate work in the bankruptcy area. It’s probable that certain companies are already considering whether filing some kind of Chapter 11-type protection [against bankruptcy] is advisable,’ he says.
‘Tax and employment are busy. Litigation won’t decrease, compliance won’t decrease, antitrust won’t decrease. Definitely insolvency will increase,’ agrees Benjamin Grebe, Co-Vice Chair of the IBA Latin American Regional Forum and a partner at Prieto Abogados.
The other area set to see growth – and possibly an increase in international cooperation – is the healthcare field.
Cécile Théard-Jallu, Newsletter Officer for the IBA Healthcare and Life Sciences Law Committee and a partner at De Gaulle Fleurance & Associés, says the crisis has forced a rapid increase in the use of apps and other digital tools to help prevention, diagnosis and patient care.
‘With the crisis I think that this will explode. Not all companies or states are at the same level but it’s a global movement,’ says Théard-Jallu. ‘It’s at all levels of the life cycle of products and services, and lawyers really have a key role to play.’
In order to keep business moving right now, millions of office workers – including lawyers – are now operating remotely, in perhaps the first real test of how far flexible working can be taken. Encouragingly, most firms have reported a smooth transition with few major problems.
Théard-Jallu suggests that the pandemic could well force a lasting shift in the way business is done globally, finding a middle ground between the need to generate and maintain relationships with clients and the likely acceptance that travelling and site meetings are no longer necessary in the proportions we know today.
‘There will be a collective acceptance that remote work, when adapted to the context, can both help businesses grow and be good for the planet,’ she adds.
This, lawyers argue, is not necessarily the end of globalisation, but more a shift.
‘We should take this as an opportunity,’ Grebe suggests. ‘Everyone should take this as an opportunity to improve communications, not to stop globalisation – to prove that we can work without being connected physically all the time.’
BlondeMoney’s Thomas suggests that the economic and social impact of the Covid-19 crisis is likely to last well beyond the point where we are all able to get back to ‘normality’.
‘This sudden stop will take a long time to reverse and will cause permanent changes to the way we live and work. Some for better, some for worse,’ she says. ‘But the key thing to remember is that this recession has been caused by a reduction in the velocity of people. As long as that remains impaired, the potential growth for the economy will be impaired.’
Thomas notes the argument that globalisation cannot be reversed, as we are all now more interconnected. ‘But this crisis is yet another – if not the biggest – challenge to that equilibrium,’ she says. ‘We won’t go backwards but we will evolve. Humanity always adapts to overcome.’