Proactively Protecting Your Business In Uncertain Times
As you probably already know, the current business climate is quite unpredictable. Many people – especially business owners whose families and whose employees’ families depend on their success and viability – often feel quite helpless in these situations.
In an effort to help you take some control in these uncertain economic times, following are some tips to help you and your company weather these storms. As a practical “business housekeeping” matter, it is advisable to follow these practices on a regular basis anyway, even when the economy appears to be on more solid footing as well.
A. Satisfaction of Obligations
Be proactive in reaching out to your business partners to discuss the status of your company and its ability to meet its obligations. If there is bad news, it is usually best to address it sooner rather than later. If there is good news, I am sure they would be happy to hear it. Be certain that there are open and transparent lines of communications with your partners, customers and vendors.
Let your business partners know that you have every intention of satisfying your duties, and let them know that you respectfully expect them to satisfy their obligations as well. In addition, carefully review all of your business agreements to ensure that you and your company are continually meeting all of your obligations so that you do not give any other parties an opportunity to avoid their duties to you.
In the event that you have any business partners that you are aware of having financial or other similar problems, be certain to communicate with them in writing as soon as possible in order to settle any disputes or outstanding issues before it is too late. For instance, that business could be subject to numerous claims from other business partners or may not be open much longer to resolve your matter. Just as the early bird gets the worm, it is often the early claimant who is able to settle a dispute or renegotiate the terms of an agreement while it is still possible.
B. Compliance with Representations, Covenants and Warranties
Closely review and analyze all contracts and agreements that you or your company have entered into that contain specific representations, covenants and/or warranties to be certain you are still in compliance with them. Moreover, take this opportunity to assess whether the projected health of your company will permit it to continue to satisfy these representations, covenants and warranties so that you will not default on your agreements. This is also an excellent opportunity to determine whether the other parties to your agreements are still in compliance with the specific representations, covenants and/or warranties that they made to you upon execution.
In the event that an issue is discovered in which either you or the other party is not in compliance with the relevant representations, covenants and/or warranties, it is generally advisable to take affirmative steps to correct the situation or otherwise modify the agreement to account for the current situation, especially before it becomes a major problem. As these communications could potentially ultimately lead to litigation or alternative dispute resolution, you should first review the terms of the agreement regarding breach, opportunity to cure and/or dispute resolution procedures.
C. Third-Party Obligations
Sometimes, the ability of a company to fulfill its obligations depends on the ability of other business partners (i.e., third-party suppliers) to satisfy their duties first. Under these circumstances, it would not be a bad idea to check in with those third-party business partners to ensure their viability, and to determine whether there may be any foreseeable problems with their ability to fulfill their duties, so that you can subsequently satisfy your obligations. Most businesses would understand and appreciate your checking in on them and it could even lead to more business.
D. Insurance Requirements
Many on-going contracts, such as leases, contain provisions requiring the maintenance of specific types of insurance coverage throughout the term of the agreement. Many times, those policies are not adequately considered after the initial purchase, except to pay the premiums. It could often be advantageous to review your company’s contracts for these insurance requirements and to discuss them with your insurance broker. He or she will be able to provide you with insight into the current rating and status of your insurers and may even be able to save you some money on premiums by moving you to a different insurance carrier.
E. Customer Satisfaction
In rough economic times, some businesses will do whatever they can to save money. It is not uncommon for some businesses to attempt to avoid paying for goods or services by claiming they were inadequate or defective. It is imperative for companies to constantly ensure that their customers are satisfied with the quality of goods and services being sold and to adequately document any concerns in writing with proper documentation. Further, if a warranty claim is made on your business’ product or service, some or all of that warranty may be covered by a third-party vendor. Closely review those contracts to understand the indemnification provisions, including any procedures to follow, deadlines and/or their general strength and validity. You certainly do not want your business to get stuck paying for something that it is not legally required to.
In summary, during both uncertain economic times and healthier economic times, it is advisable to routinely review the agreements that you and your company have entered into. Circumstances are constantly changing and it is often necessary to modify agreements and business relationships in order to accommodate unforeseen circumstances. These matters can generally be achieved through diligence, open communication and skilled negotiation.