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The Eye of the Storm – Managing a Crisis

Alban Caushi is the partner in charge of the corporate and commercial practice of Albanian law firm CR Partners and has advised clients from a range of sectors and industries on how to mitigate and handle a crisis. He has provided domestic and international clients with legal advice across all sectors on M&As both for buyers and sellers; restructurings of commercial companies, shareholders agreements, corporate governance matters, due diligences and drafting legal reports for clients. He has also worked as team leader in various PPP and energy projects advising contracting authorities, investors and concessionaires.

Fivehundred sat down with Alban to discuss the key questions that in-house counsel ask when facing a crisis situation.

What is at stake when a firm is faced with a crisis? What is the cost of not getting it right?
The continuity of the firm is obviously at stake. The crisis caused by the coronavirus pandemic presents a health risk for the employees of the firm and a risk related to a decrease in demand which one cannot exactly foresee how long it will last. It is imperative that the firm addresses its’ employees’ health concerns as soon as possible (by switching to remote work) and planning phased return to the office following the government’s health and safety guidelines. Once this issue has been addressed, firms should sense the effects of the pandemic on their demand, foresee the extent of the crises and plan for measures that preserve the financial health of the company until things return to normality.

Do epidemics justify the disruption of delivery? And when does a company have grounds to look into a force majeure?
This is very industry specific. In Albania, many businesses were ordered to close and remain closed until the emergency created by the pandemic is lifted. There are administrative penalties or even criminal sanctions if one does not abide to the governmental orders. This seems to be a clear example of force majeure when the disruption of delivery is justified. There can be other not so evident examples of force majeure situations, for example when a business can remain open but due to the circumstances created by the pandemic, they cannot deliver. One example is the upstream oil & gas industry in Albania that suspended production of oil due to lack of demand in the market and Brent prices being hit by the pandemic. This is not the case for law firms however which can easily switch to working from home and cannot justify disruption of their services.

How does the approach vary in each jurisdiction? What steps should a company that has interests in Albania take?
Some jurisdictions will have well defined force majeure provisions in the law (i.e. civil codes) or case law. This is not the case of Albania where force majeure lacks legal definition and doctrine thus leaving large room for debate. A company with interest in Albania looking to justify disruption of delivery, should first check the underlying agreements and the force majeure clause in the contract. When the contract is silent on this matter, it is advisable to turn to lawyers and ask for advice. Commentaries that law firms have published on force majeure or other related topics during this period can also provide some non-tailored guidance.

What do you see as the main points that differentiate CR Partners from your competitors in handling a crisis situation?
We created a task force designed to monitor closely the countless governments orders adopted during the crises that can affect our clients’ business such as business operation restrictions, travel restrictions, safety protocols etc. Legal alerts were prepared and published daily in our website and our social network pages and sent to our regular clients by e-mail. We were quick to adjust to remote working without interruption and advised our clients that during this unprecedented times they were free to contact our lawyers at any time, weekends and evenings included to address their urgent needs, although one can say that this is our regular working mode.

What’s the main change you’ve made in the firm that will benefit clients?
Returning to normal after the COVID-19 pandemic is over, will not mean the same thing. The coronavirus crisis taught the lawyers of our firm to be tech-enabled, flexible with remote work, set up crises task forces, and be more sensible with our clients by offering more pro bono work to those more in need. These are all transformative aspects to our firm which we recognized and embraced and believe that will always benefit our clients.

How can companies build effective risk and crisis management systems?
The outbreak of coronavirus was the lesson learned for most companies in Albania which did not have in place a crises management system. Most of them had no or very little time to set a strategy on how to handle such unprecedented situation. To respond to crises situations properly and rapidly, first of all the companies must set up a permanent crisis management team, depending of course also on the size of the company. In addition, it is important to implement of a crisis management plan which will help the crises management team to effectively respond to similar situations in the future.

How can companies assess the stress-test compliance protocols to identify and address risk?
This is a discussion that entails a thorough analysis as to whether the stress test compliance protocols are effectively used as an exercise to detect the business risks and enhance the long-term sustainability. Stress testing in Albania is more relevant in the context of banking and financial institutions; it helps to alert the bank’s management and supervisory authorities to unexpected adverse events arising from a wide range of risks and, of the financial resources that should be deployed to absorb losses across the business line. From our experience, the financial institutions in Albania perform the stress test exercise as a regulatory compliance formality but they do not see it as a powerful tool to be used for mitigation and management of the risk exposure.

What are regulators’ expectations in relation to risk assessments in each jurisdiction? What risks do changing regulations pose?
We advise clients operating in specific industries like banks, telecommunications, and pharmaceutical sector. Enforcement of government measures to control the Covid-19 outbreak as well as the regulatory measures issued to align those government measures with industry specifics created a new business behavior. All these new measures brought various regulatory changes impacting many industries resulting in, operational interruptions, consumption shortages, trade restrictions, data privacy issues, corporate governance issues etc. As an example, due to the changing work environment, it becomes more difficult to control compliant behavior, therefore our clients started to restructure internal regulations and protocols with the help of legal advice, to respond to such new business models.

Can due diligence and honest efforts to foresee and prevent crises ever be enough, by themselves, to either avoid the ire of regulators entirely or significantly mitigate the consequences?

We believe it is important that all companies regardless of their size have in place internal capacities to identify the sources of risk, evaluate factors contributing to such risk and takes measures to mitigate the consequences. However, the Covid-19 pandemic is a crisis that it was and believe still is, difficult to foresee in the first place, not only in terms of its occurrence but also the extent of its duration, intervention of the government and effects on the economy. Therefore, a measured regulator’s intervention may be necessary, despite businesses best efforts and systems to mitigate consequences caused by these types of crisis.

Alban Caushi
Managing Partner, CR Partners E.

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