The coronavirus pandemic is a generation-defining exogenous shock and has forced private equity managers across industries to react swiftly to evolving circumstances. The economic turmoil that ensued with state-mandated closures across the globe forced managers to ensure the safety of their employees as well as liquidity, solvency and technology necessary to enable remote operations.
IFT has been supporting private equity funds throughout the process and our team has further highlighted three areas that all managers should consider as the economy reopens and businesses move forward.
Review Insurance Portfolios
The insurance industry is working to understand the extent of the liabilities and global insurance markets have tightened until that is fully understood. Business interruption insurance (BII) has received the most attention due to the closures, yet even many policies in North America written after the SARS and avian flu epidemics include ‘virus and bacteria’ exclusion clauses. We suggest comprehensive reviews of all non-BII policies as they may not contain exclusions and therefore could be relied upon, these include but are not limited to: supply chain interruption, loss of key customer, subcontractor default, property (loss of access) and catastrophic risk policies that you may be carrying.
Update Cybersecurity Toolkit
The operational status-quo of many companies changed overnight and cybersecurity, especially in a remote work environment, must follow. Sensitive data is now flowing between not just some, but all employees across home networks, new devices, and new applications. Meanwhile, your cyber adversaries are as opportunistic as ever with cyberattacks and phishing campaigns preying on the fear and urgency of the pandemic that is ubiquitous. Consulting with a specialist is likely the best path, but at least taking time to review monitoring software, internal controls, policies and procedures is important now more than ever.
Internal - People are as important and more vulnerable than the systems that you utilize for day-to-day business. Put contingency plans in place in the event an employee becomes sick or quarantined for an extended period. This is especially important for management, client-facing employees or those that plan to begin travelling again in the near future with scattered closings and travel bans.
External - While internal dependencies may be easier for management to spot in the course of daily business, external dependencies - clients, service providers, and vendors - are key partners that could catch you off guard. Review the preparedness of these partners, vulnerabilities that they may pose to your business, and strategize to eliminate single points of failure in your processes or supply chain.