Most large organisations have robust crisis plans in place guiding them on how to manage a crisis, risk to the business, to communicate to their stakeholders and preserve business continuity. Few of those plans could have predicted a global pandemic the scale of COVID-19 and the lockdown.
Businesses have faced difficult decisions impacting their future and the health, even the lives, of their employees. They have grappled with unique challenges from remote working and data-security, supply chain collapse, increased health and safety requirements, ever-changing regulatory guidance and, for many, a sharp drop in enterprise value. All with no historical precedent for guidance.
Lord Neuberger, President of the Supreme Court warned of an ‘avalanche of litigation’ as businesses turn to the courts to sort out disputes that arise due to the COVID-19 pandemic.
Just as businesses start to get back on their feet after the lockdown, many will find themselves tied up in costly and reputationally damaging legal claims. Edelman’s Litigation and Legal Affairs team believe there are three main differences when considering the reputation risk associated with COVID-19 legal issues compared to other non-COVID legal issues.
First, COVID-19 creates legal and reputation risk across almost all aspects of all businesses across almost all sectors. No other event in living memory has had such universal and far-reaching impact across almost all UK-sectors as COVID-19. It is a totally unique challenge faced by all business – one they have never faced before, and will no doubt hope they never face again. It is the great leveller and businesses will be judged on how they respond. Some will succeed but many will fail.
Secondly, competence and ethics are now the key drivers of reputation and will be the principal determinants of success and failure. Corporate reputation is under scrutiny even before the legal avalanche has begun. When the legal battle lines are drawn, businesses that put profit above ethics, exposed their employees to unnecessary risk, failed in customer care, disrupted supply chains or worst of all, sought to profit from the pandemic, will be punished by the British public more severely than pre-COVID.
Even before a legal outcome, the legal process will harm reputations and disrupt relationships with stakeholders. Litigants might seek to gain a tactical business advantage by briefing the media to make their opponents look bad – the media are interested in exposing poor COVID-19 behaviour and so are more likely to run the story. Litigants might talk to customers or employees to promote their own ethical high ground and denigrate their opposition. These types of tactics will hurt businesses exponentially more than previously given the current climate and public scrutiny of competence and ethics.
The legal aftermath from COVID-19 will expose those that did what was right from a legal and reputational perspective, and those that did not. Such is the national effort and individual sacrifice around COVID-19 that businesses that did not do what was right will be judged particularly harshly in the media, by their employees, customers and by the wider public.
Edelman’s Trust Barometer 2020 found that public trust in business ‘to do what is right’ is built on two key drivers - competence and ethics. Trust data gathered during COVID-19 revealed that 1 in 3 of the surveyed public have already punished companies that have not been seen to do what was right. Therefore, competence and ethics will be the principal determinants of success or failure.
Thirdly, the national and public sacrifice involved – the British public have suffered tremendously during this crisis, and yet the vast majority have behaved impeccably. They expect the same from UK-business or will punish it more severely than pre-COVID-19.
There will be low tolerance for businesses that are seen to have behaved badly during the pandemic or its aftermath. Claims for failing to safeguard employees or refusing refunds to customers will create public villains in the media. Contesting insurance pay-outs or embarking on legally sound but morally questionable litigation might bring short term financial gain but in the long-term, the reputation harm will be more costly.
Businesses must show that they have been inspired by the forbearance and sacrifices of their employees, customers, and all those who work in their supply chain, and make the same sacrifices themselves.
To conclude, the decisions that businesses make now regarding their legal affairs will have significant and long-lasting reputational consequences. Businesses must be asking themselves the following questions:
- What decisions can we take now to protect our reputation and relationships in future?
- How do we ensure that competence and ethics are the key features of these decisions and on the resolution of legal issues? What are the societal and stakeholder expectations of our business and brand?
- What are the COVID-19 legal trends and reputation risks to our sector and business?
- How should we respond to COVID-19 legal issues in a manner that not only protects our legal position, but also our reputation and relationships?
If your business faces a reputation issue or communications challenge arising from a COVID:19 legal issue please contact Antony Dunkels, Director – Litigation and Legal Affairs, and your enquiry will be dealt with confidentially