JAMS ADR Blog by Chris Poole
Global businesses operate in an interconnected marketplace because of the increase in supply chain and procurement infrastructures. Corporations and organizations have become extremely efficient through their use of just-in-time deliveries. However, when there is a disruption to any part of the supply chain, the impact is felt globally. We are seeing this now with the coronavirus (COVID-19).
Many in the business press have written or spoken about how the coronavirus may affect the business world and how industries might want to respond. One such article appeared in David McCann’s February 13, 2020, article “Coronavirus Crimps Supply Chain, May Harm World Economy” (source: cfo.com).
Economic disruption from the coronavirus (COVID-19) is being felt by supply chains globally.
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Much of what we’re hearing now seems to mirror the sentiment prevalent during the financial crisis over a decade ago, with businesses taken by surprise and looking for a quick solution, to what should have required a more measured approach. However, I believe that businesses have become much smarter and recognize the value of maintaining relationships. Businesses should work collaboratively with their legal advisors to explore all of their options beyond a clause that would allow them to end or at least suspend their contractual obligations during unforeseen circumstances, thus engaging in effective dispute prevention and management.
Dispute Prevention: Proactive Dialogue
Because nobody can predict what will happen next with the coronavirus, this causes great uncertainty. And this uncertainty has a direct impact on businesses. The only thing they can do is try to prepare for all outcomes.
Businesses should consider all the what ifs and determine a course of action for each one. When negotiating, we should always consider the best and worst alternatives to a negotiated agreement. I suggest that businesses use the same sort of approach to consider the best and worst alternatives to no allocation. They can then speak to their suppliers and stakeholders and discuss what will happen when items cannot be delivered. If practical and necessary, they can all work together to find solutions.
When managing any commercial conflict, preparation and planning are essential; therefore, using a professional facilitator to help guide and chair discussions about these efforts is recommended.
Dispute Management: Facilitated Dialogue
Parties may be under a lot of pressure and may not be able to find a solution on their own. There may be many issues that need immediate attention as well as key stakeholders that need to be heard. In this type of situation, there is value in securing the assistance of a facilitator. A facilitator can provide a process that is very similar to that of a mediation, with the goal of gaining consensus on how to proceed. This process can take the form of dispute prevention, dispute management or, if necessary, dispute resolution, and can be used, for example, when supply chains become compromised and payments are not forthcoming.
This mechanism can help maintain business relationships during difficult times, as it removes the impulse to blame and concentrates on the future. Whatever the approach, it should always involve in-house or external legal counsel. The better the dialogue, the better the chance for a successful outcome.
While this is a challenging time for those who operate in global markets, it is also an opportunity to demonstrate a willingness to collaborate and maintain harmony ( ) rather than focusing on the crisis ( ).
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