April 17, 2020
Regulation and Risk Management: COVID-19’s Near and Long-Term Effects
The outbreak and global spread of COVID-19 has been a shock to the global economy approaching if not surpassing the scale of 9/11 or the 2008 mortgage crisis. Once the dust settles, COVID-19 is sure to cement itself into the fabric of future regulation and corporate consciousness on par with past disruptions. Already, we have seen a steady stream of new policies and regulations issued in response to COVID-19. Most, like the CARES Act, are temporary measures intended to provide economic relief to individuals and/or businesses during these unprecedented times. Others are designed to provide regulatory relief or flexibility to essential infrastructure businesses, better equipping them to alleviate the health and economic impacts of the virus. Undeniably, COVID-19 has the potential to permanently reshape the way we view, operate and conduct business on a local level and a global scale. Once companies can shift focus from survival back to recovery and growth, we expect to see renewed interest and investment in a regulatory and risk management solutions in an effort to mitigate future operational disruptions and adapt to a new normal, where low-touch is a central theme.
On March 9th, OSHA issued Guidance on Preparing Workforces for COVID-19. Although not a regulation, it may be the catalyst for OSHA and Congress to finally move forward in developing an infectious disease standard that protects at-risk American workers. The CARES Act expanded eligibility and benefits under federal leave programs (e.g. FMLA) and introduced new programs such as the Pandemic Unemployment Assistance (PUA) which extends eligibility of state unemployment insurance programs to gig workers and others who historically did not qualify for unemployment benefits. We believe more permanent, legislative measures are possible and necessary. However, in the absence of regulatory guidance, at a minimum, corporations will need to have an honest and speedy assessment of policies, processes and procedures to understand what worked and what failed as they seek to recover and enhance their preparedness for future crises.
Post-COVID, the steps taken to ensure, manage and monitor business continuity will be critical to future success. All stakeholders, including employees, boards, regulators, investors, lenders, clients and others will set the standard for what is an acceptable level of risk. Accordingly, as with past market disruptions, we expect the Post-COVID environment to stimulate interest and demand in risk management and compliance solutions, particularly those that contribute to greater business continuity and preparedness. Below are a few sectors that we expect to benefit from the new normal:
RegTech – we expect to see a surge in demand for RegTech broadly, with particular emphasis on technologies that i) can ensure compliance with any new, global regulations that may be imposed as a result of COVID-19; ii) enable companies to create and maintain a strong Enterprise Risk Posture (e.g. operational, data privacy, cyber, etc.), and also; iii) facilitate low-touch interactions with regulators.
EHS Solutions & Services– We referenced OSHAs COVID-19 guidance above. Given its proliferation, we believe COVID-19 may be the catalyst needed to reverse recent deregulatory trends and stimulate new legislation or, at the very least, increase OSHA enforcement and compliance, particularly around worker safety in essential industries.
Third Party Risk – Supply chains have been severely tested by COVID-19. Going forward, companies must review the global footprint of their supply chains and develop new strategies to ensure greater resiliency. Risk parameters will need to be expanded to include new categories of risk such as resiliency and reconfigurability. Solutions that deliver greater transparency, accurately assess systematic and unsystematic risk and deliver predictive capabilities will play a critical role in the future of supply chain management.
At the highest levels, when faced with unprecedented circumstances, business leaders must adapt their business practices and priorities to fit the health and safety needs of today and the strategic demands of tomorrow. Today’s response will chart the course for future public heath crises, allowing for greater preparedness across industries and nations in the future.