Covid19: 4 risk management tips to protect your business

Ok, so we are in what feels like a mass meltdown in the UK and in particular in the creative industries, as the news updates keep coming and the client panic is rising, and the social media platforms are whirling with all sorts of suggested  dos and don’ts about what to do in response to the coronavirus. You can see the tsunami of advice being proffered by all, from wellbeing coaches to accountants, about how this affects your business (some more useful than others, tbh) but what do you listen to? The risk is that you end up in overwhelm and do nothing.

Shall we take a moment…. Breathe …..

and let’s just try and sort an action plan for you based on actual risk, whatever contractual basis you have, the law, and some sound commercial sense.

1. Your Terms and Conditions

Your client contract is the starting point when thinking about what you can do, and/or what you must do in the light of this challenge. 

For most situations under the present position, any cancellation or postponement is going to be out of choice – either by you as the provider or by your client. It may be a harsh choice, but it is a choice none the less.

The contract terms should dictate what happens if a customer seeks to postpone or cancel your contract for goods and services. 

If they do – are the terms of your contract robust enough? Get them reviewed to ensure you are covered as well as you can be. 

If they don’t – or worse still you don’t have any – then get some! There is absolutely no justification at all in the current climate for not having terms in writing with your customers.

A word of warning – do not try to create a covid19 policy or a new cancellation policy to cover up the cracks in poor contracts – you can’t change the terms of the agreement you have already reached with your customers unilaterally. You will have to manage the risk as is – more of which below – but for anyone new coming to you for goods and services, now is the time to get your contractual house in order and make sure you are as protected as you can be by your contract.

That means having clear terms about how to cancel, when to cancel and what happens financially if you cancel, that are tied to your payment terms, and that your liabilities are limited as far as you can, legally, in your contract.

I should hastily add that no contract – and no lawyer – can or should ever promise that your contract is watertight and that you’ll never have a problem. If they do – they are lying, its simply not the case – but at least if you do have an issue, you have something to use as armoury in any tricky client call.

What happens if you don’t have a contract or you have one that doesn’t deal with cancellation/termination or postponement – you are a bit snookered – because first principles of contract law say if the contract is silent on the question of cancellation then a party can cancel at any time without penalty if the goods or services have not yet been delivered. That’s means not only no more fees, but also a return of fees paid potentially.

Hold that thought for a moment….

2. What exactly is a force majeure and what happens if that causes the contact to come to a full stop?

If  the contact cannot progress because of a force majeure ie something that is an external  and uncontrollable event  like a government lockdown, catastrophic fire or flood,  or similar which means the contract cannot be delivered, then the contract is what lawyers call ‘frustrated’ and comes to an end. 

This is NOT a cancellation event and does not mean those provisions apply.

The starting point would be, it is as if the contact never existed:

• There is no longer any obligation to provide any undelivered services or goods under the contract
• There is no longer any obligation to pay for goods or services under the contract.
• This means (when applying first principals of the doctrine of frustration) that advanced sums paid would be refundable. No one has any previous or continuing contractual obligations. 

OBVIOUSLY to be avoided at all costs where possible.

This is a serious issue for photographers as for most contracts for photography services the deposit is simply to save the date, with often little work being required before the event. The starting position for a frustrated contract would mean the return of the deposit or other money paid and both parties would ‘walk away’ – very scary stuff if you have to face the prospect of refunding people as a result of a frustrated contract.

It is usual to see a clause in a contract about force majeure to limit any liability for additional losses suffered in such circumstances to nil. 

I can’t stress enough the complexity of any court claim around force majeure and the advice to avoid a dispute, if at all possible! This is really difficult legal stuff, and the material that complex and therefore expensive litigation is made of. 

MOST IMPORTANTLY whatever the terms of your contract, speak candidly and as early as possible to your customers, and always try and reach an agreed compromise with them. It may be a difficult conversation but it will be less hassle, less stress, and less cost if you are able to reach a suitable way forward that works for everyone, rather than getting stuck in the unpleasant world of threatened or actual court claims and costs.

3. Your insurance  

Have you checked if your customers who are trying to cancel or postpone have insurance that might pay your fees on cancellation or postponement, if the client is forced to reorganise their event? Don’t compromise your claim to be paid for what your contact says is due to you, if an insurance company may be picking up the tab.

Sadly, the hope of this happening is getting more remote as wedding insurers pull out of the market temporarily, so check what policies exist – if any – with your customer.

Do you have business interruption cover? There may be help there…or possibly any existing health insurance if you are ill and unable to work as a result. Do not hold your breath on this being of assistance but again check the terms of the policy.  Broadly the advice is that most policies will not help you – but it all depends on the small print, so take advice from your broker or your insurer.

4. HR and staffing

Government policy on benefits available to self-employed is changing post Budget 2020  and so check out what you might be entitled to, and review regularly as the position evolves. If you have staff, check with your HR provider about what you need to do to comply with the constantly updating advice from government, ensuring that you advise your staff on risks, deal lawfully with pay and time off, and consider if you will need to change any of your working practices.

This is a good link: https://www.gov.uk/government/topical-events/coronavirus-covid-19-uk-government-response

If we can help you – do get in touch. Bear in mind it’s a very busy time and lots of folk are seeking help and assistance from us, so do be patient.

Our websites and our social media feeds have information available to you, from contract templates made specially for photographers,  to bespoke contracts solutions, review of your existing terms and signposting other professional services  -so check us out here