MoFo's Latest COVID-19 Impact Survey Reveals General Counsel's Increased Optimism as Business Gradually Reopens
Morrison & Foerster’s second global survey of over 100 in-house GCs gives an updated look at the impact and perceived challenges of the pandemic on business as stay-at-home orders ease.
NEW YORK (June 15, 2020) – Morrison & Foerster, a leading global law firm, today announced the results of its COVID-19 and Easing Stay-at-Home Orders Impact Survey, in which over 100 in-house general counsel from global corporations describe how the pandemic and the easing of stay-at-home orders are impacting their businesses now and what they expect the long-term impact to be. The survey is a follow up to the firm’s earlier Coronavirus (COVID-19) Business Impact Survey that was released in early April 2020 and revealed in-house general counsel’s anticipated business impacts of the pandemic shortly after stay-at-home orders were enforced globally.
While many of the issues that were top of mind in Morrison & Foerster’s first survey still remain, the firm’s new findings indicate increased optimism with respect to how businesses are navigating the impact of the pandemic, as well as a shift in priorities in the current environment now that businesses have had a few months to adapt to the new business landscape. The legal issues companies were originally focused on are now being reprioritized as legal departments are having to “make do” with the resources that they currently have, and as new issues have come forward as a result of the evolving work environment, with some companies preparing to bring people back into their offices.
“The survey underscores that the pandemic continues to have a dramatic and disruptive impact on companies and legal departments—and that significant disruption is expected to remain the norm for at least the next two years,” said David A. Newman, Morrison & Foerster partner and head of the firm’s Coronavirus (COVID-19) Taskforce. “While the overall assessment of disruption is largely unchanged from the previous survey conducted two months ago, we are seeing cautious indications of optimism. In addition, the survey suggests an increased focus on privacy and data security as companies of all sizes appreciate the risks of operating in remote work environments and study the feasibility of measures to mitigate the spread of infection as stay‑at‑home orders are lifted.”
As expected, COVID-19 is continuing to have a significant impact on businesses. The overall severity of the impact decreased only slightly within two months, averaging 6.7 on a 10-point scale—10 representing the most severe impact—versus 7.2 previously, and it continues near that same level (6.0) for the next six months, compared to 7.1 previously. Per the earlier survey, legal counsel expect the impact level to decrease over the next 12 (5 vs. 5.7) to 24 (3.2 vs. 4) months, but do not see it completely dissipating.
Although there was little change in average impact levels over the past two months, there is greater optimism among in-house general counsel today than there was in April. The number of companies rating the impact as severe today versus two months ago dropped by 10 percentage points, from 52% of companies to 42%.
Further, the survey looked again at the impact on legal departments’ workload and the types of legal risks respondents identify as the most significant for their business. Little has changed with workload, with approximately three out of five of respondents (69%) reporting that their current workload has increased as an immediate result of COVID-19 and that a majority expect it to continue to increase for the next six months (51%).
Employment/human resources (87%) and contracts (64%) continue to be the top two legal risks posed by COVID-19 regardless of company size or industry.
“Many companies have established new practices for their employees and resolved issues arising from shelter in place orders. The challenge now is to navigate the complex and sometimes conflicting guidance from authorities in having their employees return safely to the office,” said Morrison & Foerster Employment and Labor partner Janie F. Schulman.
In contrast to the firm’s earlier findings, issues related to privacy and data security have more than doubled, with privacy now considered the number three risk to the company. Privacy stands at 59% today, versus 18% just two short months ago, while data security has moved up as the fourth risk with 50% today, versus just 18% previously.
“With the vast majority of large company employees working remotely during the COVID-19 pandemic, we’ve seen a significant increase in cyberattacks, phishing attempts, and scams that have occurred. Hackers and bad actors are capitalizing on the fear of the moment and the widespread use of unsecured wireless networks by unassuming employees,” said Miriam H. Wugmeister, partner and co-chair of Morrison and Foerster’s Privacy and Data Security practice.
In terms of litigation actions respondents expect their business to face with the easing of stay-at-home orders, two out of three companies (67%) expect employment/human resource litigation to be the top action they face, followed by contract disputes (47%), directly aligning with the top two reported business risks. These risks were top of mind regardless of company size or industry.
When asked about business transactions that companies are considering taking in the next nine months, approximately one-third (31%) of respondents reported that acquiring assets or making an acquisition offer was part of their immediate plan. “There seems to be a clear divide between companies that have weathered the crisis well and those who haven’t,” said Morrison & Foerster Corporate Department co-chair Eric McCrath. “On one hand, there are those companies that are opportunistically using the market opportunity and their liquidity to seek out and purchase discounted assets. And on the other, those that are cash constrained and raising capital to ensure that they have enough cash on hand to withstand a prolonged slump or resurgence of COVID restrictions in the fall and are perhaps selling off assets and/or the company in its entirety.”
Of immediate concern is the threat of subsequent lockdowns, with nearly two-thirds of respondents citing it as a moderate to extreme concern by business leadership, followed by conflicting government guidance (62%). Over half are also moderately to extremely concerned with the threat of new COVID-19-related regulations/restrictions (56%), as well as anticipating post COVID-19 market trends (56%).
“These findings are consistent with what we’re hearing in our conversations with our clients,” said Mr. Newman. “The challenge now will be understanding what the next phase of the pandemic will look like. But having just lived through the first stage of the virus, companies now have some insight into the challenges and issues involved in operating at a time of stay-at-home orders and with a persistent risk of infection.”
For the full results and analysis, including in-house general counsel’s insights into other key areas of business, additional challenges they face, and strategies they’re employing, read the survey report.
Morrison & Foerster surveyed over 100 in-house legal professionals around the globe with revenues up to more than $20 billion. The survey was conducted between May 20 and 28, 2020. The top three industries represented in the study include: technology (22%) followed by finance and insurance (20%) and manufacturing (9%).
Morrison & Foerster launched its Coronavirus (COVID-19) Task Force and Resource Center on March 2, 2020 to help address immediate questions and concerns from clients about planning and responding to the risks associated with the pandemic as it continues to evolve. Since its launch, the Task Force has advised dozens of clients – including leading U.S. companies in the retail, technology, finance, real estate, manufacturing, and pharmaceutical sectors – on their COVID-19 response efforts.
Our Task Force is led by Washington D.C.-based partner David Newman, the co-founder of the Firm’s Global Risk + Crisis Management Practice. Prior to joining Morrison & Foerster, David served in the White House Counsel’s Office and in various positions on the National Security Council Staff, where he helped coordinate the U.S. government’s response to the Ebola outbreak in 2014-2015. The Task Force is interdisciplinary in its approach and global in its scope, comprising of almost 50 attorneys (including almost 40 partners) from across the U.S., Europe, and Asia and spanning 17 practice groups.
