How Covid-19 may affect digital businesses

The impact of the recent outbreak of Coronavirus (Covid-19) is being felt across society, and as well as the severe consequences for health and wellbeing, attention is rightly being given to the likely impact on business and the economy. Solicitor Tom Rook looks at the challenges, concerns and potential business opportunities for companies in the digital sector.

This is unknown territory for all businesses, including those in the digital industry. Business owners and managers will be paying close attention to cashflow, employee management and customer retention.

The economic effects of the virus are likely to be amplified where start-ups or fledgling digital businesses are concerned. They may not have the well-established customer base or lines of credit that a bigger market player has. Their policies and procedures may not be as well-developed, and so it is vital that they refer to government and other industry guidance when implementing measures to deal with any implications of Covid-19.

How about smaller businesses?

However, smaller businesses may benefit from being more adaptable than their larger counterparts, and government support is also available (cash grants and assistance with sick pay will be offered to eligible small businesses).

Regardless of size, all firms will face challenges along the supply chain. It may be that a supplier has let you down, or your business might be struggling to perform the contract. Practical steps can be taken to minimise the impact, for example, stockpiling hardware and sourcing alternative providers. The legal terms of trading will play a large part in determining who bears the financial risk in the event of a breach of contract.

Cancellation of advance bookings

One issue that is becoming widespread is the cancellation of advance bookings. This may be the cancellation of a venue-hire (by the venue or the hirer) or a pre-booked service such as IT maintenance. Consumer laws generally afford a consumer a high level of protection in the case of cancellations, however under a business-to-business contract the position is a little less certain.

The balance of risk will be determined by the legal agreement between the parties. Businesses should check the terms of the contract and the ‘force majeure’ clause (or ‘events outside of our control’ clause), to see where the relevant losses will fall.

Will there be any business opportunities?

It may seem coarse to consider business opportunities at a time like this, but the increased need for many businesses to be able to operate remotely may create unexpected demand for tech and digital services.

Some companies who had never previously considered the ‘working from home’ model will now be forced to trial it. Microsoft and Google are playing their part by offering free trials of their Hangout and Teams tools. Virtual events are likely to become more widespread and sectors such as health and education will increasingly rely on technology, for example, video consultations and remote learning.

By meeting this demand with existing products and developing new solutions, a tech or digital service provider can play their part in helping the country through this difficult period, whilst at the same time continuing to grow.

For further guidance and advice, contact Tom email or call on 0114 252 7183.

Sheffield Digital podcast

Matt Ainsworth, Catherine Wilson and Carys Thompson recently appeared on Sheffield Digital’s podcast where they discussed how the digital community is being affected and took time to answer some of the most common legal questions coming out of the current crisis. Listen to the podcast, here:

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