Heavily-regulated U.S. financial services companies may be ahead of the game in tackling the health and legal risks associated with the coronavirus when compared with other non-financial firms, say legal experts.
With 聽the virus spreading in the United States over recent weeks, how companies are managing the risks to their employees and supplier relationships has come into sharper focus. Legal experts have warned U.S. companies to ensure that their boards and management teams are taking the necessary steps to safeguard employees and limit their exposure to foreign countries with which they may have close relationships.
Many have started to close offices, cancel events, or encourage employees to work from home.
However, not all firms are alike in terms of the risks they face. Unlike U.S. manufacturing companies that have plants located in China or are dependent on suppliers in Asia, financial firms are perhaps better positioned to avoid some of these risks. Moreover, given that financial firms are heavily regulated adds an additional聽layer to tackling risks related to the virus.
鈥淚 have to think that for financial services companies, especially the banks, since they are properly regulated, from a risk management and governance point of view, the regulatory overlay operates in its current form to ensure that they are all over the risks presented by the coronavirus situation,鈥� says Louis Goldberg, a partner at Davis Polk.
with federal regulators about allowing staff to work from home and other business continuity arrangements amid the spread of the CORVID-19 coronavirus. The industry is reviewing and updating contingency plans in order to minimize any potential disruption to the financial markets that could be caused by personnel being unable to work onsite, explains Kenneth Bentsen Jr., CEO of the .
Like financial firms in other global centers, several Wall Street firms have also taken steps to limit 聽employee exposure. For example, Goldman Sachs聽 that all non-essential business travel should be postponed, and sent some traders to offices outside New York City Citigroup and Wells Fargo聽 all cross-border travel by employees in response to the rapidly spreading coronavirus outbreak.
惭别补苍飞丑颈濒别,听 to spend a day working from home in the coming weeks to test its contingency plans, and it too sent some New York employees to a secondary site.
Financial regulators have also begun responding. The Securities and Exchange Commission, for example, granted companies affected by the coronavirus delays in filing required reports.
Limited board risk compared with non-financial companies
Davis Polk last week published a聽 that highlighted some of the risks and responsibilities for company boards and their management. The law firm wrote that boards 鈥渦nderstand that, as part of their fiduciary duties embodied in the so-called Caremark doctrine, they are charged with understanding and overseeing the company鈥檚 approach to managing its key risks. It is obvious that the risks presented by the novel coronavirus transcend 鈥榖usiness as usual.鈥欌��
emerged from a 1996 landmark case that forces directors to maintain certain fiduciary duties in the oversight of their companies. However, for financial firms, director liabilities were likely to be聽less consequential than for those at non-financial firms, says Davis Polk鈥檚 Goldberg.
Given that financial company directors were not found liable for governance failures during the 2009 financial crisis, the risk of such liabilities arising due to the coronavirus crisis are remote, notes Goldberg. 鈥淔or a board going through a proper process of overseeing the risks, there isn鈥檛 really board risk from a Caremark duty perspective,鈥� he says. 鈥淚 don鈥檛 think you will see actual director liability exposure.鈥�
