04 Aug 2020 Ankit Chadha

Regulatory Compliance Levers: Manage Resilience Amidst COVID-19 In India

Amidst COVID-19, the one thing that has been constant across all industries and sectors is the disruption in market behaviours. Demand and supply paradigm shifts were prominent due to decreased consumer interaction and the uncertainty that COVID-19 presented. The below-mentioned illustration shows the countries that were prepared for mitigating unprecedented risks, including regulatory compliances and governance functions, in times of COVID-19. Additionally, you can see the key industries, sectors and compliance areas that have been impacted due to the outbreak of the coronavirus pandemic. 

Key Highlights: 

More than 100 countries have published and issued 350+ regulatory notices to deal with COVID-19 

7 State Governments and the Central Government of India have used powers and provisions under The Epidemics Act, 1897 

22 notices and 9 advisories have been issued in India by the Ministry of Health and Family Welfare (MoHFW) with daily updates on the same 

More than 150 governance and regulatory compliances obligations may arise due to COVID-19 

Courtesy: Data Taken From EY and Global Health Security Index 

Critical Regulatory Implications of Non-Compliance:  

  • Trade constraints and restrictions causing loss of business  

  • Increase in the additional cost of operations for businesses 

  • Vigorously imposed shutdowns for business operations  

  • Enforced fines and penalties levied by compliance regulators 

  • Reputation loss due to adverse media reports on failure to implement investigative and preventive measures 

  • Losses, damages, and compensation to be paid to impacted entities and individuals for not implementing suitable measures 

  • Criminal trials against targeted managerial personnel or board members 

The affected industries and compliance areas are:  

Key Industries And Sectors Impacted 

Key Compliance Areas Impacted 

Travel 

Corporate Governance And Disclosures 

Logistics 

Workplace Health And Safety 

Technology 

Employment 

Banking And Insurance 

Data Privacy 

Hospitality And Pharma 

Supply Chain 

Essential Goods Manufacturers & Suppliers 

Working Capital 

Retailers And Entertainment 

Fraud 

An Overview of the Current Scenario Amidst COVID-19 

Considering the data mentioned above, it is evident from the GHS index that among other countries, India is under-prepared to detect, prevent, and respond to virulent pandemics. One of the essential factors to assess during any crisis is the legal framework which can define and outline a government’s scope of responses for public health emergencies, and also highlight the duties and rights of corporations and citizens. 

India does not have a specific comprehensive law that lays down the detailed protocol for any public health emergency such as the outbreak of COVID-19. However, there are 124 regulations that focus on risks and liabilities that may arise from biological, chemical, or nuclear hazards.  

Under the century-old Epidemic Diseases Act, 1897, the Central and State governments of India are authorized to enact and legislate on health-related matters. It enables the Central and State Governments to direct and impose measures needed to control the further spread of any disease, as and when required. Additionally, the Epidemic Diseases Act also permits state governments to issue regulations and guidelines to help contain any epidemic outbreaks.  

Compliance Considerations for Commercial/Industrial Organizations 

There are several legal and compliance considerations, for industrial organizations to assess and formulate plans to respond to the COVID-19 emergency. Such compliances may be prompted by any of the three categories of laws and regulations as mentioned below:  

  • Particular ordinances and rules pertinent to pandemics and emergency responses 

  • Requirement of laws that provide rights to different stakeholders such as employees, clients, vendors, lenders, shareholders, and other partners 

  • Contractual obligations that occur due to such force majeure incidents 

Organizations that have not evaluated the impact and risks linked with critical regulatory compliances obligations (due to these ordinances, laws, and regulations), may not only encounter operational challenges but may also face the risk of criminal prosecution. In the event of significant non-compliance, an organization’s executives may even face criminal trials. Also, there is a high possibility that the enforcement actions by the regulators may result in cessation of the business.  

From a legal and regulatory compliances perspective, the main areas that need to be assessed to empower organizations to respond to a dynamic and complicated situation are provided in the following sections. You will also find questions that can help you manage organizational resilience amidst the Pandemic: 

  1. Critical Considerations for Corporate Governance and Regulatory Compliances 

While there is no definite roadmap on how corporate governance would be conceded to ensure unified decision making, organizations must adopt effective means of using suitable provisions of the law. Some helpful questions concerning corporate governance and regulatory compliances are as follows: 

  • Have you evaluated the probable impact on the organization’s financial outcomes because of the COVID-19 disruption? 

  • Have you executed a risk assessment to determine if any material releases and disclosures would be necessary to regulators or stock exchanges?  

  • Does your organization have the capacity to include or exclude symptomatic or positive tested individuals from a physical meeting which are compulsory by law?  

  • What steps can your organization take to prepare for the likelihood of stakeholder activism if the stock price drops?  

  • Have you completed succession and back up plans to ensure that there are sufficient coverage and resources available to continue with business operations if Board members or KMPs (Key Managerial Personnel) get incapacitated?  

  • Do your organization require review for insider-trading rules and window? 

  1. Necessary Considerations for Workplace Health And Safety 

The Ministry of Health and Family Affairs (MoHFW) has issued several notices concerning COVID-19, which comprise of hygiene standards, guidelines, and training resources. Organizations must implement awareness campaigns and use the MoHFW training materials as regulatory compliance, given the current need to maintain hygienic practices. A few crucial questions to ensure regulatory compliances for workplace health and safety will include the following:  

  • Have you evaluated your present facility structure and setup from a health and safety perspective? 

  • Do the standards of your organizational premise meet both regulatory obligations and appropriate requirements in case of a pandemic?  

  • Have you established a disaster and crisis management team? 

  • Have you made any assessments about your business team and partner’s preparedness to take action in case of an emergency at your work site? 

  • Have you created a mechanism to acquire statements and declarations from employees in case they have travelled to affected places, areas, or countries or if they have come in physical contact with infected individuals?  

  • Have you made suitable business continuity plans in the event of an outbreak within company premises? 

  • Have you reviewed the necessity for your employees to work from the office?  

  • Have you rendered appropriate arrangements for isolating affected individuals or factions to avert the further spread of the disease? 

  1. Essential Considerations for Working Capital 

Globally, as a response to COVID-19 and its implications on the financial system, the central banks have undertaken a two-branched approach – interest rate reductions and relieving of liquidity norms. For example, the U.S. has declared an interest rate cut to be near zero, which is a noticeable step and has not been seen since 2008. Before the coronavirus outbreak, the Reserve Bank of India (RBI) had issued liquidity measures to curb interest rates and hence is now taking more time to wait before introducing any further interest rates reductions. In the meantime, considering these questions can improve regulatory compliances for your organization’s working capital: 

  • Have you examined your organization’s liquidity status owing to extended receivables and planned for emergency and contingency funding?  

  • Have you reviewed the effect of credit downgrading because of any default in meeting debt obligations? 

  • Have you investigated the re-negotiation of payment conditions with your dealers taking into account delayed collections? 

  • Have you scrutinized loan agreements and bonds for possible violations or infringements? 

How TRC Helps with Regulatory Compliances? 

TRC Corporate Consulting offers services to help plan and implement an inclusive, comprehensive regulatory compliance and risk assessment programmes for your organization. Our credible team of experts ensure that you get all critical information and assistance to formulate and implement successful risk mitigation and compliance strategies. 

The regulatory compliances part of a business function is more than just numbers, laws, rules, and statistics. It is about demonstrating and attesting to achievements and impediments, even in the face of a crisis. And, we can surely help your organization build a solid foundation for all future endeavours and aspirations. We illuminate the when, how, and why of the transitions to enable preparedness for any crisis or disruption. If you need further understanding of our services or have any queries, contact us!