Looking ahead to 2022 and beyond
Looking ahead to some of the continuing commercial issues which many business owners will have been dealing with over the last couple of years, it is important to remain prepared and also consider how the law can help to protect your business interests going forwards.
Some of the basics include managing your supply chain. There are few businesses that won’t have been affected by supply chain issues and whether that is through shortages of and rising fuel and energy prices, shortages of raw materials, machinery, equipment, or staff shortages, import and export red-tape and delays, or ever-changing requirements from customers. Many of these issues will continue into the first half of 2022 and beyond, so it is important to protect your business in any contracts and supplier agreements. Take time to review some of the common pinch points such as:
Your payment terms – Asking for payment up front before anything is supplied will ultimately protect your business, but it is also worth considering if your customer can’t pay, what happens to the goods, where are they stored and will they lose value if delivery is delayed. Other options could include shortening your payment terms or asking for a percentage up front. Having a finance team who is on the ball and managing debtors is critical to ensuring the cash flow and survival of your business.
Shortening your supply chain – Can you remove uncertainty and delay by seeking alternative suppliers, especially those who might be more local to you? Not only is this move better for the environment by removing unnecessary transport and travel, it could also help to secure local jobs and put money back into the local economy. As part of The Environment Act 2021, the Government is looking to create a more local, circular economy and all businesses will be required to play their role in helping to achieve significant climate change measures.
Exiting restrictive contracts – Is it time to review and exit those contracts that are too restrictive, difficult, or unprofitable to fulfil, can you use Force Majeure clauses if you are struggling to meet obligations due to circumstances beyond your control, such as staffing shortages. Don’t be a busy fool, if it is no longer right for your long term business planning then look to move on.
Managing your workforce - Amongst many changes from 1 April 2022, The National Living Wage rises to £9.50. The Government now publishes details of organisations who don’t meet this obligation and the organisation will also be fined and required to make the outstanding payment. If you haven’t recently reviewed your compliance with HR issues such as ensuring you are paying the minimum wage to all employees, along with compliance with other obligations such as The Modern Slavery Bill then you should review this now. Many businesses are placing a greater emphasis on transparency and compliance towards social responsibility and want from their suppliers a minimum standard of transparency.
Technology – There is no doubt that many business operations and the traditional working day have been transformed during the pandemic. The increasing role that technology plays in the workplace brings many numerous opportunities, but also with it increased risks. You should review with your IT team or supplier ways that you can reduce the risk of cybercrime and fraud and to protect data and digital assets. You must also ensure you are following all of the rules of GDPR and data protection. As many people are likely to continue remote working into the new year, make sure your business is fully protected and not breaching any rules and if necessary, review and update employee guidance.
Finally for many businesses Environment, Social and Governance (ESG) are going to become increasingly important factors in their everyday business operations in 2022 and beyond and customers and investors are increasingly applying these factors to help identify both material risks and growth opportunities. Some of these factors have been touched on already, but to summarise this means looking at:
- Climate change
- Resource depletion
- Waste and pollution
- Working conditions, including use of child labour
- Local communities
- Health and safety
- Employee relations and diversity
- Executive pay
- Political affiliations and donations
- Board composition, diversity, and structure
- Tax strategy
If you haven’t started to consider these factors and their increasing financial relevance then 2022 is definitely the time. No matter what size your business, your customers and clients are increasingly making decisions based on one or more of the above and it is important to be one step ahead.
If you would like to discuss any corporate or commercial legal issues for your business, please get in touch with our team.