When the 2008 crisis hit, what was your initial reaction?
Our first priority was to secure cash. This effectively meant ensuring that clients would pay for tyres delivered and putting in place appropriate security mechanisms for future deliveries. I asked my team throughout Europe to forget all their objectives overnight, such as the implementation of IT projects in the legal department, compliance training sessions, data protection and privacy projects (we were at the early days of data protection then). Their only priority was to be on the ground with the credit management and commercial teams and “get the cash”.
How did this lead to a change management program?
This crisis allowed us to emphasise the role of the legal team in creating value for the company and to focus the efforts of the legal department for the following years on generating cash, creating value and working closely with the company’s other business teams - without compromising on compliance, ethics and core values. This crisis helped us in refocusing the priorities of the legal team in each country and coming closer to the other divisions.
Looking back, is there anything you would do differently?
Although I believe we moved fast and reacted promptly to the crisis, looking back, I would move even faster. Time is of the essence and each day is important when confronted with a global crisis. Second, in such unique circumstances you need to have a top down approach and looking for a consensus among team members is often not possible. That said, I would probably take more time to explain the absolute necessity of changing priorities almost overnight and improve communication with the teams.
I am optimistic and have faith in the strength of the market forces and dynamism of people.
Any lessons learned from the financial crisis which you can share with us in case they are useful in the COVID-19 situation?
Leadership, strong management and a top down approach are necessary to face a devastating crisis, as is focusing on a few key priorities. Agility, flexibility, moving fast are required, with clear and regular communication to stakeholders such as staff, fee earners and clients. They will judge you on how you manage and behave in such a crisis.
Thinking short-term may be essential, but without forgetting and compromising on the mid-term and long-term, and without compromising on ethics and core values.
There must be points in common but also vast differences between the two global crises. Your thoughts?
2008 was a systemic financial crisis, with a sudden shortage of cash and the collapse of the financial system. We did not know in which direction it would go: would we be paid at the end of the month? What would happen to markets? Although I remember thinking at the time that common sense and the real economy would take over sooner rather than later. But without question, the crisis generated a high level of insecurity - although our health was not at stake.
In 2020, the first priority is the health of your family, friends and colleagues. Even though some sectors and industries are heavily impacted by the crisis, there is no shortage of cash. The financial system appears to be strong and most - although not all - sectors and industries are set to recover, although recovery may be slow in some sectors and may require structural changes in others. We have more visibility on the rebound than in 2008: some manufacturing industries have reopened plants and are in the process of ramping up. I would expect a slow and progressive rebound in other sectors. I sense that most companies were much better prepared to manage a crisis of this magnitude, having been through the experience of managing a crisis in the past, having improved their processes and being more agile and flexible than 10 or 15 years ago.
My one hope is that we will not see a “lost generation” of new graduates. I belong to the “lost generation” of the first Gulf War and while any crisis is highly challenging for new entrants on the employment market, it forces them to develop skills which will serve them in the long term.
Stakeholders such as staff, fee earners and clients will judge how you manage and behave in a crisis.
Do you think the automotive industry can pull through again?
The automotive industry will face a painful and difficult 2020 but I am confident it will rebound. It is probably one of the industries best prepared to overcome strong economic downturns given its consolidation, its previous experience in overcoming heavy storms and its strong management.
What issues do you think in-house lawyers in general will be facing during this crisis?
It is widely expected that the pandemic will lead to a high number of insurance and contractual disputes. We are already being asked to advise on contractual arguments relating to force majeure and frustration as a result of COVID-19 and on claims arising from breaches of contract due to supply chain problems, the cancellation or non-performance of orders or events, as well as business interruption claims. That trend is set to continue. We are also known for fighting complex claims against large defendants, so the team can help assessing and bringing claims against insurance corporations.
In which other ways can we help businesses during this pandemic?
Preoccupied legal teams are not always aware of how anti-competitive behaviour may have affected their supply chain and how they can claim compensation for losses caused by such behaviour. That turns legal department from cost centres into cash generators which at a time of crisis is important. While it is to be expected that legal teams will be dealing with the fallout of COVID-19, we can keep them aware of antitrust developments. For example, the way tech giants have abused their dominant position has far-reaching consequences.
Second, we can help by remaining realistic and focusing on credible recoveries and seizing opportunities at the right time. For example, we are one of the few firms which settled the Air Cargo case for its clients in 2018. For those that did not settle, the question now is whether they will ever recover any damages from the airlines.
Managing teams in France and Belgium means you are on the road frequently. COVID-19 has put a stop to that. How are you dealing with being at home?
We are lucky this pandemic did not happen in 2008 when IT and communication tools were much less sophisticated. Remote working has become easier and allows us to liaise in optimal conditions with our team members and clients and in some jurisdictions, with courts even! Virtual contact is obviously easier when you have built up a trusted relationship with clients.
Maybe one of the silver linings to this crisis is that we have learned that some travel can be captured through clever use of technology, which will have a positive effect on our work/life balance and our climate.
If you have any questions for Laurent on any of the above, please call +32 491 254 820 or +33 631 863 095 or email him. By following Hausfeld on LinkedIn, you will be among the first to receive the Hausfeld #Perspectives as soon as they are published.