Kroll Consulting argues that the current economic climate has made business relationships more complex and outlines steps for companies to perform future litigation, defend asset bases and position themselves for the future.

The current economic crisis has stricken many of our clients like no other calamity in anyone's memory. During other upheavals a company's response was to assert its rights quickly by bringing legal action when it believed it had suffered from the actions or inactions of others, or to seize opportunities it saw in the market.

The challenges facing chief executive officers and chief financial officers this time are tough, the issues are difficult to size up and often there is little hard, publicly-available information to go on. In talking to our clients we find that they are confronting a different set of circumstances and their choices are not all that clear.

For example, some of their unanswered questions include:

• How do these events affect my business?
• How did we get to this exposure level?
• Who were the decision makers?
• What reps and warranties were made upon which we relied?
• What are the names of all the relevant companies and principals, and where are they now?
• If we sue, will there be money to collect? Are the defendants insured? Is their insurer solvent?
• What are others in my industry doing to protect themselves and assert their rights?

Based upon inquiries we have been receiving in the last 30 days, and our own analysis of developments in the last six months, this is what we are recommending to our clients:

Gather the facts

1. Develop hard evidence that will support your claim or cause of action. This should include interviews of employees and the retrieval of email communications and other electronic files. Important: suspend the deletion of data from your server so you won't lose emails that might have been deleted from individual computer hard drives. Retain a professional computer forensic technician to do this work, to ensure preservation of the evidence and chain of custody.
2. Identify favourable prospective witnesses. Bear in mind that lay-offs, downsizings and other personnel actions have made many people 'former employees' with stories to tell. In one case we found a former employee who confirmed that emails had circulated with negative opinions on the quality of commercial instruments the company was selling.
3. Determine if it is worth pursuing potential wrongdoers. Get current information on corporate structure and leadership. Conduct an asset search to see if bringing legal action is worthwhile - even to find out if the adversary's insurer can now pay a claim.

Find out what is happening in your industry and in industries where you are invested.

Keep your eye on the business

Whether or not you've been impacted by the recent events, this crisis presents new opportunities. Based on our experience advising clients over the last few months, here are some best practices that we believe will position you better to weather this storm and help you strengthen your business going forward:

• Are companies in crisis mode? Are they under financial pressure? Are they seeking buyers or merger partners?
• Will supply chains remain robust? Are suppliers in financial difficulty?
• Have business plans been shelved or discontinued?

1. Evaluate the economic environment that will follow this crisis and how it is going to affect your business (or the businesses that you are exposed to) and prepare for that environment. Understand how changes in consumption, investment and government spending over the next six to 12 months will impact you and your competitors. For instance, reduced access to consumer credit is going to affect industries ranging from electronics to home improvement products. Similarly, companies' efforts to control expenditure may impact demand for advertising, promotional products, IT solutions etc.
2. Start by gathering intelligence to understand how your customers, partners and competitors will behave in this environment. By way of example, Kroll has advised several asset management firms in the last few weeks that are exposed to industries as diverse as defence, medical devices and clothing manufacturing to help them understand if and how the current crisis will affect these industries and the specific companies that they are exposed to.
3. Conduct better due diligence going forward. More than ever, you should re-evaluate the fundamental assumptions underlying your business decisions, whether you are entering into a new business partnership, making an acquisition, hiring new employees, choosing vendors, or appointing a new board member.
4. Explore new opportunities in other sectors and geographical areas. Corporations and asset management firms that are still well capitalised can invest in companies that remain fundamentally strong but may be cheaper to buy in this environment. Sectors such as medical devices, pharmaceuticals, defence equipment and telecoms, amongst others, are likely to be less vulnerable to the ongoing financial crisis. Similarly, there are areas outside the US where the fundamentals of doing business remain relatively strong, such as India, or untapped, such as Africa.