Romain talks to us about how governments and businesses can be rescued from the turmoil the current COVID pandemic has caused. In reflection, we look back at how different governments around the globe reacted and whether or not a more unified approach towards global governance is needed, and we look at how the economic market has reacted to the pandemic and what this means for companies and the future workplace. As a distinguished jurist, member of the American Society of International Law, contributor of the agenda of the World Economic Forum and sitting at the Forbes Finance Council, Romain offers interesting insights into the current crisis.
Governments
As a good lawyer, I must say that I am quite frightened by the change in mentality that I have discovered over the past year.
There is a clear discrepancy between governments that have handled the COVID pandemic – they have either been praised or scrutinised on their strategy. As you work with governments developing governance strategies, what key things do you think governments should have put on their list when building a pandemic proof plan?
This pandemic has, for the first time in modern history, presented a challenge which has been experienced universally. Almost simultaneously, the whole world was affected by this virus which induced very strong innovative elements and restrictions that are rarely considered, especially in the Western world. At the height of the epidemic, nearly two-thirds of humanity was confined, which was previously unheard of and somewhat unimaginable.
In general, governments have been quick to consider, more or less, the economic impacts to the height in which they compensate for the impossibility or prohibition to undertake and trade, notably through the allocation of direct aid or via support to the economy by collateral; however, in doing so, the psychological variable has been considerably neglected, especially for business leaders.
We must not underestimate the impact and enormous emotional burden of these coercive measures on the population. Even more so for the entrepreneurs who, like everyone else, has to live with the restrictions of daily life, to which the burden of their responsibility towards their employees, creditors, bankers is also added, as well as the fear of losing what they have invested in. However, in the measures introduced, there was little room of consideration towards new smaller business owners.
There was also a problem of pedagogy in the measures taken by governments around the globe. Infantilisation does not work and leaving people questioning without giving them an answer creates misunderstanding. However, when you add incomprehension to uncertainty, you create destabilisation and mistrust, feeding conspiracy theories and theorists.
While, in times of crisis, the primary variable that must be maintained to avoid chaos is confidence.
For many governments, economical survival was rife, but focusing on the economy led to other aspects falling short – what do you predict will need extra attention when recovery from the pandemic begins?
As a good lawyer, I must say that I am quite frightened by the change in mentality that I have discovered over the past year.
In order to mitigate the spread of the virus, it has been essential to take strong measures; this is obvious and justifiable. The risk is that with this exceptional regime, especially in terms of reducing our individual freedom, it has the potential to end up being a permanent state. The danger is that psychologically, we have become accustomed to being hampered to our rights being reduced and that we just end up living with it, resulting in it being a part of the ‘new normal’.
This is revealed on a daily basis and in the legal sector; the rights of the defence during cases are reduced and due to derogations from the general regime, the right to a fair trial is terribly weakened, and we manage to succeed in making the litigant consider that it is in the public interest.
We have to be very careful that an exception does not become the rule, which I think it will be a strong matter at stake once the current health crisis has returned to a certain point of normality; this past year cannot annihilate the decades of struggle for our rights and freedoms.
I also think that 2020 marked a major turning point in the way in which we approach human resources management.
When building a catastrophe proof strategy, what aspects do you have to consider? In hindsight, what has the pandemic taught you about devising such a strategy?
In the first instance, assets should be secured. Then the suspension of financial and contractual obligations, where possible, and the preservation of the treasury to compensate for the problem or to organise a response scheme that is efficient, ought to be considered.
This pandemic has been indicative of the need for resilience in the governance of everyday issues and because of its duration and the resulting restrictions, it was necessary to sustainably adapt in order to be able to take a pace that would be commensurate with the obligations imposed; this is whether it was personal obligations and our day-to-day life, or our professional obligations and our working life.
I also think that 2020 marked a major turning point in the way in which we approach human resources management. Contact with others was to be avoided and was replaced with social distancing, at least for a time, in order to avoid the transmission of the virus. But it was not possible, however, to eradicate this element completely, and without visible impact on the temporality of the world economy.
It was, therefore, necessary to adapt and to evolve the archetype of work, which has resulted in digitising production systems, rethinking relationships with colleagues, respecting the hierarchy and constraints of one’s position, whilst having, de facto, greater autonomy. Paradigms have changed and patterns have shifted. For some, it came with a substantial number of advantages, but for others, just as many disadvantages.
But the first variable behind this new working system, as I mentioned before, is trust; trust, which must be bilateral throughout the hierarchy towards each subordinate, and vice versa.
In any crisis management strategy, rebuilding trust is essential.
Do you think world governance would benefit from a more congruous, streamlined approach when a crisis is on a global scale?
Yes and no. A somewhat fortunate aspect of this dramatic period is that this crisis was planetary and, thus, simultaneously felt throughout, avoiding a massive imbalance of forces due to the fact that all states were impacted. Of course, this led to a shift in global governance, as even at the beginning of the crisis, there was a role reversal between the sharing of medical and logistic soft-power between the United States and Asia, which was mainly induced by the political choices made by the respective governments.
But overall, a certain union chain had to be – albeit willingly – forged and preserved. The economically and diplomatically interdependent areas had to organise themselves in order to coordinate their efforts and optimise their results, particularly in terms of Germany’s initial and mid-wave treatment of French patients.
But integration – when it existed – was only regional. Let us remember these astounding images of the stock of masks bought at the price of gold off the Chinese market by the American government, in full sight almost in mockery to Europe, as the cargo planes were loaded.
Some states have taken inspiration from their neighbours to stem the pandemic, so there has been international resonance. Many leaders liked to point out that a virus did not have a passport. That is obvious, but some populations, through the measures that were imposed locally, were potentially more at risk than others.
The problem lies in the fact that a pandemic is sadly pragmatic; a virus strikes everywhere and in the same way. But when politics and ideology guide containment measures, it creates massive inequalities. An example: The Brazilian or American populism has been a very clear breeding ground for the spread of the virus on their territory.
While, in times of crisis, the primary variable that must be maintained to avoid chaos is confidence.
From this, do you expect to see any regulatory changes?
Unfortunately, I do not think that this crisis will move many cursors on the international scale.
There is no international health organisation that has binding powers. The World Health Organization itself has been attacked and criticised – rightly or wrongly – for its management of the crisis. The inquiry commission that was supposed to investigate the exegesis of this pandemic first found itself inadmissible to China before a compromise was reached. However, when the repercussions are global, there should be an international body that can monitor, intervene and recommend in a comminatory manner.
The only problem is international law and interference. It took decades for the UN, created in 1947 on painful ashes, to acquire real legitimacy. Today, its power is still quite limited. It is hard to imagine that the COVID-19 crisis could result in a similar instance. However, no doubt a coordinated action at the international level, particularly in terms of stocks, prevention and vaccination policies, would have made it possible to curb this situation a little better.
Businesses
Helping small businesses to be resilient through crises is a small detail which is easily overlooked; from your perspective, what helps?
Once again, the first key step is safety.
It is appropriate, as I mentioned just before, to prevent any cash risk that would be linked to debts or maturities that would no longer be possible to settle, which could lead to cessation of payments. This applies not only to institutional creditors but also to its suppliers and partners. Once the situation is under control, it is necessary to take stock of the support mechanisms that exist, to the effect of rebuilding a financial base.
Then - and I have often reminded my clients of this - it is not enough to be relying on public money, patiently waiting for better days; this wait-and-see strategy is not working.
We need to reinvent a new economic model, which adapts to the constraints, which are often very strong and induced by the situation.
Force Majeure in English translates to ‘Act of Gods’. We must seize this situation of adversity and turn it into an advantage by transforming it into an opportunity. And this does not mean denying oneself, simply considering that in a situation where there is perfect uncertainty about how long it will take to learn to live with this state of affairs, in order to try to achieve the previous rate of profitability, it is necessary to innovate in the literal sense; the constant search for improving the existing circumstances results from adapting business models to the constraints we have suffered. That is resilience.
In any crisis management strategy, rebuilding trust is essential.
The World Bank estimated that the world economy will grow by 4% by 2021. From a business law perspective, what should companies be doing now to ensure they are part of the growth?
They can contribute to this growth precisely by changing their economic models and adapting according to the new constraints COVID has imposed.
For many companies in the education sector, teleworking was still an abstract concept, yet now for the entrepreneur of tomorrow, teleworking is undoubtedly optimisation at its finest.
A decrease in gross fixed capital formation, due to a lack of need to own physical premises – or at least to limit the area –which thus significantly reduced fixed costs, lifts geographical restrictions on hiring and presents real flexibility.
This also requires total digitalisation of the workplace. And what can initially be a constraint and has the potential to cause significant cost, undoubtedly and ultimately, increases productivity. But first of all, it is necessary for companies to evolve their distribution or sales model. The health crisis has demonstrated to companies the limits of their current model and the services they presently offer.
Although, for some, physical contact was an essential variable for them to mark a strong economic footprint, but when proscribed, they were stopped, causing a potentially catastrophic issue. It was therefore necessary to remove this particular aspect of the company model, isolate it, and find a new equation to where physical contact was no longer needed.
For others, it was highlighted that their dependence on subcontractors was exacerbated, some of which had to – or made the choice to – suspend their activity, thus rendering the entire production chain inoperative.
The choices these companies have now made will be for the coming years of greater internalisation. With the interconnection of crises – health, economic, social and environmental – the situation has changed and everyone must consider the lasting impacts of this unprecedented and intense experience and evaluate the changes they must make in order to survive.
But when politics and ideology guide containment measures, it creates massive inequalities.
Why does being reactive not work in a crisis for businesses?
In times of crisis, the strategies to be defined vary considerably across industries; however, regardless of the activity, they all have one thing in common: a proactive strategy is the best approach.
The main difference between proactive and reactive is planning. Reactive management is a strategy in which problems are dealt with after they occur, without long-term planning.
Proactive management is a strategy which results from planning for the future by preventing potential problems before they occur. It’s about anticipating and governing.
The proactive strategy results from the use of analyses to determine the best option to choose to prevent a problem from occurring. During the implementation of this new strategy, real-time monitoring of progress is carried out, allowing you to adjust the dispositions accordingly – so you can remedy or improve what is needed if it does not achieve the expected result.
On the other hand, the reactive approach amounts to addressing problems in real-time, without prior analysis or planning, and the results of the strategy adopted are determined at the end. It is obvious that this creates inefficiencies because the strategy is poorly targeted and poorly refined. From this, time and resources are quickly wasted. Crisis management is an almost surgical act. You have to do it accurately, in record time. You can’t afford to squander, either.
The paradox is that if a crisis occurs, and we have to deal with the problems that arise from it, it is because we did not anticipate it. It is therefore necessary to be reactive at the beginning of crisis management, before being proactive.
Crisis management is an almost surgical act. You have to do it accurately, in record time. You can’t afford to squander, either.
How do you come up with solutions to help businesses avoid falling during catastrophes?
After the security phase that I was talking about earlier, we firstly have a comprehensive overview of the situation. We identify the issues and define what led us to face them.
It’s sort of an express audit of the contentious situation. From this, we then consider two types of scenarios: one in the short term, the other in the long term.
The short-term scenario allows us to “break the wave”, to cushion the shock and, in particular, to take measures that aim to rebuild a cash position and to achieve a cruising pace; this then allows us to put in place the second strategy, which will look at the long term, particularly by isolating the defective variable which caused the issue in the first place and solving the problem differently, i.e., without it.
At the same time, we will communicate to keep a strong link between the partners and customers. Playing the transparency card - in a certain way - maintains the trust between both parties (as aforementioned).
The tech industry boomed throughout the pandemic, contributing to NASDAQ gaining 44% - do you have any predictions on the industries which have the potential to flourish in the next year?
There are two main categories of winners, which will continue to grow in the coming years, one of them being the digital sector, in all of its forms, mainly for the reasons we have previously mentioned. No company will want to face the same problem twice. The digitalisation of the workplace, which makes it possible to be effective even in the most extreme restrictions, will be an extremely buoyant market.
In the same way, the marketplace and e-commerce will continue their rise in power that they had already initiated. The current market is the best reflection of this. In the first half of 2020, for example, the market capitalisation growth of Amazon was +401.1 billion dollars, Paypal + 65.4 billion, Zoom Video + 47.9 billion. Of the 20 largest capitalisation increases, 17 were related to digital.
The other industry which will boom is the biotechnology industry. Moderna, created in 2010 and has been listed on the Nasdaq since July 2018, saw its share price rise by 171% between 24 February and 5 May 2020. Similarly, Novacyt, a Franco-British start-up, a pioneer in PCR and two target genes tests, saw its action increase from €0.16 cents to €13.96 at its highest in a year, (or an 8,725% increase). The need for evolutionary tests or research is not likely to be extinguished in the short term, even with durable and effective vaccines on the market. It is very difficult to imagine that States allow free entry of travellers, even vaccinated, without a negative test.
And the health authorities have warned that we will have to live with the appearance of new coronavirus strains in the coming years. These technologies will be duplicable to other types of viruses.
Romain GERARDIN-FRESSE
+33(0)4.72.53.83.08
r.gerardin-fresse@gfkconseils-juridis.fr
About Romain
- What do you want to achieve in 2021?
Strengthen our presence in Africa and Asia, by developing the partnerships and agreements we have already initiated.
- What has been your biggest achievement in the past 12 months?
Six nominations and six victories: (Best Luxury Multi-Family and Business Law Firm (LLSA); Best Business Law Firm and Reputational Consultancy (Executive Global Magazine); Banking and Finance Lawyer of the Year (Business Worldwide Magazine); Best Prestige Business Law Firm (Corporate LiveWire); Strategist of the Year (European Business Magazine); and, Man of the Year 2020 (The Global Investor).
- How do you measure your success?
Through the recommendation of our firm’s clients to their inner circle and business relationships. And the best satisfaction is to be able to choose the new customers with whom we want to collaborate.
The firm Gfk Conseils-Juridis, which Romain founded in 2017, is present in Europe, the Middle East, the United States and Asia. Specialising in the definition of strategies, Romain has a strong reputation in the resolution of technically complex cases, from mergers and acquisitions to restructurings, through the drafting of laws that contribute to legislative and constitutional changes.
