Economists worry about a recession in the next year. (E.g., per Fortune, NPR , CNBC, and MarketWatch.) Whenever the next downturn arrives, businesses should be prepared for increased litigation and regulatory action. Start now by updating contract terms to anticipate tighter budgets and by preparing your team for scrutiny from regulators, customers, and counterparties.
Downturns Yield Upticks
Increased litigation and regulatory activity typically accompanies recessions. Revenues slow, forcing businesses to reevaluate their contracts. Stock prices fall and disgruntled investors pursue shareholder and derivative claims, as well as actions against advisers and brokers. Political pressures prompt rigorous investigations by regulators and self-regulatory organizations. Budget reductions compel layoffs, and unhappy ex-employees level blame, and legal claims, at former employers. Bankruptcy filings trigger litigation over receivables, and disputes erupt over earn-out provisions in M&A agreements. Even businesses lucky enough to avoid direct investigation or litigation still receive third-party subpoenas for documents and testimony.
Five Proactive Steps
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