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The Morning Risk Report: Coronavirus-Related Production Shifts Bring Liability, Compliance Risks
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Skoda Auto, a unit of Volkswagen in the Czech Republic, has pivoted to make respirators to help Covid-19 patients. PHOTO: MICHAL CIZEK/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Good morning. Companies that are shifting operations to make masks, ventilators and other medical equipment are taking on compliance and liability risks as they work to fight the new coronavirus, legal experts say.
That has confronted compliance teams with responsibilities like vetting new vendors, distributors and suppliers to prevent possible sanctions violations and spot corruption risks. They also are working to ensure their new procedures and products meet federal guidelines governing once-unfamiliar industries.
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“You’re just dealing with a whole host of new people and you’re doing it on a time frame that is extremely expedited,” said Timothy O’Toole, the leader of the white-collar defense practice group at law firm Miller & Chevalier Chartered who is advising companies on compliance issues.
Corporate innovation is emerging from surprising corners of the private sector in the coronavirus fight. General Motors, Ford and Toyota are among the companies converting assembly lines to crank out ventilators. Volkswagen has used parts of its plants around the world to make masks, face shields and breathing aids. Smaller companies also have pivoted, such as sewing shops now making simple cloth masks.
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From Risk & Compliance Journal
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Royal Dutch Shell Chief Executive Ben van Beurden. PHOTO: MAXIM SHEMETOV/REUTERS
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Royal Dutch Shell agreed to set bolder carbon-emissions goals after engaging with a group of investors representing $40 trillion in assets under management. The move comes as the oil sector faces growing pressure from climate-aware investors and headwinds due to the coronavirus pandemic and low oil prices. The International Energy Agency said Wednesday that it expects global oil demand to fall by 9.3 million barrels a day this year as a result of government-imposed lockdowns.
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Pallets of personal protective equipment arrived in New Hampshire from Shanghai on Sunday. PHOTO: STEVEN SENNE/ASSOCIATED PRESS
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New Chinese export restrictions have left American companies’ U.S.-bound face masks, test kits and other medical equipment urgently needed to fight the coronavirus stranded, according to businesses and U.S. diplomatic memos. Large quantities of critical protective gear and other medical goods are sitting in warehouses across China unable to receive necessary official clearances, said some suppliers and brokers.
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Temporary restrictions on betting against stocks have been extended in Europe, even as investors bemoan the problems such bans pose and their lack of effectiveness.
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Ticketmaster could be in hot water over its refund policy for postponed shows as thousands of concerts and other live events are on hold because of the coronavirus pandemic.
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The lending machines of Silicon Valley are running at half-speed. Financial-technology companies including PayPal and Square were eager to participate in the government’s $350 billion lending program designed to keep small businesses afloat during the coronavirus pandemic. But some aspects of the government programs render much of the industry less effective.
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Wireless venture Ligado Networks LLC won Federal Communications Commission Chairman Ajit Pai’s backing to develop a swath of radio frequencies, overcoming staunch opposition from the Pentagon and other U.S. agencies.
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Dave Hoag, chief information officer at Options Clearing Corp., said business continuity planning served the firm well in dealing with the coronavirus pandemic. PHOTO: CHARLIE SIMOKATIS FOR OPTIONS CLEARING CORP.
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Options Clearing Corp. saw record-breaking trading volume in March as concern over the coronavirus hit markets. But the OCC, which serves as a guarantor for derivatives, was prepared, having organized a companywide exercise in pandemic preparation last November.
The exercise focused on business continuity planning and preparedness training as well as reviews of information technology systems, including bandwidth to handle a surge in connections from home workers.
“Municipalities and mega-organizations for a while have been looking at pandemics as a potential situation and how they might handle it. We felt that there was a chance that this could be a possibility,” said Dave Hoag, chief information officer at the Chicago-based firm.
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More than 22 million workers have sought unemployment benefits during a month of coronavirus-related shutdowns, a record-shattering total that reflects a broad shock for the U.S. labor market.
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Treasury Secretary Steven Mnuchin is under growing pressure from industry officials and members of Congress to ease strains on mortgage companies as millions of borrowers skip their monthly payments amid the coronavirus outbreak.
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China’s economy shrank 6.8% in the first three months of 2020 compared with a year earlier, the first such contraction since Beijing began reporting quarterly gross domestic product in 1992. Meanwhile, American companies in China believe the coronavirus pandemic is making the decoupling of the U.S. and Chinese economies more likely.
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Countries such as South Korea and Israel have monitored individuals’ locations to track the spread of the coronavirus, but the EU say that is unnecessarily invasive. PHOTO: PHILIPPE LOPEZ/AGENCE FRANCE-PRESSE/GETTY IMAGES
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European officials have a plan to use smartphone apps to stem the Covid-19 pandemic without trampling on the bloc’s strict privacy rules: track individuals’ exposure to the virus without tracking their locations.
“Strong privacy safeguards are a prerequisite for the uptake of these apps, and therefore their usefulness,” Thierry Breton, the EU’s commissioner for the internal market, said Thursday.
There is debate about how the apps should work behind the scenes. It boils down to how much data the apps should send to central databases that will likely be run by health authorities in countries around the world.
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Hackers have used a number of ransomware variants to attack hospitals and health-care facilities in multiple countries, adding to medical providers’ concerns as they confront the coronavirus pandemic, according to Interpol.
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Zoom Video Communications is calling in the equivalent of the cybersecurity cavalry after security lapses that have drawn attention from U.S. authorities and raised concerns with customers.
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Luckin, which earlier this year said it is China’s largest coffee chain by number of stores. PHOTO: BRENDAN MCDERMID/REUTERS
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The accounting mess at China’s Luckin Coffee Inc. has forced one of its top backers to put off its fundraising plans.
Centurium Capital, a three-year-old Chinese private-equity firm that has a sizable investment in Luckin, has put on hold plans to raise a second fund with a target size of $2.5 billion, according to people familiar with the matter. Its decision comes after the coffee chain’s revelation that employees fabricated much of its 2019 sales.
Large investors including the Washington State Investment Board, the Ontario Teachers’ Pension Plan, Singapore’s sovereign-wealth fund GIC Pte. Ltd. and state investment firm Temasek Holdings previously made initial commitments to invest in the Centurium Capital Partners Fund II. The fund was earlier on track to close a first $2 billion in fundraising shortly before Luckin’s disclosure earlier this month, according to some of the sources.
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Spirit will have to resume service to some two dozen cities where it had already ceased operations to receive government aid. PHOTO: ORIT BEN-EZZER/ZUMA PRESS
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Two U.S. airlines have been told by regulators to keep flying routes that carriers say have little or no demand in order to qualify for federal funding.
The Transportation Department on Thursday denied most of the requests by JetBlue Airways and Spirit Airlines to reduce or suspend flying in response to collapsing demand amid the coronavirus pandemic. The agency, which is responsible for deciding the amount of flying airlines must maintain to receive government funds, said both airlines could suspend service to destinations in Puerto Rico, where incoming flights are restricted.
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Amazon has started building a testing capacity to diagnose all employees for Covid-19, including those who display no symptoms, Chief Executive Jeffrey Bezos said in a shareholder letter.
He echoed sentiments expressed at Wednesday’s White House meetings with chief executives, in which leaders described current testing levels in the U.S. as inadequate to effectively reopen the economy. Some said they were attempting to secure their own virus testing kits for employees and possibly customers as well, The Wall Street Journal reported Wednesday.
Meanwhile, Amazon closed its warehouses in France after a court this week temporarily forbade the company from shipping nonessential goods because of the risk to workers from the coronavirus.
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A U.S. state-run program that helps businesses cut costs while retaining staff is becoming an increasingly common strategy to fight the economic toll of the pandemic.
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Google’s parent company, Alphabet, said it would slow hiring as a result of the coronavirus pandemic, in a sign that even the largest corporations are recalibrating to prepare for a recession.
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Neiman Marcus is the latest retailer to skip a payment owed to bondholders as the coronavirus pandemic keeps stores closed, setting a clock ticking for the company to restructure its debt or file for bankruptcy.
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EBay expects to select a new independent board director and said it will consider the people Starboard nominated. PHOTO: WILFREDO LEE/ASSOCIATED PRESS
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Activist investor Starboard Value has withdrawn its nominees for eBay Inc.’s board after the online marketplace company named a new chief executive, the companies said Thursday.
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Verizon has focused on building out 5G service in hubs like stadiums and pitching businesses on its ability to deliver localized private networks. PHOTO: RICHARD B. LEVINE/ZUMA PRESS
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Verizon Communications has agreed to buy videoconferencing company Blue Jeans Network, as an unprecedented number of people work remotely because of the coronavirus pandemic.
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McClatchy said Thursday it has received a takeover offer from two hedge-fund managers—and senior debtholders—that would get the newspaper publisher’s business out of chapter 11 bankruptcy this year.
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