Deal or No Deal?

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It is not yet too late for individual companies to consider the potential implications of Brexit and whether there are risks or opportunities that could be addressed through contingency planning. Unfortunately, the politicians have failed to identify and communicate a clear way forward due to their different agendas, political manoeuvring and personal egos.

Like the Y2K millennium bug contingency planning activities 20 years ago, there is a defined event on the horizon with differing views on what might happen. It can sometimes feel overwhelming trying to understand the “moving target” of potential outcomes and this causes many organisations (and countries) to delay their contingency planning activities until the picture becomes clearer. This strategy may work for some but will leave others somewhat vulnerable.

Brexit contingency planning should be approached in a pragmatic way to ensure that no more time and money is invested in the project than is wholly justified by the potential risks and opportunities. An effective project will provide the Board, senior management and stakeholders with the assurance that comes from knowing:

1.    The potential implications of Brexit upon the organisation, its resources and services are understood

2.    The necessary improvement actions to be taken beforehand to mitigate risks and ensure contingency plans will work in practice are defined

3.    The response process, steps and workarounds to be adopted following different Brexit outcomes have been drafted

4.    Critical activities will continue at acceptable levels to ensure business continuity is not jeopardised.

Consideration should be given to the potential implications on transport/stock management, personnel requirements, approvals/compliance issues, information/systems processes and any other challenges that could have a detrimental impact on your business during Brexit.

You need to understand where there are vulnerabilities in your supply chain and take appropriate actions to address. This may require changing contractual terms, stockpiling goods or spreading the risk through setting up additional supplier arrangements. Keep in mind that your customers may be going through the same contingency planning process and you will need to provide them with confidence that your services will continue, otherwise they may choose to place their business elsewhere.

However much you invest in risk mitigation and contingency planning, there may remain certain things that are outside of your direct control that could result in a loss of business and market share. It is worth considering this eventuality as part of your planning process by answering the following questions. Are there alternative markets that could be developed, just in case? Are there opportunities for increasing services offered to existing customers or regions where we have no Brexit risk exposure? What is the process for making difficult decisions should we need to quickly cut our staff and operational costs?

It is recommended that every company with a potential exposure should set up Brexit contingency planning workshops involving individuals with the relevant knowledge and experience to understand the potential implications, impacts and contingencies for their organisation. A strong, independent facilitator should be identified that is able to lead the discussions, allow appropriate assumptions to be made to keep discussions moving and ensure that there is effective contribution from all participants. It is amazing what can be achieved by getting the right people around a table for a few hours considering a range of scenarios.

It is important to ensure that a proven and structured analysis and planning method is adopted to take full advantage of participants’ time and provide useful output. The workshop objectives, approach and scenarios should be clearly defined beforehand and this will help determine the appropriate participants. Where certain knowledge or skills are lacking, consider inviting select professional advisors with an understanding of the risks to participate. The findings from the workshops should outline the necessary activity required at all stages, resulting in a Brexit contingency plan.

It is not usually feasible to plan for every possible situation, so the workshop method should define a selection of potential scenarios and open questions. Consideration of “worst case” scenarios will often result in identification of strategies, solutions, contingencies and workarounds that would also prove effective in the event of less severe situations. In the lead up to the 29th March 2019 deadline, organisations should be considering the consequences of a “no deal” exit as one of the scenarios.  Although the anticipated likelihood of different Brexit outcomes can be considered when determining focus areas, it is important to use this opportunity to also consider the high impact events that are perhaps less likely.

Exercising and testing should be undertaken to validate the findings and contingency plans, as well as to help raise awareness of responsibilities. It is essential that managers have an opportunity to enhance their incident management skills prior to real events occurring. Keep in mind that Brexit is an example of an event where some companies may simply go out of business due to how others perceive them, ineffective communication and actions being taken by third parties that are outside of their direct control. Having an experienced Incident Management Team with the necessary skills and knowledge to respond promptly to events as they unfold will be essential. 

The organisations with the most effective Brexit contingency plans will be those that avoid the potential pitfalls and take full advantage of any opportunities that arise. Those who choose to “wait and see what happens” will be putting their company’s future prosperity into the hands of politicians and fate.

David Teed

 

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  • Date: 14th January 2019
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