Corporate Governance refers simply to the system by which companies are directed and controlled. In the UK, this system has been enshrined as a set of principles contained within the Corporate Governance Code. Among these principles, the UK’s Corporate Governance Code calls on boards to carry out a robust assessment of their company’s emerging and principal risks. Although the code applies to listed companies, it reflects best practice for all businesses and therefore all directors should pay attention to its provisions.
The code calls on boards to confirm in their company’s annual report that it has completed a risk assessment, including a description of the company’s principal risks, what procedures are in place to identify emerging risks, and an explanation of how these are being managed or mitigated.
Naturally, a no-deal Brexit presents a number of business risks including the potential for disruption to supply chains, changes to customer demand, the introduction of new or higher tariffs on goods and the possibility of restrictions on labour. Boards should seek to identify specific risks and take measures to manage and mitigate them.
These are the five steps that directors should take to ensure that their companies are prepared for the event of a no-deal Brexit:
Directors need to understand and approach preparing for a no-deal Brexit as a companywide risk management issue
Directors should understand the legal implications of a no-deal Brexit as they relate to their company’s specific circumstances
Boards should have adequate access to Brexit related expertise, and discussions around no-deal planning should be allocated sufficient time on board meeting agendas
Directors should set the expectation that management will establish a companywide no-deal Brexit risk management framework with adequate staffing and budget
Board discussions should include identification of risks.
Ultimately, having effective decision making and risk management structures in place at board level can help ensure that any risks posed by no-deal withdrawal from the EU can be well understood ahead of time and therefore adequately managed and mitigated.