When discussing business continuity, we usually do so with power cuts, floods and other disasters in mind. However, a successful business should be resilient to all influences, and if it comes to it, quickly repairable.
The referendum decision to leave the European Union has focused the minds of UK business leaders on what comes next. However Brexit affects your business, it will act upon the business structure you have created. The resilience and agility of your business is the part of the unfolding Brexit story in which you are a key player.
Theresa May triggered a two-year countdown to Britain’s breach with Europe on 29th March by serving notice to Brussels that she intends to end their 44-year relationship in pursuit of a new place for the UK in the global order.
Your business continuity plan may pivot around the 2019 date, but will allow for an earlier or later settlement. Of course, movements in financial markets and other areas of business may register at any point in the Brexit process.
Take a breath and gain perspective
Depending on your view, leaving the European Union will mean fresh opportunities or challenges. You should recognise the need to prepare for both. Brexit is not a monolithic shadow over your business. In practical terms, Brexit will be an assembly of agreements and legislation to enable an ongoing trade relationship between the United Kingdom and European Union.
Ultimately, there is a limited range of viable options for the new UK-EU relationship. You can use scenario planning to work through these.
Business people are also concerned by less tangible factors such as market sentiment and consumer behaviour. These factors constitute much of what is ‘uncertain’ about Brexit. We should admit that anything could happen, but understand that a handful of outcomes are very likely to happen. These outcomes can be framed and explored in your planning.
Make the most of now
A company director should always have a complete understanding of the condition of their business – and even if we do not yet perceive what is about to happen, we know that something is going to happen. It is time to prepare.
Ensure you have detailed information on all assets, resources, customer relationships and employee capabilities. Are you exposed to withdrawal of EU funding to research? EU grants to businesses in scheduled regions?
Review your business plan
This is likely to serve as the basis for your response to the challenges and opportunities of Brexit. The business plan can also be used as the starting point in scenario-based planning. The IoD provides a range of factsheets on business plans:
Writing a business plan
Review your banking arrangements (consider moving to a UK overdraft facility if this is not in place). Engage with your investors and consider alternative sources of funding if required.
The IoD provides a range of factsheets on all aspects of company finance, including some specifically on options to fund your business:
Alternative funding options
Finance your start-up business
Getting a grant for your business
Maintaining a presence in the EU
If you have significant commercial ties to EU customers, you could explore maintaining a direct presence in the Single Market. The IoD Business Information Service can provide information on starting a business in most EU member states.
Preparing for the future – Scenario planning
Brexit is unlikely to provoke storms and floods. Unexpected shocks are more likely to come from a sudden change in market sentiment, customer behaviour, or perhaps a clause in a new law. Equally, there may be a sudden window of opportunity. The main business continuity tool to apply here is scenario planning.
Gareth Jones in a paper called Brexit calls for Scenario Planning Now (The Crisis Interface February 2016) explains the advantages:
‘The technique that stands the test of time for high uncertainty situations is scenario planning. Scenario planning provides the technique for identifying and framing the uncertainties for a plausible set of scenarios. At the best case it enables you to be proactive and understand the assumptions you have, see uncertainties more clearly and seek out the possible opportunities. At worse it brings your team together and allows you to start to rehearse responses. The real aim must be to examine the change in the environment to seek to identify possible opportunities that were not present before we embarked down the ‘in/out’ road! We need to be prepared for the possible range of destructive forces and opportunities. Agility does not come from being static!!’
The benefits of scenario planning – and potential pitfalls – are also explored by McKinsey: The use and abuse of scenarios.
A key benefit is that scenario planning allows a business to identify which underlying drivers are vital for an intended outcome to happen. Again, this separates out what in Brexit is most crucial to your business. Jay Ogilvy writing for Forbes in Scenario Planning and Strategic Forecasting, offers advice on how scenarios are devised. The ‘External Forces’ section urges recognition of political events, migration and cultural differences.
By using scenarios, rather than deal with ‘Brexit ’, you are dealing with a specific business issue – “If the value of sterling is X would it be cheaper to switch to a domestic supplier of component Y” or “Would UK membership of the European Economic Area remove our need to open an office in an EU member state?”
Scenario planning therefore reduces Brexit to a series of possibilities which can be directly matched against your resources and competences. You could take the ‘Brexit by 2020’ consensus and ask “What would Brexit 2018 or Brexit 2025 look like?”
Find out more about Brexit from the experts at IoD Open House
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