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Brexit: a strategic risk that makes scenario-planning a priority

by Gavin Hinks on March 31, 2017

Brexit scenario-planning becomes the key boardroom activity for UK companies as the prime minister triggers Article 50.

Brexit scenario-planning, UK, EU

Photo: Shutterstock

Prime minister Theresa May this week pulled the trigger on Article 50, starting the process of withdrawing the UK from the European Union and perhaps one of the biggest strategic review projects Britain’s companies have ever seen.

With the prospect of Brexit radically changing the country’s trading relationship with member states of the EU, corporates in the UK will have to know what their options are when it comes to making their big strategic decisions over the next couple of years.

Karen Briggs, head of Brexit at KPMG, writes: “Although individual companies have different levels of Brexit exposure, the majority are deep into scenario planning and some firms are beginning to reconfigure their businesses.

“This means talking to and reassuring staff, seeking new regulatory approvals, and shifting certain parts of their operations. UK PLC recognise we are at the point of no return and key business decisions are now required.”

The key issues there are staff, location and regulation—all major issues underlying any strategic decision a company is likely to make in the next couple of years.

Of course, much uncertainty remains. We do not know the final shape of the trade deal the UK will have with the EU. Nor has either side firmed up the position and rights of workers on either side of the continent.

And while the UK will, for the time being, adopt EU law as British law in the Great Repeal Bill, we also know there are groups lining up to demand that elements of European law be done away with altogether, thus ensuring that uncertainty remains hanging over rules and regulation that companies currently take for granted.

Forensic detail

But Briggs’s point is also one about planning: that is, scenario-planning. Any company board not currently working through the Brexit scenarios in forensic detail is behind the game. This is not just about where the company’s corporate base will be, or how new tariffs will affect business, but also the risk of subtle regulatory change that comes as part of Brexit that could have a significant impact on business.

These changes may be bad news. On the other hand, approached in the right way, they may be turned into opportunities.

But it’s not too much of a stretch to say that Brexit scenario games will become one of the biggest preoccupations of company boards over the next two years as news evolves of the final exit deal for Britain. In fact boardrooms may be in for some long sessions before the two years to withdrawal is over.

Undoubtedly, boards will need to order a deep dive on the elements of their business models to know the true impact of Brexit. It is happening for better or for worse.

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Article 50, Brexit, European Union, strategic planning, Theresa May

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