Guidance

Finance and operations – adapting processes and systems

Peter Legge Peter Legge

Make sure your organisation is “match-fit” for Brexit by focusing on the business basics. This includes operational efficiencies and healthy balance sheets.

Review your operational plans to ensure you can continue to serve your customers effectively and assess all of the opportunities and risks.

Government's intentions on regulation

The triggering of Article 50 does not materially change the UK regulatory environment.

The European Union (Withdrawal) Bill brought before Parliament aims to ensure regulatory consistency post-departure by carrying over EU law into UK domestic law.

Organisations can plan that in areas such as employment law, safety standards, accounting standards and consumer rights there will be no immediate change in the rules as we leave.

The extent to which the UK regulatory environment may change post-Brexit depends on the details of our future relationship with the EU.

Whatever the outcome, government has signalled no ambition to lower regulatory standards.

Does Article 50 impact your company report?

Triggering Article 50 does not affect the manner in which companies report.

The risks Brexit presents to a company must be clearly communicated in annual reports, keeping in mind that these disclosures should be ‘fair, balanced and understandable’.

To ensure appropriate consideration and disclosure of these risks, you should:

  • assess the risks in an impartial manner and consider how these risks will be managed
  • challenge valuations
  • review tolerances and sensitivities of your modelling.
  • focus on the business basics to get "match-fit" for Brexit 

Plan for the uncertainty

In scenario planning, businesses should undertake a board-level assessment of the potential financial impact of the top five downside-risks and upside-opportunities presented by Brexit.

In order to do this you must check:       

  • whether you have got access to the necessary data and whether this is reflective of the uncertainties the entity faces
  • ensure you have the necessary access to budgeting, forecasting and modelling skills.

Book a Brexit workshop

To book a Brexit workshop or find out more about how we can support your business through Brexit, please contact your usual adviser or email us.

Re-evaluate your operating models

In response to scenario planning and financial modelling, organisations may need to review key parts of their operating model to cater for new realities as Brexit unfolds.

What do you need to do to continue to serve customers post-Brexit?

Consider:

  • how operations may need to change in light of potential new relationships with Europe – including regulatory requirements for services
  • the tax implications on supply chains and the options to restructure
  • the impact of carving out European operations into new entities
  • current finance structures and how IT systems may be impacted.

Prepare now by:

  • thinking about how administrative burdens might change if the UK leaves the Customs Union, and what impact this would have on incremental costs
  • mapping the people, process, systems, contracts and asset related issues around potential operational remodelling
  • thinking about the financial reporting implications of operational decisions.

Insulate your balance sheet

A robust balance sheet can shield against any harmful trading performance impacts. It also provides flexibility to seize unforeseen opportunities.

Ensure you have sufficient liquidity in your balance sheet.

Begin by, reviewing and optimising working capital performance, exploring alternative sources of finance and reviewing hedging positions.

Communicate clearly

Give your investors and other key stakeholders confidence by engaging them in a positive dialogue about how the challenges and opportunities posed by Brexit may present themselves and how you will react.

One of the key channels for this communication is your annual report.

Deal prospects

The depreciation of Sterling will make UK assets more attractive to overseas investors. The uncertainty will also provide opportunities for those willing to take a risk on Brexit. This means there will be opportunities for those wishing to enter or exit markets