Finally, in our mini-Brexit series, we are looking at how businesses must make sure they are ‘match-fit’ for Brexit by bringing the focus back to business basics such as operational efficiencies and healthy balance sheets. Taking the ‘wait-and-see’ planning approach to Brexit is risky especially when sufficient clarity may come too late to take crucial action and could lead to the risk of falling behind better-prepared competitors. Planning now by reviewing your operational plans, should ensure you can continue to serve your customers effectively and help assess all of the opportunities and risks.
Despite the economy in Northern Ireland showing growth since the Brexit vote, we are noticing companies struggling to make the right operational and commercial decisions without knowing the full impact Brexit may have on their operations.
The uncertain future has led to many businesses unsure how to forecast revenue or decide whether major change in strategy is required. With only nine months until the official exit date, businesses should:
- plan for uncertainty – undertake a board-level assessment of the potential financial impact of the top five downside-risks and upside-opportunities presented by Brexit;
- re-evaluate operating models – in response to scenario planning and financial modelling, businesses may need to review key parts of their operating model to cater for new realities as Brexit unfolds. Consideration should be given to how operations may need to change in light of the new relationship with Europe, the tax implications on supply chain and the options to restructure, the impact of caving our European operations into new entities and the potential exposure to withholding tax in European states when the UK leaves the EU;
- insulate your balance sheet – A company with a robust balance sheet can shield itself against any harmful trading performance impacts. It also provides flexibility to seize unforeseen opportunities. Companies should have sufficient liquidity in your balance sheet, a factor which should be reviewed regularly in any instance. Increased pressure on working capital can result from any additional Customs Duties costs and timing on recover of Import VAT; and
- Communicate clearly – give your key shareholders confidence by engaging them in positive dialogue on how the business is addressing the challenges and opportunities posed by Brexit.
Businesses can re-evaluate their operating models based on how their sales and costs could evolve in each Brexit scenario and incorporate them into their existing strategic plans. Each scenario will incur differing costs from labour, tariff and non-tariff barriers, and regulations.
There has been a lot of focus on how companies should be protecting their operations, however part of the planning process should also focus on seizing opportunities. Notably, the depreciation of sterling may make local products more attractive to overseas investors and also provide the time to enter or exit markets.
Businesses should begin to plan their finance and operations for Brexit sooner rather than later. We are currently assisting local businesses via the ‘Start to Plan’ voucher from Inter Trade Ireland which provides up to £2,000 of professional advice for planning for Brexit.