Businesses are largely still in the dark over exactly what Brexit Day will bring next March, but practical plans need to be devised and enacted now. And risk managers must be central in preparing for every eventuality, deal or no deal.
Brexit Day is looming, and negotiations continue to hit stalemate. But this must not stop risk managers developing plays for every outcome if they want to protect their business from whatever the future holds.
Fast forward. It’s 29 March 2019 – Brexit Day – the date that, just two years after prime minister Theresa May triggered Article 50 to get the wheels turning, Britain leaves the EU.
Her predecessor David Cameron certainly would not have anticipated this moment when announcing that the country would be holding a referendum to determine the UK’s future relationship with Europe, but what seemed like the unthinkable for many has come to fruition, and the big EU experiment is over.
Rewind back to the present day, and politicians on both side of the channel are still working frantically to come up with a deal for how trade will work in our upcoming post-Brexit world. As of yet, there has been no agreement and with every day that goes by, the prospect of a no-deal Brexit grows increasingly likely.
In the worst-case scenario of a no-deal Brexit, the pessimists speak of tailbacks at the channel stretching for miles as businesses collapse under the pressure and bureaucracy of attempting to trade across borders without adequate rules to govern them. Optimists will stiffen their upper lip and say things will work out, we just have to get on with it.
The truth, as always, will likely lie somewhere between the two.
Of course, the 29 March deadline is the date that the UK will officially leave the EU, but May has already negotiated a 21-month Brexit transition period under which the UK will continue to follow EU rules as if nothing has changed. So it may not be until December 2020 that the dust settles and businesses can finally see what they have to work with.
But what could this post-Brexit landscape look like? And what can risk managers do to make the path to a fully operational post-Brexit Britain just a little bit less perilous?
KNOW YOUR EXACT BUSINESS NEEDS
Carl Leeman, chief risk officer at multinational logistics company Katoen Natie, says it is impossible
to determine exactly how business will work post- Brexit, so risk managers need to be fully aware of their business’s precise situation, and what the different possible outcomes of Brexit negotiations could mean going forward.
“As a risk manager, you cannot predict what is going to happen with Brexit – no one can,” he says.
“You have to prepare on a number of scenarios that may play out, and those are very different from one company to another.”
“Some companies will not have any issues after Brexit, while others will face a lot of issues. So, as a risk manager it is important that you really understand the type of activities your business has and how they link to the UK.”
To help better understand his own business, Leeman sent out questionnaires to all of his suppliers to determine what exposure the business had to the UK.
FEAR OVER UK LINKS
“The most dangerous situation surrounding Brexit is one that we have already tackled in our business, and that is not being aware of your own dependence on the UK,” he says.
“We have an engineering department where we build equipment, and we don’t directly buy any parts from the UK, but after questioning our suppliers, we found out that some of our second- and third-tier suppliers do have items coming from the UK. We are now in the process of assessing if they can buy those goods from somewhere else or what the price difference may be once the UK does leave the Europe, and whether those parts could take longer to be delivered.”
David Hansom, procurement law specialist at law firm Clyde & Co, says businesses need to act before it is too late.
“A number of organisations have put in place the strategic, fundamental decisions they need to be able to continue trading after any type of Brexit. Outside of the multinational space, however, Brexit may be on board agendas for many businesses, but the message we are getting is that this hasn’t turned into operational work yet,” he says.
“There is an issue of Brexit fatigue in the wider population, and the absence of clarity in terms of the route that will be taken makes it difficult to plan from a risk perspective.”
“There are practical things that can be done, but it is just a real mixed bag across the industry as to whether or not these actions are taking place.”
PROTECT YOUR PEOPLE
In the run up to the Brexit vote, the issue of immigration was a hot topic that for many was one of the pivotal factors driving the choice to leave the EU. And the importance of this topic has not changed. Theresa May might have been favouring a deal whereby EU nationals would receive preferential treatment in any future post-Brexit immigration framework, but the signs are now that EU and non-EU nationals will likely be treated equally.
And despite politicians’ talk of protected status in the event of the UK leaving the EU without an immigration deal in place, there has been no unconditional unilateral acceptance by the UK Government of the Citizens’ Charter, nor the EU Settlement Scheme.
For Jonathan Chaimovic, consultant in Clyde & Co’s employment, pensions and immigration team, the threat that this presents to foreign workforces means that risk managers need to prepare for the worst, no matter how certain they are that a deal being finalised.
“While I’m confident that we will get a deal, sensible risk management dictates that we should prepare for a no-deal Brexit,” he says.
“That means people, where eligible, should formalise their status now – citizens of EU countries should look to obtain permanent residence in the UK, while UK citizens working in EU countries should look for equivalent residency status for the country in which they are based.”
The same applies to businesses; Chaimovic says those that do not already have a tier-two licence (currently only applicable to employing non-EU nationals) should consider applying for one now to cover employing EU nationals following Brexit.
Chaimovic also advises companies that, where feasible, they should be accelerating start dates of EU nationals in the UK and UK citizens in EU countries before 29 March 2019, to cover a no-deal Brexit.
GRAB THE MIC
The most important piece of advice, however, could come from Airmic deputy chief executive and technical director Julia Graham. She says the first task for risk managers is to make sure they are in a position of power to effect change within their own organisation.
“We have been telling our members from almost the moment the referendum results were in that Brexit is a prime example of why risk managers need to be seen by their businesses as business partners,” she says.
“That is because the risk manager really needs to be in the business team to be able to influence and support what the business is doing in its response to Brexit. You can’t have the impact needed if you are not invited to that business group and hold a position of influence.
“It seems blindingly obvious, but there are still a lot of risk managers who struggle to get their business to see them as business partners as opposed to a back office technician, and when it comes to Brexit you really do need to be seen as a business partner.”