As the Brexit countdown gets louder, it’s time to ensure your governance structure is fit for purpose – and ready to rocket-fuel your growth – says Katie Clinton, UK Head of Internal Audit, Risk and Compliance services.
In a word, everything. Brexit is a many-tentacled beast. So complex is the whole process in fact that, whatever your sector, its impact is likely be felt not just in one isolated part of your operations – your supply chain or logistics activities, say – but potentially across every single aspect of your business. Everything in other words from tax, finance, legal and technology to the EU people on your payroll and the way you service your customers.
Try to tackle one area in isolation and you may well find that those tentacles have suddenly spread to a completely different, unforeseen, part of your business. It’s only by approaching the challenges holistically that effective risk mitigation strategies can be put in place. And with the Brexit clock now ticking down fast, companies have absolutely no time to lose in getting their house in order.
It all starts with Internal Audit and Risk Management – the beating heart of any business. Get your Brexit focus right here and you’ll be able to create a thorough and effective response company-wide. We’ve developed a Brexit methodology for our clients, helping them to safeguard their businesses thanks to a robust governance and management structure put to work in every part of their operations.
Think of it as a catch-all Brexit health-check: a box-ticking exercise in the best possible sense. It helps businesses get fit for whatever issues lie ahead by asking the right – unexpected – questions of themselves, their customers and suppliers. We then help them map their Brexit exposure to develop a critical path for risk mitigation strategies via a well-calibrated, proportionate response. That includes investment spent not just on protecting their business today, but fuelling its growth tomorrow – whether that’s an automated warehousing facility or building a presence overseas to avoid customs barriers.
Brexit needs to be right at the top of the boardroom agenda, bang in the centre of the risk radar. And given that it’s such a fast-moving landscape, developments need to be constantly monitored to validate business forecasts and protect the road ahead.
Nowhere near as many as should be at this critical stage, with hard deadlines now approaching fast. Businesses in highly-regulated areas, such as financial services and pharma, are more advanced in their contingency planning, with a clear sense of where their vulnerabilities lie – if passporting no longer exists for banking and insurance, for example.
Elsewhere, too many companies have adopted a wait-and-see approach and are only now waking up to the potential disruption they face. Based on what we’ve seen and heard at external business platforms, we estimate that only 30% of companies have prepared a Brexit plan or done the extensive impact assessments necessary. According to the Institute of Directors, half of companies are making contingency plans and about 1 in 10 businesses have implemented them. That leaves a lot of people with a lot of work to do before 2019.
You’d be surprised. We’re currently working with one household name retailer which has extensive integrated supply chains and Brexit exposure everywhere from its logistics network and product sourcing to its pool of EU talent. The company had already done its own discrete Brexit impact analysis in various parts of the business – but having spoken to our team, realized that they had significantly underestimated the possible impact on their business as a whole. Another client in the pharma sector suddenly realized they would need to change all their product packaging in order to still meet EU labeling regulations. And, likewise, a financial services company I met recently assumed that Brexit was tangential to their business, until we found that 20% of their assets were in European mortgages.
Disruption can be rocket fuel for business growth: ask any fintech leader. We view Brexit and all its uncertainties as a trigger for clients to totally reassess the way they operate. Those companies which assess their entire activities top to bottom may well end up reinventing where, how and why they do business as a result – and be in pole position for any new openings that arise. Financial services firms are masters at that kind of nimble adaptability. Companies in other sectors can easily follow suit. The time to act decisively and with imagination is here.