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Keep the finance flowing: Exposing global corporates’ Brexit funding issues

Brexit’s financing risks for corporates

Companies should keep preparing for Brexit and in doing so consider the wider impact it could have on their financing and hedging, says Joe Cassidy.

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Partner and Brexit Banking & Capital Markets Lead

KPMG in the UK

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Keep the finance flowing: Exposing global corporates’ Brexit funding issues - pipe with on off handle

Conditional agreement on a Brexit transition period gives global companies vital breathing space. However we believe companies should not only press on with Brexit preparations, should also assess more broadly what a potentially fragmented financial system might imply for the way they finance and hedge operations.

Too few are currently addressing this hidden consequence of Brexit in their plans. Non-financial corporates should not assume their financial counterparties will come to them with a solution… or that they have Brexit all worked out. Clarity may only emerge at the last moment and come too late for companies to rearrange access to finance, switch bank branches or obtain local authorisations.

To reduce risk and keep finance flowing, we are advising corporate clients to:

1. Look again at you banking and financial relationships:

  • Have a plan if lending freezes up
  • Check your bank footprint
  • Study your counterparty risk on deposits
  • Prepare for frictional costs to rise

 2. Make sure your regulated financial businesses can continue to operate cross border.

  • Companies carrying out regulated activities in the UK or EEA must make sure they still have the right local authorisations to continue trading.
  • Understand whether you need to take action and what to do next.

    … and establish four certainties in your planning:

  • Certainty of counterparty
  • Certainty of data
  • Certainty of contract
  • Certainty of market access

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