Comment & Analysis
We’re eight months in and the determined positioning of both sides doesn’t provide too much insight into current progress. A March 2019 exit still seems a long way off.
It might be welcome news that following the latest round of talks in Brussels, the UK government wants to accelerate its current one-week-a-month negotiations to start tackling post-Brexit relations, but what does that do to help your business? Until we can see the final deal, how can we make decisions which will determine the future of our businesses?
And what are the options in the meantime? Do nothing and wait to see what happens? Get stressed every time you hear that negotiations have stalled or that the terms to be agreed will have an enormously negative impact on your sector? Hardly proactive management and against the natural instincts of most owner managers, not to mention larger corporates.
So what are the alternatives? Well, what about focusing on the things you can control or at least manage. For most businesses your lifeline is your supply chain. Put simply, it’s what you buy in, what you do with it, and how you sell it on.
Perhaps, obviously then, the protection of relationships with your suppliers, your people and your customers is vital if your business is to survive and thrive. If any of your suppliers or customers, or indeed your people or processes are likely to be affected by increased Brexit costs or a new regulatory regime then they may well look to renegotiate contracts with you, increase prices or reduce your margins.
So rather than do nothing, or delay decisions which could take your business forward, consider the following actions, which may well help you to avoid any unintended disruption to your business.
Supply chain collaboration
- Start thinking about your suppliers, your people and your customers as part of the same team. If one is effected by the coming changes, you all will be.
- Use the current period of uncertainty to speak to your suppliers, your people and your customers about any mutual concerns and use these discussions to reassure them that any issues can be worked out collaboratively rather than on a “devil take the hindmost” basis.
- Work out what you think might be a worst case scenario, say if WTO rules were to apply from March 2019, get your FD to work out the implications, not just for your business, but for your suppliers and customers as well, and deliver your findings to them.
- Discuss any issues arising openly and work out solutions frankly, hopefully in a way which spreads any risk between you and shares any likely cost implications in an equitable way.
- By developing an atmosphere of trust and co-operation, you will stand a far better chance of retaining valuable relationships and locking in the key components of your business in the medium term.
But while you’re at it…..
- Make sure you know exactly where you stand by reviewing your supplier and customer relationships to determine the longevity of these arrangements and any termination rights that might apply either way.
- Identify any key dependencies and put in place contingency plans to ensure you have solid alternative sources if one of your key suppliers is likely to be seriously affected.
- Consider potential barriers to trade and the impact of delays in importing goods, including costs or levies. Investigate dual-sourcing and consider alternative supply sources outside of the EU.
- Investigate if your suppliers have any key sub-contracts in place which may affect deliveries to you, and if these may be affected by Brexit.
- Review Supplier prices and Customer costs in existing contracts and ensure that these calculations are clearly set out. Renegotiate pricing terms to deal with potential currency fluctuations.
- Consider whether hedging is an appropriate way for your business to address potential fluctuations in price or currency, whether on the supply or customer side of your business.
- If your supply chain is dependent on sharing people skills internationally, consider the impact of not being able to send staff to Europe on short notice and look at alternative means of sourcing key people.
In conclusion……
So the key message is not to just sit there worrying. As with any risk, the procedure is to identify, assess and manage the issues, we’d suggest by collaborating closely with your key business partners to share concerns and spread the impact, but also by taking active steps to protect your business by making sure that your escape routes are well planned and ready to execute.
Find out more about asb law - www.asb-law.com