Many multinational organizations didn't think it would actually happen, but now that Britain has officially voted to leave the European Union, it’s time to start planning for the impacts of the referendum. It could take a couple of years for Britain to officially exit the union, but experts are saying now is the time to plan for how the change could affect your procurement organization and your supply chain.
James Yearsley of Deloitte, who leads the business and professional services industry consulting service line team and the supply chain team in the U.K., said companies will need to assess their supply chain and understand the impacts the Brexit vote has had specifically on currency fluctuations.
Procurement and supply chain organizations typically plan for currency changes around the world, but it’s important to take a closer look at where currencies are today given the Brexit decision and what that means for contracts with suppliers and if certain trade deals and relationships will be impacted. Yearsley said organizations should engage in scenario planning, if they have not already, to determine if they are prepared for the effects of Brexit and changes in trade deals that may occur.
“It’s really important to prepare yourself for it — do you know your deals well enough? Can you assess the commercial realities of certain things happening in the marketplace?” Yearsley said.
Many organizations remain cautious following last week’s vote in Britain, not having a “knee-jerk reaction” at the moment, he added. Because there are still so many unanswered questions regarding how exactly this will affect global supply chains, it’s important to plan for every possible scenario.
Another piece of advice Yearsley gave for organizations: communicate. Procurement and supply chain leaders should “over-communicate” to global teams about specific plans in place to deal with Brexit impacts.
“Really engage the whole of your organization to make sure you keep your teams well-informed,” he said.
Andy Hovancik, CEO of Sovos Compliance, which helps companies with tax compliance, also urged companies to plan for the impacts of Brexit, even if the effects of Britain leaving the E.U. are not completely known at this time.
“I don’t think it hurts to kind of plan for the worst and then hope for the best,” he said.
If Britain leaves the E.U., it will introduce risk for multinational corporations, he said. Yet it could also create opportunities for some companies operating with British firms and even encourage them to pivot to other E.U. nations. However, Hovancik urges companies not to jump to any one conclusion, but to take some time to see how this vote plays out and how it starts to impact the global landscape.
Before taking significant actions, Hovancik said, take time to think about all the implications and assess the different ways Brexit may impact the business. The next step is to put mitigation plans in place to ensure the organization can respond to those possible challenges, he said.
“Brexit didn't kill pragmatism,” Hovancik said. “And I think that is where you go back as a business and you say, you have to plan for this but you don’t have to overreact.”