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Brexit: Where Companies Feel Most Exposed

While senior management teams digest last week's vote, most report that they weren't well prepared and are working hardest to understand the legal, compliance, and workforce planning implications

As everyone takes stock of Britain’s EU referendum result, it looks increasingly likely that little is going to happen immediately – beyond the inevitable political fallout – and that no irreversible political decisions will be made without a period of reflection.

On Thursday, the FTSE 100 index was back up to pre-referendum levels, and senior business figures continued to make reassuring noises, such as HSBC chairman Douglas Flint ruling out a decision to move the bank’s headquarters out of London (paywall).

That’s not to diminish the scale of the tasks facing companies’ senior management teams but it does suggest that they have some breathing room. And that’s probably a good thing. Only 7% of over 600 corporate executives polled by CEB this week believe that their companies were “highly prepared” for a leave vote on the day of the referendum (see chart 1).

Organizational readiness on the day of the vote

Chart 1: As of the day of the referendum vote, what was your organization’s readiness for a “yes” vote to leave the EU?  n=629  Source: CEB Brexit webinar snap poll, 28 June 2016

Note: Total does not equal 100% due to rounding.

Companies Focusing On Their Staff and Legal Risks

The same polling shows that managers are most concerned about the legal and compliance implications of the vote and then, second, making sure their workforce planning is as up-to-date as possible (i.e., asking what skills are needed in which areas of the business and currently what nationality of staff hold those roles?).

Third, management teams are understandably ensuring that their supply chains are in good condition, that they’re talking (and listening) to top tier suppliers and running through scenario planning exercises depending on would could happen to trading conditions in the years to come (see chart 2 for more).

Brexit exposure

Chart 2: Where do you currently feel most exposed as a business because of Brexit?  n=907  Source: CEB Brexit webinar snap poll, 28 June 2016

Note: Total does not equal 100% due to rounding.

Expert Views

CEB held a webinar earlier this week where CEB and external experts gave advice on the work that HR, finance, legal, and communications teams should prioritize in the coming weeks and months.

Indeed, management teams may well have pressed the pause button when it comes to longer timeframes; there’s evidence that Brexit has slowed M&A activity (paywall). As Johannes Haas, general manager of DZ Bank AG London and an expert panelist in the webinar, pointed out, companies will tend to, “sit back and wait until they have a bit more clarity and I think they will hold back investments until there is a clear pathway of what is going to happen, especially for corporates who are producing in the UK. It’s going to be difficult if you want to export into the EU and we have to see what rules will apply for these companies.”

The experts combined to provide a three step plan; anyone can access the complimentary replay for more detail.

  1. Reassure employees, stakeholders, and investors: Create clear communications to all employees, customers, and investors to reassure them that nothing drastic is going to happen immediately.

    It’s important to share both what your company does know, and what it doesn’t, and help separate fact from rumor. This is particularly vital since the extent of the changes your organization will experience remain largely undetermined.

  2. Set-up a Brexit task force, if you haven’t already: Firms should establish a small cross-functional group of people that are the designated contacts for Brexit-related decisions and planning, according to panelists Kon M. Asimacopoulos, a corporate restructuring and insolvency lawyer, and Peter Nolan, a global sales and marketing consultant.

    You want this team to “keep an eye on developments…and decide what actions to take internally,” Asimacopoulos explained. They should be looking at potential changes affecting the movement of people, trade currencies, the movement of people, and contracts, and report back to the board or executive committee level, he added. They should also lead communications regarding upcoming changes, with the immediate goal of creating an open flow of communication to the right people. Only around 30% of companies have already established a Brexit task force.

  3. Prepare to respond with agility: One of the biggest mistakes companies make during uncertainty is to focus too heavily on predicting what is to come. Instead, managers should concentrate on how to respond to changes with the necessary speed and flexibility. Management teams should avoid three common mistakes when planning for different scenarios (see chart 3 for detail).

    Key mistakes when modelling scenarios

    Chart 3: Key mistakes when modelling scenarios and how to overcome them  Source: CEB analysis

CEB members have access to a suite of resources to help them plan and operationalize their ongoing response to Brexit.

More On…

  • Webinar: The C-Suite Response to Brexit

    Learn what executives are focusing on in the immediate aftermath of the Brexit vote, and get some practical advice from practitioners and experts on how to formulate a strong response plan.

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