5 steps all businesses should be taking to manage risks post Brexit
To borrow from former US Secretary of State Donald Rumsfeld, there seem to be many more unknown unknowns since we voted to leave the European Union on 23 June. This makes decision making and planning for any business fraught with difficulty. But one known we do know is that unravelling our links with the EU is going to take a very long time.
Given all the uncertainty, it is increasingly important for businesses to get to know their unknowns sooner rather than later. By identifying both internal and external risk factors, you can begin to deal with them and lessen their impact in the medium to long term. Whatever the size or underlying strength of your business, an unknown or ignored risk can destroy it overnight.
For those businesses who are already trading or have significant relationships with the EU, the risk factors may be all too readily apparent. But others who have no existing relationships and no plans to develop them may just be thinking “so what?”. That would be a dangerous trap to fall into. Any period of economic and political uncertainty is likely to affect all businesses and damage those who have not prepared for it.
As a commercial litigator, I am often asked to advise clients about risk. Too often problems and disputes which have been left to fester in a business for way too long and well beyond the point where meaningful corrective steps can be taken. In my experience the simple truth is that no problem gets better with time, only worse. Those businesses who deal with problems as and when they emerge prosper, and those that sit on or bury them often struggle and fail.
So what steps should businesses be taking to help manage the risks?
- Identify your EU relationships, both internal and external
I am sure that this has already been item one on your agenda at recent board and planning meetings and you may well already have a plan to deal with exit from the EU. If not, then you need to be having the meeting, taking soundings from your professional advisors, and making your post Brexit plan pdq.
- Review your trading terms and conditions
It is important for any business to regularly review its terms of trade. Long relied upon clauses can become obsolete overnight or simply unworkable as trading practices change. It is always worth asking your lawyer to review your terms and conditions on a regular basis. This is a relatively small on-going expense which will help prevent what can often be a very damaging dispute.
For those businesses with existing EU relationships, consider how these will be affected once we leave the EU. For example, do your standard terms have a clear governing law and jurisdiction clauses? Might any contracts be difficult or uneconomic to perform or enforce? Does the contract refer to the “EU” as a territory?
- Identify all existing disputes and draw up a plan to resolve them
Over the years I have witnessed first hand the financial and emotional pain associated with litigation. Disputes or complaints can quickly become a cancer that can have a damaging impact upon the performance of your senior management team and be an unwelcome drain on both time and resources.
Whenever a dispute or complaint arises, you should ensure that you have an effective process for identifying it at an early stage and ensuring that a strategic plan is drawn up to manage it. Your litigation lawyer can help your devise an effective process to deal with disputes at source.
In my experience, most disputes are better resolved quickly and effectively by instructing a specialist lawyer at an early stage. Not only will this help you identify and quantify the risks you are facing, it will also ensure that your lawyer is given the best opportunity to devise and implement the most cost effective legal strategy for dealing with it. I understand that all businesses want to avoid incurring legal fees wherever possible, but in most cases significant costs can be saved by the early involvement of your legal team and an early collaborative approach.
Brexit now means there are additional legal uncertainties which need to be addressed for those already managing EU relationships. For example, in due course, you may face uncertainty relating to the law which governs the contract or the country which has the jurisdiction to hear the dispute. Litigating a dispute in an EU Court is likely to become far more problematic, with unfamiliar law and procedure, inconvenience, delay, language barriers and unpredictability. Businesses might find themselves dealing with “parallel” proceedings, where two courts in different countries are engaged in the same or similar proceedings at the same time.
- Learn from your mistakes, don’t bury them or blame external factors
I recently attended a seminar where the successful business owner told the audience that his business celebrated failure as well as success, by holding a wake when projects fail. You may not need to go that far, but a healthy business culture will seek to openly and honestly identify processes or changes which will prevent the issue or complaint from arising again. It will very easy to fall into the trap of blaming any failings on a general post Brexit malaise or other external factors, but very few risks or potential set backs are genuinely wholly outside your control and influence.
Your professional advisor is often best placed to offer an objective and independent view on what changes you can make and lessons you can learn particularly following any significant dispute. Considering inviting your legal team for a coffee once the dust has settled and be prepared to take any medicine they prescribe.
Don’t be afraid to stick your head above the parapet and try to shape the conversation in your sector or market place. Be prepared where necessary to influence policy making on both a local and national level if it will improve your businesses prospects. More than ever before, we are likely to need business leaders who are prepared to share their experiences.
- Make a flexible business plan and keep it under review
Given all the uncertainty, the great temptation is to sit tight and not to change anything, in the hope that things may turn out better than expected or that the right decisions and choices will start to emerge through the fog. But doing nothing is seldom better than doing something. Decision paralysis usually leads to damaging failure so encourage your business to make a plan for its short, medium and long term future.
As any military leader will testify, no plan survives contact with the enemy and the need for your business plan to have in built agility and flexibility is more important than ever post Brexit. Don’t be afraid to refine it, change it or abandon it as and when necessary but make sure that whatever happens at least you always have one.
Consider consulting your trusted professional advisors as part of your planning process. They will know your business and the risks and uncertainties you are facing and you will often benefit from their emotional detachment. Once a plan is drawn up, ask them to sense test it from a critical risk perspective to identify ways in which it can be improved.
Contact a solicitor
For more information on how Clarke Willmott solicitors can help your business manage the post Brexit risks, please contact us.