Understand the Risks
The first step for each business is to identify and assess the risks to which it is exposed.
We recommend that all businesses should allocate responsibility to particular individuals or a group or committee charged with considering and addressing the risks to the business presented by Brexit. Depending on the size and resources of the business, the group should comprise individuals with different backgrounds and expertise and might include individuals with experience in finance, procurement, sales and marketing, logistics, compliance and HR.
The sort of key questions that the committee might be advised to consider include:
- where are our top suppliers (and their suppliers) and customers located?
- how many shipments to and from our business are made across the EU border or the northern Irish border?
- what are the lead times for our suppliers?
- what personal data relating to customers, suppliers or employees do we receive from the EU (including any cloud service providers hosting in the EU or group companies based in the EU)?
- do we rely on the skills of any EU workers?
The answer to some of these questions may not be obvious and so further questions or research may be required. If necessary the business should ask suppliers for the information required from them to assess the risks involved.
Take action to mitigate the risks
Once the risks to the business have been identified, the next stage is to assess and prioritise the risks and the actions required to seek to address them.
For advice on procedures and documentation and general advice, the government has provided useful guides and information on its website https://www.gov.uk/brexit. The website includes guidance on a range of topics relevant to different businesses and we would strongly recommend all businesses to investigate the site and check the published information which is relevant to them.
There is a considerable amount of information in particular concerning importing and exporting procedures, customs and VAT and specific information also for those importing live animals, hauliers and for those operating in regulated sectors such as food and medicine.
Any businesses likely to be affected by a No Deal Brexit who has not already done so, should review the Government advice as a matter of urgency as there is potentially very little time before the end of the month to prepare for potentially significant changes in procedures and documentation.
To keep up to date with the latest developments, businesses can subscribe for daily email updates from the Government which is also strongly recommended.
Once the risks and consequences of Brexit for the businesses have been understood and properly digested, the business will need to consider its strategy and action plan.
For some larger organisations the options to be considered might include fundamental restructuring for example by setting up a new subsidiary in the EU or in the case of existing multi-national groups, re-allocation of work or staff within the group. Such actions are likely to require significant investment and making such a decision at a time when the final effects of Brexit are still uncertain and with the possibility that consequences anticipated in the event of a No Deal situation might not materialise, would involve a difficult balancing of the costs and risks.
For importers and exporters, other practical steps which can be taken to mitigate the effects of Brexit might include:
- considering warehousing or stock piling options
- monitoring current suppliers for insolvency risk
- improving communications with key suppliers and putting in place arrangements for early communicating and escalating resolution of problems
- reviewing contracting arrangements with a view to understanding how contractual rights and obligations may be affected by the effects of Brexit, the risks in relation to breach of the contract and scope for disputes and identifying points which the business would want to renegotiate either in relation to the current contract (if possible) or in any renewal contract
- investigating alternative or reserve suppliers based in the UK or outside of the EU ( who may be more competitive as a result of reduced tariffs applied under WTO rules)
- considering alternative transportation arrangements
- considering hedging arrangements to deal with currency fluctuations
- putting in place arrangements to mitigate effects on cash flow for example taking steps to shorten payment terms, reduce credit given or extend credit received;
- investigating new opportunities and markets outside of the EU
Seize the opportunities
Of course, Brexit presents opportunities as well as risks and challenges for businesses.
Opportunities may come from shifts in exchange rates, the opening up of more vast markets and suppliers and perhaps from greater experience and expertise in exporting for UK businesses acquired in adapting to the changes required for trading with the EU.
Local Chambers of Commerce have great experience and typically offer a range of schemes, advice and resources to assist businesses in increasing their exports which are well worth investigating.
How Sydney Mitchell LLP can help
We can assist by:
- providing more detail or advising in relation to any of the legal issues covered in this summary
- advising on and drafting distribution or agency agreements for new resellers or sales intermediaries
For help and advice please contact us on 08081668827.
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