Brexit Business Checklist: A Guide to What Companies Should Do Next

Even though it was certainly on the cards, the realization that the UK will be quitting the world’s biggest political and economic union has greeted most people with shock this morning.

Similarly, David Cameron tendering his resignation was expected after a “leave” vote but still has caused some surprise and worry. Mark Carney, the governor of the Bank of England was more reassuring in an effort to soothe markets. But warm words will do little to cool the turmoil right now: The pound plunged to lows not seen since the mid 1980s, UK banking stocks saw falls of almost a third of their value at one point, and stocks of British housebuilders and retailers were also hit hard.

While there is nothing to help anyone predict what the coming months will hold, it’s worth remembering that, first, the UK prime minister – likely Cameron’s successor – has to trigger article 50 of the Lisbon treaty which then gives the UK two years to renegotiate a huge host of treaties with the EU, and exit.

So, if there is any kind of economic upset looming, it will be happening in slow motion – with hopefully sufficient time and political goodwill to make the right course corrections.

Questions Managers Should Ask in the Wake of the Brexit Vote

UK-based executives are still taking stock but, given they had contingency plans in place, many are concentrating on business as usual. They have sat through Brexit scenario-planning sessions, and most are still confident in their growth targets and core strategy, at least for now.

Executives around the world should focus on the more practical business concerns of, “what next?” To support this, the below checklist will help managers assess their exposure to Brexit-related risks and do their best to stay competitively sharp in a difficult situation.

You can also sign up for this complimentary webinar to hear what executives are doing in response to the vote, and how companies should navigate the coming months. And an earlier post has a list of questions by functional area that senior management teams should be able to answer.

Immediate:

1. How should we change our currency hedging and trading?
2. If we raise funds in sterling or euros, how should we change our funding plans?
3. If we are on the cusp of an M&A transaction, can funding be contractually compelled?
4. In the event Brexit leads to a liquidity crisis (e.g. loss of confidence in UK financial services sector and contagion), do we know what our optimal cash buffer would be under multiple scenarios?
5. Could we quickly identify which capital investment and research projects to put on hold if liquidity became a priority?
6. Which UK- and EU-based capital investment projects will be affected and can we safeguard the most critical?
7. Are we aware of all exposures to foreign-denominated debt being paid in British pounds and whether certain foreign exchange scenarios pose elevated liquidity risk?
8. Are there liquidity or other balance sheet requirements embedded in credit line or other debt covenants that might be triggered by the Brexit?
9. How will we know what employees are thinking and feeling? How will we know if they need additional information, guidance, or training? Do we have adequate feedback, listening, and escalation channels for employees?
10. What is our immediate communication plan to our employees, our investors, and our business partners?

Near term:

1. For customers in the UK and Europe, how will this change their buying behavior?
2. For customers who pay us in depreciating currencies, should we change their pricing?
3. Do we know which customer segments (if any) are at risk under financial pressure? What is our plan to strengthen our relationships with at-risk customer segments?
4. How well do we understand our suppliers’ financial positions? Do we know which of our critical suppliers are most vulnerable?
5. How do we avoid overreacting and distracting from the current plan?
6. Is there a consistent view amongst board directors, executives and business management of the Brexit’s impact on company financial performance and strategy?
7. Do we have a clear view of how we will communicate the financial and strategic effects of Brexit to investors?

Medium term:

1. Do we recognize the relative advantages and disadvantages that specific industry players will face as the economic situation changes and as the schedule for Article 50 is rolled out?
2. What further government or regulatory interventions will be made related to Brexit, and how would they affect our company and our industry?
3. Have we assessed the likely impact of Brexit on talent sourcing to and from the UK (e.g. labor law and restricted migration)?
4. What might the implications be for any EU nationals working for us today in the UK and, vice versa, for UK nationals working elsewhere in the EU?  How will this affect workforce mobility across our organization?
5. If risk-aversion escalates, how do we ensure managers support and encourage innovation and new ideas?
6. As the UK and the European Union work through Article 50, how do we adapt to changes related to:
   • Taxation
   • HR laws and policies
   • Legal entity and regulatory status