The UK Brexit result had introduced a new era of uncertainty. How can organisations manage risk in these unprecedented times?
Before the referendum on 23 June, audit committees were known to be challenging executive management over Brexit implications, highlighting the need to consider associated risks. As a result, Brexit was definitely on the leadership risk radar, although not necessarily in great detail. Many organisations’ risk registers captured the issue with a single Brexit entry.
Now that the UK referendum vote has resulted in a pro-Brexit outcome, businesses and organisations in all sectors need to look in more detail at the associated risks arising for them.
The key challenge in assessing such risks is the ongoing uncertainty about what Brexit means in practice. Without knowing, for example, what trade deals will be struck or the extent to which immigration will be curbed, detailed risk analysis is impossible. Effective risk management usually relies on the analysis of information, but in this ‘post vote – pre exit’ limbo period, the necessary information is in short supply.
Nevertheless, management teams need to provide leadership within their organisations. Despite limited actual information on how Brexit will be achieved, broad risks can be defined and potential mitigation plans begun to be developed.
Management teams need to distance themselves from the media hysteria and focus on their organisation’s own specific situation. For example, any public and private sector entities currently receiving funding from the European Union will obviously need to assess the risk of those funds not being replaced by the UK government or any other source. To what extent will current of planned projects need to be frozen? Many other issues apart from income could potentially be considered, such as investment plans, trading prospects, currency fluctuations and the availability of skilled labour.
Simple steps towards risk management
Organisations need to accept that they are operating in a period of uncertainty – but that limited information does not prevent them from considering their risk exposures. Management teams can move forward by:
Look for the upsides
- attempting to identify all risks resulting from the Brexit vote, without worrying about too much detail: precise risk assessment is impossible in the absence of adequate information, but risks need to be flagged and risk registers updated even so.
- establishing procedures for keeping up with Brexit developments: businesses with substantial risks may benefit from allocating monitoring responsibility to a specific individual who will keep decision makers informed.
- making sure that any risk mitigation plan is dynamic: as the government’s Brexit planning progresses, new information will emerge that could change your organisation’s risk assessment and analysis. You need to be able to respond quickly.
While the prospect of Brexit and the associated uncertainty creates risks, there are opportunities too. For example:
- some UK investors may be pulling out of the property sector, but the weak pound may attract additional investment from overseas locations such as the Middle East.
- UK exporters may also have a chance to win new business in overseas markets.
- if the UK is not beholden to EU legal, tax a regulatory strictures, the UK will be able to increase responsiveness and support for particular areas of growth through tax relief or relaxed regulation.
Assessing such balancing factors is an important part of the risk assessment, management and planning process.
To discuss further, please contact Sarah Hillary
or Robert Noye-Allen