Firms hoping for the best rather than planning for the worst face the most danger

Harry Goddard: Many businesses are waiting, anxiously hoping for a positive outcome on key Brexit issues that affect them. But this is an extremely risky strategy.

January 1 is approaching. The Covid-19 pandemic has taken some attention away from the fact that Britain is about to leave the EU single market and customs union on terms currently unknown, or perhaps without a deal at all.

But it’s going to happen. An extension to the transition period may be agreed due to the disruption to negotiations caused by the Covid-19 pandemic, but this is no cause for raised hope for a more favourable outcome. Firms must therefore act on the basis that there are now just four months left to resolve a wide range of issues. Ireland is likely to be disproportionately affected by Brexit. Our agri, pharma, wholesale, retail, electrical and transport sectors are likely to be hardest hit.

Some businesses have been planning for a range of different Brexit scenarios for some time, and have solid contingency plans governing how to protect their supply chains, their people and their access to essential data.

However, many businesses are waiting, anxiously hoping for a positive outcome on key issues that affect them. This is an extremely risky strategy.

It is those who are waiting rather than planning for the worst who face the most danger. It seems more and more likely that we will end the year with no more than a basic free trade agreement (FTA). This will likely mean a high level agreement on core trade elements, with the detail left to be filled in. Even a basic FTA is not a given, and the short time left could mean we unintentionally default to a no-deal.

Whatever the outcome, it’s clear that firms will need to manage and embrace varying levels of uncertainty over the coming months and years. Brexit is not the only reason for this: Covid-19, a potential recession, global political uncertainty, climate change and a myriad other new and developing risks all mean that developing the capacity to identify risk and the management ability to overcome new challenges is a very urgent task.

So if there is a particular outcome to a specific Brexit-related issue that would have a very serious negative impact on your business, then you should prepare for that now.

To give an example, those in agri-business are very much hoping that the Brexit outcome will not involve tariffs. But if your business would be very negatively affected by tariffs - and that is a reasonable assumption to make for many in the agricultural sector -then you should run scenarios for next year as if tariffs are going to be imposed.

This may lead you to identify new markets, remove potentially unprofitable products and introduce cost reductions and efficiencies. If you wait to respond until a new tariff regime is in place, your business will suffer severely. If ultimately we end up without tariffs, the scenario analysis and planning will probably have helped identify ways to improve your business anyway.

If there is a possibility that your supply chain or physical route to market will be disrupted, then plan now on the basis that it absolutely will be.

Do you need to scope out different suppliers and new routes? Is there a possibility your transport will be slowed by new checks? If so, examine whether your supply chain will withstand that potential delay and, if it won’t, make a new plan.

If you don’t have to change your physical route or supply chain as a result of Brexit, you may want to change it following the outcome of your Brexit planning anyway.

The importance of reliable and timely information on Brexit over the coming months cannot be emphasised enough. It is likely that things will move at a significant pace. It will be important that you have the most up-to-date data to inform your decisions.

There has, for example, been quiet but important progress on key issues for Ireland. The land bridge through Britain is used by two-thirds of Irish exporters of goods to mainland Europe -150,000 trucks per annum in all.

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If there is a possibility that your supply chain or physical route to market will be disrupted, then plan now on the basis that it absolutely will be.

Last month, Ireland and the EU agreed a system which will distinguish between Irish agri-goods which have just passed through Britain, and British goods, when they land in mainland European ports. Irish goods will now go through “green lanes” on arrival, and won’t face the perhaps lengthy delays faced by British exports.

This change is now going through a European Com­ mission process, and it will finally need to be approved by national leaders and the European Parliament.
While this should relieve one headache for firms transporting their goods to Europe it also means they must adapt to the new requirements. The earlier you have reliable information, the earlier you can respond.

It is difficult to see much silver lining in the current process. Perhaps in years to come, we will look back at this moment as a time when Irish businesses further broadened their world view and developed new markets in mainland Europe, the Far East and the Americas. Maybe we will see innovations that were forced on business by Brexit that had a long-term usefulness.

Such potential crumbs of comfort are for the future. Right now, there is a short sprint to Brexit, and businesses must prepare for the worst. There is still hope that some of us will be pleasantly surprised by a positive outcome. But the worst situation would be if your business was surprised by an unfavourable outcome in just four months’ time.

This article first appeared in the Sunday Business Post on 30th August 2020. Columnist author.

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