New research has highlighted the daunting range of decisions that firms are facing in the run up to Brexit. It will take a special blend of leadership qualities to light the way…
What kind of leader does an organisation need if it is to navigate a choppy sea of variables and arrive at its destination unscathed? What does it take to make decisions amid waves of jarring uncertainty?
Companies in Europe will have to square up to those questions with mounting urgency as the calendar gets ever thinner ahead of the UK’s 1 March 2019 Brexit deadline. Believe me, its pages are already tearing off into history at a dizzying speed: it is now seven months since Prime Minister Theresa May triggered the Article 50 countdown, and so far, not a single concrete agreement has emerged from the ongoing talks between the UK and EU teams. It is a uniquely testing and pressured time for organisational stability.
One of the great, central tenets of business is that leaders never have all the facts they need at their disposal at a time when they must make their most important decisions. If, as a leader, you wait for the stars to align so that copious time availability in your diary and total command of every required scrap of data somehow coincide, then I guarantee you will never make any decisions at all. Instead, you’ll provide a perfect opening for your competitors to hurtle merrily onwards and leave you standing.
The reason why Brexit is such a game changer in this regard is that the backdrop of questions it presents makes the need for decision-making skill, agility and insight even more pressing than usual. And that need has been vividly highlighted in a new report on the type of post-Brexit business environment with which organisations may have to engage.
Published on 2 October by law firm Baker McKenzie, The Realities of Trade after Brexit takes a sobering look at the fine degree to which leaders will need to calibrate their decisions in the event of an outcome that leaves a rigid trade border between the UK and EU.
“If a hard border were imposed,” the report says, “companies that once traded freely with European markets would see their goods exposed to new costs each time they cross the channel. These costs would take the form of both tariff and non-tariff barriers.” As a result of those cost exposures, the report stresses, the UK could lose some £17 billion per year in EU export revenues, across just four business sectors: automotive, technology, healthcare and consumer goods.
Plus, a hard Brexit would rupture UK firms’ links to their EU counterparts at such a fundamental level that many of them would be forced to overhaul their supply chains – shifting from the pipelines out of Europe to which they’re accustomed to countries covered by free-trade agreements with the UK. However, the report cautions, altering a supply chain can be a complex process – and business leaders would do well to take stock of the multitude of decisions involved.
Baker & McKenzie trade partner Sunny Mann sums it up: “Supply chains can be malleable,” he says, “but it takes time to find alternative sources of a comparable quality from a country where the duty implications are at least as good, if not better, than existing arrangements. New suppliers bring new compliance challenges from the perspective of the Bribery Act, human rights obligations and reviewing potential trade sanctions. Can you negotiate good commercial terms? Can the supplier gear up their manufacturing to supply you on time? And if goods are coming from further afield, have you ensured that transport costs won’t be too high?” In short, the report says, “it may not be possible to replicate entirely the position of trading from within the Single Market, but supply chains can be altered with care.”
By far the most critical word in that sentence is the last one. In the scenario that the report considers, care is at the very crux of the sorts of decisions that leaders will have to take. But how can that care manifest itself within such a dynamic climate, where the tiniest political announcement in Westminster, or pivot of negotiating tactics in Brussels, could radically alter an organisation’s entire starting point?
The answer is that leaders will have to be every bit as dynamic as the situation itself – not to mention intensely collaborative. Much of a leader’s skill hinges upon the ability to anticipate the future and then plan for it. As such, it is incumbent upon leaders faced with uncertain times to harness the talents around them in order to design different scenarios and versions of the future – then agree upon how the organisation as a whole will respond.
Finalising that response will require no little stress testing of the business’s strengths and limitations, given all the various scenarios that the team has outlined – plus some shrewd financial modelling. The leader’s risk appetite would have to strike a very delicate balance with that of the organisation’s investors. On those terms, a maverick would hardly be appropriate – but then again, neither would an individual who is highly risk averse (see my earlier point about how waiting for a clearing in the storm could paralyse the decision-making process altogether).
If we zero in specifically on how small businesses will cope with Brexit, I think that leaders of those companies will have more of a challenge on their hands than their counterparts in larger firms. While smaller organisations will naturally be more agile, their leaders tend to work ‘in the business’ rather than ‘on the business’ – which is to say, they are often tangled up in fulfilling business functions, leaving them with little or no time to work on strategy. That means they will lose valuable scope to focus on the horizon-gazing necessary to make decisions for the future.
However, they should endeavour to carve out as many spare hours for that purpose as they can. As the Baker & McKenzie report indicates, supplier costs could rise significantly, meaning that firms will need to pass costs on to their clients. Much also depends upon the nature of the products or services they offer. If, after Brexit, consumers in the UK find that they can source products and/or services at cheaper prices from overseas, then that’s exactly what they will do.
Image of boat sailing seas of uncertainty courtesy of Pixabay