Navigating Brexit uncertainty Leading from the front

Transcription

1 Navigating Brexit uncertainty Leading from the front Nick Haigney & Libby Mason February 2018

2 Objectives for today 1 Overview of the deal understanding the timing and scenarios 2 Share the latest thinking on Brexit and what do we see our clients doing now 3 Inspire you to talk to your organisation about what they are doing to prepare 4 Share some tools to support your thinking about what Brexit means for your organisation 5 Give you confidence that there is action you can be taking now Leading from the front February 2018

3 Leading from the front February

4 Defining the Scenarios Beyond Brexit January

5 What should businesses be doing now? With under 500 days to go, now is the time to assess organisational readiness Brexit Plan and implementation 4 Prepare and sign off a Brexit Plan, with clear implementation responsibilities and relevant governance arrangements. Understanding Brexit issues and scenarios Data analysis and risk assessments 2 Design future solutions 3 Business wide data collection and analysis for high level Brexit impact assessments, checking Brexit readiness and key risks. Design future solutions in key areas to facilitate mitigation (based on understanding of level of impact, and scale of change required to stabilise operations). 1 Brexit baseline understanding of key political issues, likely negotiating outcomes and scenarios for future trade arrangements. 4

6 Getting started It s time to start asking the questions about what it means for your organisation There is no effective one size fits all impact assessment framework. Potential impact can be very different between sectors and even businesses in the same sector. It is possible now to get into detail in assessing impact and potential mitigation. 1 Trade and customs 2 People and immigration 3 Strategy and business plan 4 Governance and mobilisation What will trade between the UK and the rest of the world look like and what impact will this have on cost, admin and time? What impact will changes to immigration have on the workforce and operating model? What can you do to prepare? How will Brexit affect the UK economy and market demand? Are the assumptions in the strategy and business plan still fit for purpose? How are you setting up your Brexit response? How are you tracking developments and are you able to act if needed? Our Brexit Impact and Readiness check list provides the questions needed to start exploring potential impact areas and current readiness. Leading from the front February

7 Five questions for Internal Audit Assessing the impact of Brexit requires detailed scenarios, considering the characteristics of the trading relationship between the UK and the EU and the rest of the world which will dictate how your business will operate. Once these scenarios are well understood, IA can start to work through the following five questions: 1 How well do you understand the completeness of the risk landscape? 2 Have you quantified the impact on your organization? 3 How effective are your mitigation plans? 4 Do you have the right governance in place? 5 Are you considering how Brexit impacts your existing internal audit plans?

8 Useful links and additional information 1 Visit the Beyond Brexit website: pwc.co.uk/eureferendum For trade specific insights visit our Trade Matters online hub: pwc.co.uk/tradematters 2 Subscribe to the Brexit webcast and podcast series: pwc.co.uk/the-eu-referendum/beyond-brexit-webcast-series Covers Brexit-related events and issues affecting business and the economy 3 Get in touch with our subject matter experts get in contact through our Beyond Brexit page, or the Trade Matters page Beyond Brexit January

9 Libby Mason Director Office location: UK Embankment Place, London Mobile +44 (0) Libby is a Director in our international trade team and specialises in Trade Policy and Customs. Libby spent 14 years working in the public sector across a range of Trade and Customs Programmes helping to implement the Canadian strategy on pre and post clearance of goods and a suite of trusted trader and trade facilitation programmes. As a trained accountant who spent a number of years working in executive level finance positions, including as the Director of Financial Systems and Policy and as the Financial Controller for the Home Office, she is uniquely placed to bring strategic customs and trade planning in line with business strategy. Nick Haigney Director Since joining, Libby has been working with clients in chemicals, automotive, retail and consumer and pharma and life sciences to help them understand the risks they face from Brexit, identify tangible mitigation strategies across a range of impact areas. Office location: UK Embankment Place, London Mobile +44 (0) nicholas.haigney@pwc.com Nick is one of s most experienced Risk Assurance practitioners, with nearly 30 years experience of providing assurance to the private, public and not-for-profit sectors. His experience includes five years working with commercial and government clients in Australia, implementing risk and assurance regimes in accordance with the Aus:NZ Risk Management Standard. Nick is trusted to work on some of our most sensitive engagements, including high profile investigations. He currently leads a range of internal audit teams providing specialised and core assurance to infrastructure, government and commercial organisations. He draws on a range of experts to provide high quality internal audit including, for example, commercial experts, civil engineers, programme managers, deep IT and Digital expertise, trade professionals, financial and modelling risk specialists and HR consultants. Recent and current clients include HS2 Ltd, Network Rail, Department for Transport, Capita PLC, FSA and The Pensions Regulator. Nick is a Fellow of the Institute of Chartered Accountants in England & Wales and associate member of the Institute of Internal Auditors.

10 Example Brexit Tools Leading from the front February

11 Trade & Customs Deep Dive - Brexit Impact Assessment Tool (BIAT) Our Indirect Tax and Customs team is supporting many clients to model the potential financial impacts resulting from customs duties and customs clearance costs. Our Brexit Impact Assessment Tool models the tariff impact on sales between the EU/UK, tariffs on third country FTAs to your supply chain structure, including an analysis of your import/export data, helping to identify areas of risk and opportunity as you build your Brexit action plan. In addition to the tariff review we can model the impact of customs clearance costs on additional declaration charges. Determining the overall impact of Brexit on cost of goods.

12 Warehousing Inventory Planning Finance Catering Planning & Pricing (Mirko) 1. Planning Phase History Report Transfer Items Objects Business Supply chain and operating model support Forecast and budget preparation Draft 4-quarter lineitem forecast and budget Approved 4-quarter line-item forecast and budget Product mix update (volume or product change or product intro) Catering service definition (product mix) 12-month flight schedule Aircraft deliveries roadmap Previous consumption Passenger traffic projections Every October Budget review and approval Initial 12-month lineitem forecast Quarterly forecast update Quarterly line-item forecast update Ad-hoc forecast update (5-8 per month) Forecast update (based on change request) Change requests (20-30 per month) forecast Ad-hoc forecast updates Quarterly forecast updates Yearly Replenishment cycle (to Inventory Control) Key drivers Customs declarations and duty Import VAT Tariffs Aging IT & Business Model Managing Change Analyse the impact of Brexit changes on your current or future trading model and monitor the effect of changes. Managing Change Analyse the impact of Brexit changes on your current or future trading model and monitor the effect of changes. Business Considerations Step 1 : Data analysis and scenario modelling Step 2: Operating model design Step 3: IT systems review Analysis and Outputs to inform Information on the cost and cash flow of Brexit and impact of current operating model Future operating model options Required system changes

13 Recruiting in the future

14 Communications and engagement

15 Impact and readiness checklist Trade and customs Understanding the as-is Do you know what proportion of your sales and purchases are with counterparties in the EU and what product/service categories they are covered under? How well do you understand how your goods are be classified under tariff commodity code classifications and are your current classifications robust? Are you trading with suppliers or customers in countries who currently have a trade agreement with the EU? How reliant are you on third country agreements for access to key markets? How well do you understand the impact of meeting rules of origin requirements for these agreements for your products? Supplier/supply chain risk Have you engaged your key suppliers to understand how they, and their supply chains, are impacted? Have you considered supply chain contingency options, for example UK or non-eu suppliers? Under what scenarios do alternative suppliers become more attractive? What specialist logistics and warehousing arrangements would you need to have in place? To find our more about the expertise you can access via our Trade & Investment Hive, please visit Movement of goods and services How advanced are your IT systems to allow you to meet new data requirements for selling to the EU and third countries, how easily can you prove rules of origin for your products (made in the UK)? How much would increases in duty between the UK and EU cost you under the different Brexit negotiation outcomes? Are you shipping in bulk into/from the EU or are average consignment sizes small? What would be the additional customs administration costs? To what extent is your EU-UK trade time sensitive? What would be the cost of additional border delays in time, working capital and operational difficulties? Are you currently taking advantage of the full range of facilitated customs programmes available such as Authorised Economic Operator and inward processing relief schemes? Do you know whether your products will be classed as UK products (rules of origin requirements) in order to benefit from tariff reductions in a future trade deal with the EU? What would be the cash flow impact of the loss of VAT relief? Are you required to have products tested or certified against EU standards to allow your goods to enter the EU market? Do you require movement of personal data between the UK/ EU to provide your products or services, and need to comply with GDPR? 11

16 Impact and readiness checklist People and immigration Workforce composition Do you know how many EU and non-eu personnel you employ directly? Do you know who they are? How reliant are you and your supply chain on labour from the EU? Do you know where in your organisation these personnel sit and which parts of your organisation could be most at risk from Brexit-related personnel uncertainties? Mobility and visas How mobile is your workforce currently within the EU? For how many will mobility be impacted? How dependent are you on the local demographic for your key locations? Have you considered how this may change? How are you supporting your existing employees to secure their status in their current country of residence? Do you a communications plan? Do you have the means to communicate to your non-uk workforce? Workforce planning Do you know what proportion of your business critical skills, capabilities or positions reside in EU vs. non-eu personnel? Have you conducted scenario planning to understand the risks and impact on your business critical functions due to uncertainty in these personnel? Do you subsequently have short and long-term workforce planning contingencies to prevent disruption to your business critical operations? Do you have short and long-term workforce planning strategies to more broadly address the impact of Brexit on all parts of your organisation? How dependent are you on the local demographic for your key locations? Have you considered how this may change? Do you have a location strategy should your geographical footprint need to change to better accommodate supply and demand of talent and/or local regulations? 12

17 Impact and readiness checklist Strategy and business plan Macro-economics What would be the impact of a sustained slowdown in UK consumer expenditure and/or business investment? What economic scenarios have you considered? What is the total impact on your cost position and market competitiveness from weaker sterling? What plans have you got in place to manage volatility in the value of sterling? Market risk and opportunity What might be the impact on demand in your industry (sub-)sector under each economic scenarios? How rapidly would you be able to adjust to a slowdown and how are you monitoring the market to provide early warning? How will the social and political changes that drove Brexit impact your markets and your position within them? What new product/market opportunities does Brexit open up for you? Will Brexit hit your competitors harder than you? What will happen to your relative cost/differentiation advantage? Reputation and branding Are your overseas customer relationships strong enough to withstand anti-uk sentiment and/or industrial protectionism? What overseas stakeholders are you dependent on? Do they understand Brexit and the issues it creates? How are you engaging with them to manage their understanding? Government and regulatory alignment What sources of regulation are significant for your business at present? What are the risks of regulatory change arising from the EU negotiations or new UK legislation? How are you monitoring these processes or engaging in appropriate advocacy with both Government and Regulating bodies? Are you engaging with the Government on export opportunities, export support (DIT) and Industrial Strategy (BEIS)? Do you receive R&D funding from the EU or from organisations based in the EU? (e.g. Horizon 2020) 13

18 Impact and readiness checklist Governance and mobilisation Governance Who is responsible for Brexit impact and mitigation planning? Do they have sufficient personal authority to be able to effect change if needed? How are they engaging senior personnel from key functions across the business? Has the board and non-exec directors been briefed on and understand the plans in place to manage the risks and opportunities presented by Brexit? Tracking and acting Do you understand the range of possible outcomes from the Brexit negotiations? Have you developed and maintained a set of meaningful scenarios with which to baseline the impact on your business? Do you have a Brexit contingency plan that addresses Brexitrelated risks under each outcome scenario? Does your contingency plan meet the guidance set by your industry regulator (if available)? What are the key decisions that will need to be made under each outcome scenario? When do these decisions have to be made by? How will they be made? How are you tracking and interpreting external events? 14

19 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers LLP. All rights reserved. In this document, refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.