The outcome of the Brexit referendum took the whole world by surprise. It was clear that the financial markets were not prepared.
The global markets were pummeled, wiping out around US$4 trillion in two days. The bounce back was equally impressive, with more than 75 percent of the losses in the financial markets recovered within the next three days. One thing is clear: financial markets, political leaders, and CEOs are all uncertain as to what lies ahead as fallout from the Brexit.
It is possible that it will take two to five years to renegotiate the trade and security agreements between the United Kingdom, the European Union, and other countries. There are various reasons for these lengthy negotiations, which will drive a prolonged phase of uncertainty:
- The United Kingdom, Germany, and France are the key economic pillars of the European Union economy. While the EU is the second-largest market in terms of gross domestic product (GDP), just behind the United States, a sudden withdrawal of the United Kingdom from the EU could have a devastating effect on the structural stability of the union.
- London is the financial hub of Europe, with an enviable level of global reach and influence.
- The United Kingdom, France, and Italy are the strongest military powers in the EU. The Brexit could have implications for the military balance in the region.
- Security threats faced across the EU require more collaboration among its members to protect against increasing levels of terrorism and cyber-crime.
- Pound sterling potential weakness could have a massive impact on every UK citizen. Already, some electronic manufacturers have increased their prices by 5–15 percent.
Much research was published prior to and after the Brexit vote, but the truth is that no one knows the real implications of the Brexit. Best-case scenarios may be a reversal of the Brexit decision or very friendly separation terms, with possible worst-case scenarios of separation of Scotland and Northern Ireland from the United Kingdom and a shrinking of the European Union. It is clear that the next two to five years will be a period of great uncertainty, and companies need the agility to adapt to any potential scenario.
Business Leaders Across the Globe Should Consider This
In the digital economy, we are undergoing one of the biggest business transformations ever. Companies need to continue reimagining their business models and operational efficiencies.
CEOs and Corporate Strategy Leaders
With the Brexit, it’s critical to evaluate your business readiness to address challenges and exploit opportunities resulting from the changing economic market.
- If the United Kingdom continues to provide a corporate tax haven, how do you take advantage of it?
- Is your value chain resilient enough to cope up with large fluctuations in demand and supply?
- How do you recalibrate your level of investment in the UK (manufacturing, logistics, etc.)?
- How do you address EU citizens’ data privacy held in UK data centers?
Chief Financial Officers
It is almost certain that, with the Brexit, labor and tax laws will change, tariff agreements will be renegotiated, and corporate structures will be reassessed, driving significant, new complexity.
- How do you minimize the cost of the additional complexity?
- How do you optimize corporate taxes?
- How do you hedge against increased volatility in the currency market?
- Do you have agile business processes and technology to help you adapt fast and at low cost?
Manufacturing and Supply Chain Executives
This section is very relevant for companies with significant investments in manufacturing and logistics and a large customer base in the United Kingdom.
- Do you have the simulation tools to optimize your manufacturing and logistics blueprint?
- Can you optimize your manufacturing network to balance profitability and customer demand?
- How do you mitigate the increased risk level in your supplier network?
- How do you manage administrative complexity with minimum cost and customer service impact?
- How do you reduce cycle time between demand signals and delivery of products and services?
Sales and Marketing Leaders
No matter how the Brexit impacts your business, the one thing every company needs to keep in mind is its customer experience.
- How do you strengthen your go-to-market capability with new partnerships and innovative ways to access the entire European market?
- Can you minimize currency fluctuation impact through more dynamic pricing?
- Can you sense real-time changes in customer buying behavior or demand patterns?
- What changes do you need to make to your disruption channel to secure customers and prospects?
- What will be the impact of new tariffs and taxes on your sales and profitability?
Human Resources Officers
Labor law changes will definitely impact workforce planning, talent management, and organizational structures.
- Can you quickly align your HR planning to the new corporate strategy?
- Are you able to evaluate the impact of new immigration and labor laws on your workforce?
- What is the talent acquisition impact once the United Kingdom exits the EU?
- Can you quickly design and implement the right compensation and incentive programs that will neutralize the impact of external, non-controllable factors?
- Are you prepared to change the setup of your European social partner bodies after the Brexit?
- Do you have the right tools to test the robustness of your organizational model in the new EU setup?
Why SAP Is More Relevant Than Ever
Every company today needs to take advantage of digital technologies to adapt, thrive and manage uncertainty. SAP has diligently invested in the 21st century digital business platform of choice through disruptive innovation and strategic M&A investments. As always, we at SAP are ready to help customers turn uncertainty into opportunity.
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