Believe it or not, every two seconds a Brexit-related tweet is sent somewhere in the world. On its online 365BREXIT data visualization platform, KPMG tracks and analyzes at least 1.1 million tweets monthly that mention Brexit. How can in-house counsel deal with so much noise on this massive political and regulatory change 18 months from now?
It’s a question I raise often with global in-house counsel since the fated June 2016 referendum. There’s lots of talk but precious little is clear. Wisely, most global counsel are avoiding the tweet onslaught and taking action. Here you’ll find approaches that global in-house legal and compliance teams and their organizations are taking to Brexit, and insights from both sides of the Channel.
Moving to the mainland
Like the actor Colin Firth, many financial services organizations are making moves. Citing Brexit among the reasons, Firth just reported on his newly acquired dual citizenship (Italy and UK—his wife is Italian). Banks and investment houses are shifting operations to mainland Europe to ensure business will not be disrupted in the EU minus the UK. Over the past few months, Bank of America and more than 12 financial institutions have announced moves to Dublin and other European cities. B of A’s European hub will move from London’s financial district to Dublin. Citigroup will open a second trading hub in Frankfurt (first hub is in London).
Banks call these contingency moves. Opinions abound, but no one truly knows whether lenders that are licensed in the UK to sell products across Europe will be able to continue to do so from London after the UK exits the European Union. These institutions decided not to take that chance.
Advising without a crystal ball
At a roundtable I moderated in Brussels earlier this year, senior in-house legal and regulatory counsel agreed that perspectives on Brexit vary by geography. They find that portrayals of Brexit’s effect on business and financial forecasts are far rosier in the UK than in mainland Europe. Best to hear both leavers’ and remainers’ perspectives, and consider best and worst-case scenarios.
Helena Samaha, a global counsel based in London, formerly General Counsel of OSN in Dubai, says that in-house counsel must resist pressure to predict what will happen. In her words, “We just don’t know now. We’ll be nimble to act when certainty crystallizes.” Samaha’s advice, shared by many, is to educate internal stakeholders on the range of scenarios and make sure that your organization’s governance is prepared to handle uncertainty.
Sector, trade and logistics drive Brexit focus
According to Jay Modrall, Partner at Norton Rose Fulbright in Brussels, “The impact of Brexit will vary by industry sector. For example, manufacturers will likely be most affected by supply chain issues; technology sector may be most affected by data transfer restrictions; logistics businesses are potentially most affected by customs clearance issues.”
General Brexit information is not particularly useful to in-house counsel. What you need is a sector-specific focus and a timeline. Law firms are on the case, and in-house counsel choose the sector updates they prefer and access Brexit calendars online. A few firms have developed tools that help their clients craft scenarios and plan ahead.
Use the Brexit calendar to help prepare
Countless issues of Brexit will be decided on complex timelines before and well beyond March 2019 (imagine 28 country-specific negotiations). You’ll need the Brexit calendar to guide your planning. For example, you may be able to delay worries on employee issues for a year or more. On the other hand, potential impact on your organization’s trade flows and manufacturing supply chain requires scenario planning now.
For companies moving and manufacturing goods, many global counsel have already taken a detailed look at their supply chains. I’ve heard several instances of the corporate legal function leading a multi-disciplinary team (e.g. operations, finance, tax, compliance, sales, etc) to review each UK-based manufacturing site. The goal is to determine potential impact on tariffs and trade barriers, sourcing and destination, and sales. This exercise helps the organization identify potential strategic, operational and financial impacts of Brexit. It’s not just for production and distribution, but also to foresee competitive advantages or disadvantages that could hit the bottom line.
Other Brexit advice from global in-house leaders
- Get as much information as you can from trade associations in your sector.
- Avoid analysis paralysis. Focus most on your core business, and make sure you can deliver your product to your customers, starting with logistics.
- Think through scenarios and determine which is most likely. Tax and finance issues help quantify the value of issues and help you decide priorities for interacting with regulators to share your concerns.
- Don’t forget Brexit’s potential effect on corporate reputation, which could have major financial impact. For example: will you relocate employees that may no longer be able to work in the UK?
Before you worry too much, remember that in the early days post-Brexit, similar to GDPR, nearly every enterprise will breach one or more countries’ regulations at some point. So much will still be unclear. It’s likely there will be a reasonable ‘grace period’ before regulatory compliance is broadly reviewed and enforced in the new regimes.
E. Leigh Dance is a management consultant to global corporate legal and compliance teams, and founder and executive director of the Global Counsel Leaders Circle, a membership forum of global legal and compliance chiefs. The roundtable mentioned above was hosted by Norton Rose Fulbright in Brussels, as part of the Global Counsel Leaders Circle’s EU Minus UK working group. eldance@ELDInternational.com