Richard Sampson, SVP EMEA, insightsoftware
You cannot get away from Brexit. The lack of clarity and melodrama in Westminster is the perfect storm for uncertainty. Businesses are now attempting to find a way through the mess,using technology to help them make certain decisions given the lack of direction coming from the House of Commons.
At the time of writing, the UK has agreed to an extension until 31st October, with a review of progress scheduled in June. This throws more uncertainty into the air, considering Theresa May’s cross-party talks are yet to bear any fruit.
While the extension leads to a greater period of uncertainty, it does mean businesses have a little bit more time to plan for multiple scenarios.
There’s a lot to take into consideration, for example currency fluctuations. As it stands, a weak pound is more of a certainty for the markets. The pound is down 20 percent since the original referendum result in June 2016. Despite it steadying since the meaningful vote held on 29 March (because the markets predicted a failure), investors do not want to be on the wrong side of a currency rebound, which means a weak pound is the “new normal” for businesses to plan for.
Technology steps up
Quickly investing in the right technology that can compute all potential Brexit variables – and quickly – is the right way forward to ensure every business is prepared for the new 31st October deadline.
There are many moving parts that businesses are having to consider as the Brexit saga plays out. Predicting the future can be difficult, which is why technology is instrumental in predicting specific outcomes, for example, what would happen if we end up with a no-deal.
These moving parts amount to, for example, reviewing suppliers, updating supply chains, stock piling, re-evaluating margins as a result of changes to potential EU preferential rates, and reviewing possible changes to credit ratings.Interestingly, stock piling is causing an increase in the HS Markit’s Purchasing Managers Index, which rose to 55.1 in March,the highest since February 2018.
Therefore, it is no secret that UK companies are already acting on advice from their predictive scenarios, limiting the impact that any version of Brexit will have on their businesses. Based on conversations with customers, those simulations chiefly revolve around inventory planning, currency movements, and any potential changes to credit ratings. Overall, this amounts to calculating 50-100 what-if scenarios a week using technology, and that changes daily depending on activity in the House of Commons.
A new view of reporting during periods of uncertainty
Shareholders, regulators, and other business stakeholders want a Brexit strategy, especially if the business in question has a complicated supply chain involving the EU. This puts increased pressure on finance teams to deliver the right data analysis for making sound business decisions.
The amount of data that needs analysing across various systems of record can be huge when planning for, for example, a no-deal Brexit. However,time-intensive data extraction is not possible anymore;manually compiled static Excel spreadsheets that lead to human errors make certain data untrustworthy for making reliable decisions.
At this stage, if a finance team wanted to implement a traditional reporting system to tackle this challenge, it would be fraught with problems. They would need to hire programmers and allow for huge implementation times to get everything working. Therefore, the only way for a finance team to remain agile in an uncertain world is to create calculations and predictions from live-data with automated, flexible ERP reporting to satisfy stakeholders, customers, and shareholders quickly.
A department of strategy and management
With the creation of Brexit-led predictive reports a “must,” the finance team becomes heavily involved in business strategy. ERP reporting systems are able to elevate the finance department to a department of strategic analysis, rather than the “folks who do the numbers.” By freeing up time that was previously spent compiling data, finance teams now have more capacity to focus on analysing and interpreting that data.
Now more than ever, as the Brexit process continues, CFOs and their teams are making ground-breaking decisions, helping to shape a company’s Brexit strategy and its future role in the UK. An internal review of existing reporting methods is the priority to get them to this level, as the only way forward hinges on agility and doing things quickly.