Planning for Impact of UK Brexit on Procurement – Is It Like Planning For The Millenium Bug?

Posted 14/04/2016

The imminent referendum in the UK is drawing out a range of arguments about the effect of staying in, or of exiting, often using the same basic information to argue that both directions have a benefit for the UK. 

Evidently, as both parties can't be right, there is likely to be a spread of effects, which are likely each to have a range of outcomes. As it is currently unclear what exactly will happen (and neither movement seems willing to make a prediction about the outcomes of following their own preference) it seems only sensible to make a review of which areas are most likely to effect procurement, and what the potential outcomes could be.

There is a large amount of opinion, and a lesser amount of well researched papers which suggest the potential impacts of the available outcomes. The papers available cover issues such as timing of changes of trade arrangements, availability of capital, impact on London based finance houses, change of general trading patterns, change in focus of existing trading partners, the range of impacts on trade tariffs. Some have been produced in recent months, but a number were developed when the question of Scottish separation from the rest of the UK. was under scrutiny in 2014. 

Given this volume of available information, a well-structured procurement organisation will be seeking to 'game' the potential outcomes to advise the business internally of potential risk. A 3 phased approach could work well: 

  1. Our first stage is to identify which areas are of most relevance to us. The PEST analysis tool can be a great help to drive our thinking in this area. We are likely to work at a very high level on this, but try to get to a reasonable level of detail as it will make the next stage easier. This activity will work well in a video or teleconference environment. 
  2. Our next phase is to gather further data in the areas identified, looking for the various reports on the suggested impacts and the range of potential outcomes suggested by the in or out groups. This needs to be run as a standard data gathering exercise, with individuals tasked to collect and parse information so it can be presented back. 
  3. The third stage is to examine the range of outcomes suggested for each area. As an example, the impact of the cost of money is projected to be in a range from zero to plus 2%. Although we can't be sure of the exact medium term outcome, we can model the effect of the extremes on the business for a selection of categories.

This gives us an idea of the impact on the business, and whether or not we can cope with the overall effect. By extending this through a range of possible outcomes in particular areas, we can start to model the potential effect on the business and to consider if we need to plan for particular outcomes or design a procurement transformation programme.

For those that remember, there is a sense that some of this will be like planning for the millennium software bug (where historic software pre 2000 ran out of space for date ranges above 1 January 2000). A huge amount of time and effort was expended in preparing for that change and the risks which could be experienced by a range of controllers being confused about the date. And, in general terms, nothing happened. However, there was a considerable – sometimes massive -  effort expended making sure than nothing bad happened! 

Brexit has that potential. If we leave, then a range of outcomes is possible, but one end of that range is no medium term change. However, we do need to stare into the abyss and at least contemplate the worst possible outcomes to understand if we can cope with them, just as we need to be happy that we can cope with staying in. 

Given the timescales for post referendum activity (which seems to be quite protracted), the likelihood seems to be that the immediate effect (except perhaps on market sentiment, exchange rate and cost of money) will be limited. However, a good procurement organization does need to start to think about the longer term effects and consider how we would adjust category strategies to cope. Have you started to?  Let us know in the comments below.

Tagged by topic: News , Procurement Transformation , Risk Management & Sustainability

  by Allison Ford-Langstaff

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