How to carry out a Brexit business risk assessment
The UK’s forthcoming departure from the EU will inevitably bring about significant change for businesses of all sizes and across all sectors.
Given the significant uncertainty surrounding the current Brexit position, it is more important than ever for business owners and managers to be conducting appropriate risk assessments. If you haven’t started yet, you should do so as a priority!
A typical Brexit business risk assessment may include both a review of the strengths and weaknesses of your business generally, as well as a review of how your business is currently affected by the EU and the possible effects of any exit.
The reason why it is worth considering the overall strengths and weaknesses of the business, rather than just focussing on how your business is directly affected by the EU, is because it may well be that current areas of weakness and risk in your business model could amplify post Brexit.
Even for a business which seems entirely UK based, the business’s customers and suppliers may not be, and what about their customers and suppliers? Ensuring your business is robust even if it has limited direct contact with other countries within the EU is clearly going to be important.
Business owners will need to compile a (potentially quite long) set of questions for the two reviews set out above. It is clearly important to tailor these questions to the specific business, and there is not a “one size fits all” approach. However, questions might cover areas such as: where its key customers and suppliers are located, whether the business relies on EU grant funding, how WTO trade terms might affect the business, proportion of EU workers within the business, and so on.
As well as the business risk review, business owners should, in consultation with their legal advisors, conduct a detailed legal risk assessment. This legal risk assessment should have two main elements:
- Reviewing how robust your contractual terms and conditions are.
- Considering any legislative changes that will most impact the business.
Similarly, to the business reviews mentioned above, business owners (assisted and led by their legal advisors) should prepare and consider a list of questions in respect of the legal risk assessment.
Whilst these questions must be tailored to your specific business needs, examples of areas to cover might include: jurisdictional issues, what legislation applies to the business, high risk customers and suppliers, and contractual provisions such as termination.
As well as the clear commercial need for businesses to understand their exposure to Brexit, Directors have a duty to consider the implications as part of the statutory obligations. There is now a very short period of time until the exit date of 29 March 2019. Whilst it will not be possible to review and renegotiate every contract by 29 March 2019, by prioritising key standard forms, new contracts, and any high-risk agreements, business owners should at least cover the areas of most impact.
Time spent considering the changes that Brexit might bring to your business now, could mean significant savings later, particularly in the event of a no deal Brexit.
For information as to how our Sheffield commercial solicitors can assist you in carrying out your Brexit business review, please contact us.