Two months ago, Great Britain voted to leave the European Union (EU). One of the most frequent questions asked was “What does this mean for me and my company?” While Brexit hasn’t actually happened quite yet, the past two months has given us time to see the impact of Brexit on local economies and world economies as well as assess all the changes that have occurred since the vote.
“Brexit” is the term used as a nickname to Great Britain’s exit from the EU. Some speculate that the entire process of Brexiting will take up to 10 years and will need 10,000 people in order to make it happen (The Guardian).
Should you still care about Brexit? Brexit is just an example of an external factor that can have a huge impact on your company. By completing an external analysis, for example, you’ll be better able to assess all likely outcomes and react accordingly.
Change Happens – Impact of Brexit
It’s simplistic to expect that dramatic changes will occur in a single day, but we can expect things to change in 2 months time. And it’s true that lot of adjustments have been made since the referendum.
David Cameron resigned from his position after the vote came in, vacating the leadership role he filled for 6 years. This resignation is similar to presidential elections or any other change in office due to the different agendas, perspectives, and goals.
The new Prime Minister, Theresa May has already created 2 entirely new governmental departments (or ministries): the Department for Exiting the European Union and the Department for International Trade. Although these ministries are still sorting out the details, we can assume that immigration of labor and trade will be impacted (positively or negatively).
Where Does Everything Stand Now?
During any time of uncertainty, businesses are bound to be cautious (particularly in the Business-to-Consumer arena). As an entrepreneur, I consistently try to stay ahead of the curve in knowing what’s about to happen. An easy tool to use is called PEST Analysis; this tool allows you to take a broad scope of political, economic, socio-cultural, and technological factors that influence your company, customers, or vendors.
New Prime Minister Theresa May has some major hurdles to overcome due to the Brexit decision. As the first person to actually organize Britain’s exit from the EU, all bets are on the table as to how she is going to react. Earlier, we talked about how May created 2 new governmental departments. Think about what this is going to impact.
Taxes: Someone has to pay for this to happen, and it’s probably going to be the taxpayers – citizens and businesses.
Labor: People are necessary for operations to run smoothly.
Trade: Restriction on trade might hinder companies from conducting business in or with Great Britain.
BBC reported that unlike expectations leading up to the referendum vote, retail sales haven’t seen a major downturn. In August, Great Britain experienced their second upturn in retail sales since Brexit. Moreover, credit card sales were higher in July than the previous 6 months.
Consumers and businesses alike are remaining cautious and conservative in their spending habits, but they are continuing to spend.
Interest rates and the value of currency decreased dramatically, which has a major impact on businesses (particularly with international business).
With the value of the pound having been decreased since Brexit, manufacturers are seeing an increased cost of importing. This could be due to interest, trade regulations, and tax laws.
The impact of Brexit hasn’t given rise to many socio-cultural changes in the past 2 months other than the obvious – change in consumer purchasing behavior.
Companies may find that telecommuting and telecommunication are solutions to avoid predicted labor restrictions. Another option would be to adjust manufacturing processes to reduce the weight of product for shipping.
How Can I Prepare for These Types of Environmental Factors?
It’s important to understand that external environmental factors are going to impact business confidence, causing uncertainty in businesses and consumers. Similar to Brexit, presidential elections and other events can cause businesses to freeze up.
But how do you know if your company is going to be impacted by external events if you haven’t given it thought? Take a look at your consumers. Where do you even start to prepare for these types of environmental factors?
Do Your Research
Nowadays, people are tied to their smart phones, tablets, and computers due to the integration of technology into culture, the workplace, and daily life. Information is readily available, so don’t get left behind like the luddites. Your friend Google is a great resource that you can use to do your research.
Perform a SWOT Analysis
Create an External Analysis
An external analysis looks at the opportunities and strengths of a company. This is necessary in order to know what could impact you.
This might be a good time to revisit the notion of the economic dam…
It’s only when the tide goes out that you learn who has been swimming naked. – Warren Buffett
Your external analysis will bring to light factors that may hit you immediately or collide with your company later down the road. By estimating where you are in the river in relation to the dam, you’ll be able to combat uncertainty.
Create Action Plans
Write an action plan or a list of action items that need to be completed upon the occurrence of a particular external event. This is one of the most important things in order to prepare for any scenario.
The more aware you are of what could impact your company, the better you are able to successfully pull through any situation.
This emergence of the new CFO is changing the landscape of tomorrow’s financial leader. Financial leadership is no longer simply managing the finances, but rather steering the ship through smooth and choppy waters.
One of the biggest mistakes companies make in troubled times is not acting early. Start today and download your free External Analysis whitepaper that guides you through overcoming obstacles and preparing how your company is going to react to external factors.
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