Brexit: Seize The Opportunities, Manage The Risks

Justin Sadler-Smith

Part of the “SAP Ariba and Deloitte Brexit” series

In 1992, Yoshihiro Francis Fukuyama, the American political scientist and author, published the much-praised The End of History and the Last Man, which suggested that the spread of liberal democracy and free-market capitalism meant that the final and ideal form of human government was now clear and established. He foresaw “the end of history as such.”

Well, 25 years on, life has not quite worked out like that.

The world continues to be as unpredictable as ever, with the rise of unexpected leaders such as President Trump, the emergence of China as a global superpower, Brexit, wars in the Middle East, and many other developments. All we can say about the future is there is still plenty of history left to be written, and anyone who tells you they know what is going to happen is a genius, crazy, or simply a liar.

Look for opportunities

But of course, times of change bring huge opportunities, too. The digital revolution has turned industries upside down, with disruptive market entrants seizing market share. Some incumbents adapt well and others don’t. Emerging markets hold great potential, too, which many western firms have been slow to pick up on. For instance, by 2050, Nigeria will be the third-most-populated country in the world, with more citizens than the United States.

It is also amazing how rapidly the politico-economic situation appears to change today; a few weeks ago, the press was reporting that the United States and Europe were about to enter a trade war. One meeting later, all seems well again, and the “U.S. and EU reach deal to calm trade war fears,” as The Guardian reported.

Where does this apparently ever-increasing pace of change leave the procurement professional and the organizations in which they work? In our recent series of articles, of which this is the concluding part, we have looked principally at Brexit, although in doing so we have raised and discussed many wider issues around change management, technology, and supply chain strategies.

In Part 1, we compared Brexit to the over-hyped “millennium bug” (Y2K) and related challenges, and said this: “Unlike Y2K, where there was a defined risk and problem to solve, Brexit poses significantly more uncertainty and therefore perhaps a wider range of risks to review.”

That uncertainty is central to the challenge for organizations. We know there will be issues to be faced; we talked about likely tax, customs, and trade complexities in Part 2 of this series, for example. But it is impossible to know yet exactly how Brexit will affect the business environment at the national, sector, or individual company level. So although it might seem tempting, this is not the time for procurement executives (or indeed anyone in business) to pull the blankets over our heads and ignore the situation – the “wake me up when it’s all over” approach, we might call it. The UK was, after all, an independent nation for many, many years before it joined the EU. We know life will go on after March 31, 2019!

Be prepared

Indeed, fortune favors the prepared, as we noted in Part 4 of this series. Scenario planning, looking at the “what if” questions, is essential for organizations that can see their business being potentially impacted by Brexit. And whatever happens, procurement or supply chain leaders, with their focus on the external world, have a particularly important role to play.

We have also discussed leading-edge technology in the series, including blockchain and “cobots” in Part 5. But let’s finish with two key takeaways for procurement leaders based very much on currently available technology. Both relate to areas where digitalization should continue or even be accelerated to position the organization well for Brexit and a period of change.

First, make sure your procurement “fundamentals” are in good shape. Digital technology provides the means to do this more effectively than ever: robust vendor master data; visibility on spend and suppliers; and accurate, relevant, timely data about spend and spending plans, suppliers, and contracts. Understanding the supply situation in its widest sense is essential if the organization wants to be well positioned to handle future change, shocks, and opportunities.

Second, consider the specific need for supply chain risk management to be robust, effective, and dynamic. That covers not just political risks, of course, but also financial risk, reputational risk, “man-made” risk (e.g., labor disputes at supplier plants), or natural disasters. It also needs to consider multi-tier supply chain risk, not just immediate suppliers. Technology is a key enabler here, as well, but organizations need to consider skills and mindset too when it comes to effective risk management.

To sum up, while no one would pretend that there won’t be issues, problems, and costs associated with Brexit, for the UK and indeed other countries, there will be opportunities, too. We hope this series has helped procurement and other business professionals consider how to seize them in the coming months.

Join our Webinar, “Integrating Supplier Risk Management into Your Procurement Processes” on Wednesday, October 31, 2018, at 10:00 a.m. GMT / 11:00 a.m. CET.

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Justin Sadler-Smith

About Justin Sadler-Smith

Justin Sadler-Smith is head of SAP Ariba UK and Ireland, procurement and supply chain thought leader, and cognitive procurement ambassador. He is one of a growing number of procurement leaders around the world who helps procurement and supply-chain teams ensure that fair labor practices are in play across their global supply chains by harnessing innovative technology and increasing competitive advantage.