Time running out to begin Brexit supply chain risk management

Businesses cannot afford to wait any longer to carry out vital supply chain risk management work in preparation for Brexit, according to experts at a Clyde and Co event.

Speaking during the supply chain resilience event, at which delegates heard from leading UK politicians and civil servants about the current and future shape of Brexit negotiations, Nick Wildgoose, an independent consultant who previously worked for Zurich, urged companies to get moving on building supply chain resilience to Brexit.

“You cannot afford to wait,” said Mr Wildgoose, who was previously global supply chain product leader at Zurich.

He said a number of companies have started to prepare for Brexit and seen the benefits of supply chain transparency and resilience. “So if you haven’t started to plan for Brexit, your competitors could be one step ahead of you,” he told delegates.

Companies that do not know where to start should begin with areas of highest value, he continued. “People say they don’t know where to start. This is a conversation I have had with many clients out there. Start with your most profitable product or service and what suppliers you heavily depend on. Not just tier one; map it out as far as you need so you are comfortable and know where the risk is sitting,” said Mr Wildgoose.

He added that companies should be doing something about their supply chains irrespective of Brexit. “Please start on this journey. See Brexit as an opportunity – a catalyst – for change to something you should be doing anyway,” he added.

Mr Wildgoose listed some of the things companies need to think about when it comes to supply chains and Brexit.

Organisations need to map multi-tier aspects of their supply chains because they are “often flying blind on lower-tier suppliers”, he said. “There are diamonds of death in supply chains when it comes to Brexit. For example, UK companies might think they are ok because tier-one suppliers are all from the UK, but they might all be supplied a widget from the same French company,” added Mr Wildgoose.

Businesses also need to work out how to secure skilled or unskilled labour, think about lead times, look at contracts, and consider regulatory changes, tariffs and currency implications, he said.

Mr Wildgoose’s comments followed hot on the heels of speeches by John O’Regan, deputy director at the UK’s Department for Exiting the European Union, and Conservative politician Ken Clarke, who is currently Father of the House, has held a whole range of ministerial posts and is a staunch European.

Mr O’Regan said there is a “reasonable expectation” that the Brexit withdrawal agreement, a political statement outlining a future relationship between the UK and EU, and a meaningful vote on the deal in the UK will take place by the end of this year. But he added a note of caution that any deal this month, as some media reports have suggested, is unlikely.

The civil servant said government has listened to business about the need for clarity on Brexit but is looking for more help to ensure it comes up with correct answers.

Mr O’Regan also delivered a message on the government’s position when it comes to dealing with services in any post-Brexit world, put forward in its Chequers plan.

“On services, the meta message from the whitepaper is that we believe services issues, in the main, can be dealt with using existing tools of international trade. Specifically, on financial services we have proposed a system focused on the EU existing equivalence regime, but including some binding commitments that will give some protections to ensure that in the future it is a more secure and reliable system on which businesses can make decisions,” said Mr O’Regan.

In typically robust fashion, Mr Clarke said Brexit events are out of control. He said “there is no sign of political sanity”, but believes a no-deal Brexit remains highly unlikely because the majority of politicians in Europe and the UK want to avoid such a scenario.

“There is a genuine desire to come to some kind of sensible decision. This [Brexit] is going to do great damage to the Republic of Ireland, great damage to The Netherlands, great damage to Belgium and is not going to be good for most of the other European countries,” said Mr Clarke.

“I think there is a desire on both sides of the channel to minimise the damage… It is only extreme fringes on both sides of the channel that actively want to see a no-deal,” he added.

Mr Clarke argued that a compromise Brexit deal is the only one that can carry a majority in the House of Commons, with UK Prime Minister Theresa May supported by pro-European Conservatives, “quite a lot” of Labour MPs, the Scottish National Party and the Liberal Democrats.

“So, the trick for the UK Government is: can it get a compromise agreement with the Europeans, somewhere between Chequers and the EU’s current position, that will get a majority?” he said.

Mr Clarke thinks the deal might end with an agreement, via an implementation period or backstop, that things carry on largely unchanged until somebody comes up with a “grown-up” version of what future trading, political and security relations will look like.

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