The Sirion Blog

Brexit has happened. How do contracts and commercial managers prepare for what’s next?

56 days have passed since the unthinkable Brexit, the United Kingdom’s pull out from the European Union, took the world by surprise (us at SirionLabs, at least).

As leaders figure out how to negotiate the uncharted waters they have sailed into, contract and commercial managers must navigate the unfolding business environment.

Wait no longer for political direction to clarify or to gauge how the markets pan out. Wait no longer to see how other companies respond to the economy. To quote wise words from oral communication expert Karen Lamb: A year from now you will wish you had started today.

Here are some considerations for activities that can be initiated irrespective of the eventual plans for Brexit.

  • Most corporations have instituted Brexit teams to forecast and prepare for some scenarios that are likely to develop. You can proactively support them by leveraging your sourcing teams’ insights to prepare for these possible scenarios across the key management areas: contracts, performance, finance, relationships and compliance.
  • For starters, identify and list major changes the possible scenarios could mandate to your contracts. Collate all of these contracts. Make sure they are up-to-date.
  • Identify performance areas that are critical to future operational changes Brexit could warrant, as well as those that may be suspended. Check that suppliers clearly understand and are adhering to existing performance against obligations. Any existing discrepancies could adversely impact your crunch time renegotiation.
  • Introduce discipline in identifying, documenting and tracking the resolution of all issues surrounding your key service agreements. When cost pressures mount, there will be little sympathy for discrepancies in regular performance or finance. Then, bigger issues will take centre-stage. So while you’re about it, run through the charging process to ascertain it is working effectively, and queries and errors are being speedily identified and rectified.
  • Compliance obligations are often only effective if they are applied consistently across all service areas. To track adherence across all your service agreements, create a consolidated view of all your obligations. A bird’s eye view will also come in handy to respond to queries from internal and external auditors and regulators trying to establish safe operations.

Adequate preparation will allow you to respond quicker and stronger to the changing business environment even if some scenarios are easier to anticipate than others. As an example, a tip being passed around is there is a good chance that Brexit will trigger cost pressures on companies. How can you prepare for the inevitable internal requests to reduce costs and increase efficiency at a time when you can also expect your suppliers to ask you to scale down service levels to cut costs?

While you want to ensure adherence to the key contractual obligations and deliverables, a critical review of your contracts may reveal overlaps, duplications, and activities that can be changed with the supplier’s collaboration, or removed or temporarily suspended to minimise wasted effort and costs on both sides. Prioritise those activities that most move the needle on costs and discretionary work that should ideally be managed without.

To achieve all this without any drop in performance, involve your delivery teams in the review. Ask them to validate volumes so that you only pay for what you need. Examine your people deployment to minimise the number of people assigned to relationship management. Automate wherever possible. Assign your most effective people to focus on issues rather than processes.

Stay flexible, be open to renegotiate; develop a collaborative structure with your strategic suppliers. You will need their support when the going gets tough, especially when black swan events trigger technical and operational changes. In that eventuality, which services can you rely on? List provider’s obligations that could help you deal with unusual circumstances to be sure to leverage the appropriate agreements when the time comes.

By staying on top of existing performance and financial flows, you can list service levels that you might be willing to compromise in the short term to meet the unexpected events, and identify the best approach for paying for the services you avail of.

Make sure you consistently engage with key supplier and other stakeholders. It will help you to speedily resolve issues, actions and disputes when you need extra support.

Compliance obligations can increase during extraordinary times. Establish a clear and agreed workflow for responding to this eventuality beforehand. Here, look to your service providers for help in identifying responses accepted in other organisations. Inform key people of what is expected of them. Take their consent to act accordingly.

Only step one of Brexit has unfolded. The best is yet to come. Are you ready?

Key takeaways:

  • Do you have a view of the likely changes to your contracts?
  • Are all your contracts up-to-date and easily accessible? Are you clear about all the obligations, spanning performance, operational and compliance? Are they managed?
  • Are the service and financial flows working effectively?
  • Are issues, risks and related actions working effectively?
  • Is an adequate and clear process in place to identify areas of change, compromise and collaboration with your suppliers?
  • Cost pressures will prevail. Have you identified the key levers for managing these pressures, and how to minimise duplicate or wasted efforts?