Thomas Kwasniok: Is Your Supply Chain Ready for Brexit?

Companies can limit the negative consequences of a hard or soft Brexit by adopting a different approach to strategy—one that anticipates a number of future scenarios. Thomas Kwasniok, a partner with Bain's Performance Improvement practice, shares three types of actions executives can take to limit risk and prepare for the outcome of Brexit.

Read the Bain Brief: Is Your Supply Chain Ready for Brexit?

Read the transcript below.

THOMAS KWASNIOK: Uncertainties about duration of negotiations, the final outcome and the transitional period create a dilemma for companies. Preparing for a hard Brexit could certainly backfire if at the end of the negotiation Brexit turns out to be a soft one.

The riskiest option, however, seems to be to wait for a clearer sense of the future. There will be about a handful of factors impacting supply chains: customs tariffs, foreign exchange rates, restrictions on the UK labor market, and delays in transportation along supply chains.

We recommend [developing] a flexible strategy to define uncertainties for your business, starting from probable scenarios and their impact, to potential strategic actions and clear signposts to watch out for.

There are three types of strategic actions. Firstly, no-regret moves. These are the easiest, because they will put you in a better position in any case. For example, operational efficiency.

Secondly, options and hedges. They help you to deal with uncertainties as they unfold. For example, finding and qualifying new suppliers. In case of a hard Brexit, [you are] well positioned. In case of a soft Brexit, not a large investment lost.

Thirdly, big bets. These are the most challenging ones, as they have varying outcomes depending on how Brexit plays out. For example, committing to a large investment to a new manufacturing plant on one or the other side of the border.

We expect uncertainty around Brexit to be around for another few years. And we see successful companies [taking] these three steps to master the challenge.

Read the Bain Brief: Is Your Supply Chain Ready for Brexit?