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Your Vote Counts: BREXIT Scenario Planning

June 29, 2016
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The United Kingdom’s vote on June 23rd to leave the European Union (a.k.a. BREXIT) was far reaching and historic. The outcome will challenge many of us over the coming months and years as we try to understand and foresee the implications the move will have on our organizations. The stability of the financial markets, import and export regulations, and political fallout from the historic vote are just a few of the items we’ve got to consider.BREXIT Scenario Planning For Your BusinessBREXIT squarely hit two top areas of concerns that CFOs and Financial Professionals shared with us in our annual survey, politics and the economy. A new Prime Minister will be in place, potentially as soon as October. And the economy? The markets reacted and have started to adjust but the changes are far from over. Here’s a quick look a few of the many areas that we need to pay attention to, as well as one I’ll dig in a little deeper on.

  • Monetary valuation and policies – The value of both the Pound and the Euro – as well as other currencies around the globe – are being closely watched as the exchange rates fluctuate. Investors are reacting to the BREXIT vote by shifting to more conservative vehicles. Governments are checking in with their monetary advisors for reassurance on how well their own currency is backed.
  • Regulation and tax changes – The ability to import and export goods between the UK and EU countries smoothly is a thing of the past. While the formal exit from the EU could take years, the unrest that’s been created is immediate.
  • Relocate companies from UK to EU countries – Companies that utilize England as their primary port for importing and exporting goods with the EU may need to maintain their ties with the EU and shift thousands of jobs to new sites within EU countries.
  • Parent and subsidiary companies – The planning and forecasting for U.S. companies that have subsidiaries in the UK and/or EU will be complex. You’ll need to run through scenario planning for every possible way the UK’s exit could affect you. Make sure your rolling forecast is updated as changes unfold. Forecasting your Cash Flow will need special attention as exchange rates and trade conditions flux.
  • The Vote – The piece that I’d like to see talked about in board rooms, classrooms, and hallways the vote itself. Only 72.2% of those eligible to vote to remain with or leave the EU cast their votes. Was that turnout good enough to reflect the will of the people?

In the end, 48.1% voted for the UK to remain in the EU and 51.9% wanted to leave. That is pretty close. When you see the breakdowns by country and age, there is more that we can learn. Scotland’s overwhelming majority voted to remain in the EU. The final election outcome is fueling the concern that Scotland may work to break away from the United Kingdom.Another piece we should notice about their voting patterns is that an estimated 36% of people aged 18 to 24 voted. The sentiment from that group has been that they wanted to remain in the EU. Had more of the 64% of those younger people taken the time to vote, the outcome of the referendum for BREXIT likely would have been different.Now let’s look at the United States. We’ve also got a pivotal election coming up. Voter turnout for the Presidential election in 2012 was 53.6%. That’s 18.6% BELOW the population that voted on the BREXIT issue. I wish that 53.6% number was an anomaly, but it isn’t. The US ranks 31st out of 34 highly developed countries in voter turnout.As business people, we’re continually performing our fiduciary duty to stay abreast of information that can affect the organizations we work for. Whether and how BREXIT will affect us remains to be seen but I have no doubt that you’ll prepare and respond to the changes to the best of your ability. Many decisions and situations are out of our hands but one unexpected lesson I’d like to see coming of BREXIT, and spread to the American people, is to understand how just how critical every single vote is.What BREXIT scenarios could most affect you and your company?

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