If you’re an exporter, last week’s shock result in the UK’s ‘Brexit’ referendum has thrown the importance of supply chain management into the spotlight.
Britain’s decision to leave the European Union has rocked markets worldwide, and The Australian reports that some executives and advisers are cooling off on corporate deal-making as boards wait to see how currencies settle and reassess the risk of doing business in Britain.
While we wait and see the full implications for Australia, Brexit is an intriguing case study in the importance of supply chain management in an unpredictable marketplace, and how properly identifying and managing risks is essential to an exporting business. So, what can exporters learn from Brexit when it comes to compliance and supply chain risk?
Markets Are Subject To Political Will
Brexit is a timely reminder that any market, any trading partner, and any exporting opportunity is subject to change. Even markets that are usually reliable and predictable can be swayed and impacted by the will of a government or its people. Brexit has important ramifications for Australia, which is the UK’s seventh largest trade partner. Prime Minister Malcolm Turnbull has already looked across the Tasman and flagged potential new trade and immigration deals with New Zealand in the wake of the Brexit result.
But with an election of our own pending this weekend, we could have a new Prime Minister by Sunday morning and nothing is certain. At the very least, Prime Minister Turnbull has ordered the Reserve Bank, as well as the financial regulators ASIC and APRA, to provide a report early next week to whoever wins Saturday’s federal election.
For exporters the lesson is clear: Change is inevitable; your compliance has to keep up.
Manage The Economic Implications
KPMG Australia chief economist Brendan Rynne told the Australian Financial Review that once the full impacts of the UK’s departure from the EU take effect, Australia’s GDP will be “shaved” by between 0.1 percent and 0.2 percent through to 2031. “These forecasts are predicated on the UK government implementing new trade agreements that continue to allow negotiated access to markets in the EU,” he said. “If the UK gets ‘shut out’ of EU markets more than anticipated, then the consequences will be worse.” Westpac economist Elliot Clarke and Justin Smirk said the key issue in Australia will be how far the UK currency falls relative to global commodity prices. Since the referendum, the pound has shed around 4 per cent against the US dollar, easing the pressure on Australia’s economy. The revised forecasts and shifting currencies need to be adequately incorporated into your supply chin management.
Now Is The Time To Implement A Robust Governance, Risk and Compliance Program
The situation in the UK, and the ripple effect it has caused across Europe, are important reminders that in global trade, there are no guarantees. That’s why it’s important to establish a systematic and standardised approach to managing risk and compliance across your entire supply chain. Managing export risks is a process of thinking systematically about all possible undesirable outcomes before they happen and then setting up procedures that will either avoid or minimise these risks, or help you to cope with their impact.
There are six basic elements in the risk management process:
- Establish the context of the risks
- Identify the risks
- Assess probability and possible consequences of the risks
- Develop strategies to mitigate these risks
- Monitor and review the outcomes
- Communicate and consult with all parties involved
The peak body of your industry, the Department of Foreign Affairs and Trade and the Department of Immigration and Border Protection will be able to provide specific advice about exporting, relevant for your industry.
An automated and standardised compliance software solution such as Compliance Checkpoint can also take the hassle out of managing supply chain risk. This software can fully automate your complex and time consuming audit, risk and compliance tasks right across the supply chain. Whether it’s the farm, the office, the transport and logistics or the international market where you’re operating, compliance software means you can spend more time concentrating on the business and less time worrying about your obligations.