Competing in a changing business environment · the UK’s business environment. The UK economy is inextricably linked to the global economy and issues such as a slowdown in growth

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Competing in a changing business environment

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Introduction Business Strategy

Data

WorkforceSupply Chain

Legal

Finance

Tax

Pensions



Introduction

IntroductionBusiness Strategy

Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

The uncertainty surrounding the terms on which the UK leaves the European Union and the nature of the future trading relationship makes it difficult for any business to prioritise and plan.

However Brexit is only one circumstance that affects the UK’s business environment. The UK economy is inextricably linked to the global economy and issues such as a slowdown in growth in the Eurozone as well as in the economies of both the USA and China impacts the prospects for UK growth.

It is critical therefore that businesses in the UK are equipped to manage the changing business environment. In a low growth environment what can be done to drive real business improvement and so increase company growth and profitability?

This questionnaire is designed to concentrate attention on the planning required to enable success.It involves a series of questions focusing on issues that may have a significant impact on future growth and competitiveness.

KPMG is committed to supporting the businesses we advise to succeed and to grow whatever the business environment. Completing this questionnaire provides you and us with a framework to prioritise action. We look forward to discussing the contents with you.

KPMG implements standard procedures to maintain the confidentiality of all responses.



How to navigate through the questionnaire

The questionnaire is comprised of categories that cover a range of issues affecting a business’ ability to compete. Each category contains a series of questions to help you evaluate current thinking and to prompt what might need to change to succeed in an uncertain business environment.

The questions use a rating (set out below) to provide a quantitative measure of your preparedness.

Not every question will be applicable and there is no need to complete every category in order to get a sense of what changes might be required.

The questionnaire can be used as a self assessment tool and should be used for self-assessment only by entities audited by KPMG.

If you are completing this questionnaire on behalf of an entity which is not audited by KPMG, we invite you to send it back to us so that we can review your responses in more detail using our team of growth experts led by David Slater. We will then propose some next steps.


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

Not applicable 0

Not reviewed yet 1

Review started but more information required 2

Strategy developed but not yet actioned 3

Strategy agreed and activity in progress 4



Business information

1Name

2Company

3Job Title

4Company Sector

5Email Address

6Company telephone number

7Turnover

8Head office location

9Location of other offices

10Location of data centres

11Total number of employees

12What % of your turnover is derived from sales in:

i) The EU? ii) The rest of the world?

13What % of your cost of sales are sourced in:

i) The EU?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

ii) The rest of the world?

Is there any further information that you think might be relevant for us to know?



Business Strategy

There is little doubt that Brexit could cause significant disruption to the UK and European business environment. However it is one of many potential disruptive factors over the next few years e.g. low consumer and business confidence, risingcompetition from new, innovative and agile businessmodels, trade wars and increasing protectionism areall threats.

The necessary preparations in the run up to the original hard Brexit deadline of 29 March 2019 can be viewed as the fire drill to prompt planning and action in response to a wide range of future changes in the business environment and to take advantage of opportunities that will follow.

Experience suggests there are three phases to both managing and taking advantage of disruption to the business environment:

Stability – ensuring the business is able to continue.

Cost management and profit improvement –using the opportunity to focus on efficiency and releasing funding for investment.

Growth – getting ahead of the competition through increased productivity and driving profitable sales.


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

Rating hereEnter a value from 0-4

What assessment of your current business model has been made across these three areas against the impact of potential disruption?

Have you assessed the key challenges for the business in the medium term and how the business is positioned to respond?

Have you reviewed whether competition will increase as a result of Brexit and other market disruptors and how you are planning to respond?

Where do you see the biggest opportunities and have you positioned the business to take advantage of these?

Have you tested how your customers’ needs and expectations will change in the medium term and are you ready to respond to these?



Finance

The uncertainty caused by Brexit or a fall in business and consumer confidence could place a strain on the cash position of any business.

For example

- New orders could fall and customers delay payments for goods and services received.

- Current pricing may no longer be sustainable, but the pressure to improve profits will increase.

- Delays at the borders might result in the need to hold more inventory and future costs might arise from new tariff regimes or fluctuations in the value of Sterling.

This section will help you to identify key areas of potential risk.



Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

To what extent have you factored in uncertainty into your financial planning?

To what extent have you stress tested future demand for your goods/services and how this will impact your cash flows, margins and profitability?

How far have you discussed your future funding needs with your key finance providers and creditors? Might the future cost of capital increase?

Have you tested how exposed you are to fluctuations in the value of Sterling and against which other currencies?

Will you need to hold more inventory or build a stock buffer and have you modelled the impact of that on your cash flows?

How far have you considered the impact of tariffs or increased customs costs on your cash flow and profitability? (e.g. might you seek to absorb these or pass onto your customers)?

To what degree have you reviewed your contracts or SLAs for potential issues such as penalties for delays in supply?



Pensions

Disruptive events are likely to have a significant effect on equity markets, bond markets and currencies, with a consequent knock-on effect on the funding position of defined benefit pension schemes.

Furthermore, any Brexit-related impacts on business prospects, or plans to restructure in the UK as a result of Brexit, could lead pension trustees to seek additional cash funding or security packages.


Do you operate UK defined benefit pensions and, if so, have you assessed its materiality to the size of your business?

How far have you tested the exposure of the pension scheme to financial market shifts or if Brexit damages your business?

To what extent have you communicated with the trustees of your pension scheme and ensured that workable plans are in place to review the pension scheme?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions



Workforce

Changes to UK immigration rules will necessitate changes to the way that business approaches the attraction and retention of staff at all levels. When considered against the backdrop of record levels of employment, an increase in overall staff costs is probable.

Even if your levels of EU or foreign workers are low, other businesses and competitors may seek to attract your staff to fill their gaps resulting in wage inflation and cost increases. Fluctuations in the value of sterling may also impact the attractiveness of the UK as a place for foreign workers.

Retention is therefore key and communicating proactively to staff will play an increasingly important role.

The EU may also change the way it treats business travellers from the UK which may necessitate change to your approach to mobility.


Do you know what proportion of your workforce are EU and foreign nationals, contractors and agency staff and in which functions they sit?

What assessment have you made as to how critical they are to your operations should they decide to leave?

Have you considered your communication strategy to inform colleagues about the new immigration rules and how to support staff retention?

To what extent do you have contingency plans in place to replace lost staff should the need arise?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

To what degree have you considered the status of UK nationals employed in the EU?

How far have you reviewed how your HR systems might be impacted?

To what degree have you assessed the impact of change in EU immigration policy or the ability of your staff to travel?



Tax

Leaving the EU changes the tax environment both in terms of direct corporate tax and for indirect taxes such as tariffs, duties and VAT.

The impact on business models will be particularly significant for businesses trading internationally and that move goods across borders.

Other disruptions to the business environment will also result in changes to business models and thus this is an opportune time to review company structures and tax arrangements and seek these tax efficiencies that increase competitiveness.


What assessment has been made to ensure you have an optimum corporate and tax structure, particularly post-Brexit?

To what degree have you assessed your capacity to change internal systems to ensure compliance with any new regulations and tax/customs changes?

To what extent have you assessed the impact of a new tariff schedule and WTO rules?

Can you be confident the current team can cope with increased customs processes, declarations and what related changes there might be to your administrative/ business processes?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

To what extent have you assessed what additional tax requirements you might need for any subsidiary of a UK listed business operating in the EU?

Have you considered applying for Authorised Economic Operator status?



Supply Chain

Understanding the supply chain both upstream and downstream is critical to the continued effective management of a business’ supply chain operations.

Disruption at UK ports will cause problems to any time sensitive supply chain. Businesses may also need to factor in longer customs clearing times as well as deepening the understanding of your logistics networks.

Also changes in business confidence might alter demand for products and necessitate more careful management of inventory.


How far have you mapped your supply chain and assessed any exposure to your suppliers and customers?

To what degree have you undertaken conversations with your suppliers and logistics partners to ensure continuity of supply?

What confidence do you have that you can identify threats e.g. failures by your suppliers/logistics providers to take remedial action?

To what detail have you reviewed the volume and type of goods imported from inside and outside the EU (and their original origin)?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

What consideration has been given to any lead times required to clear customs due to the introduction of new procedures?

Have you understood your key inbound and outbound supply chains taking into account temperature, ports and transport modes?

Have you considered the impact on goods transiting through the UK (e.g. ROI to mainland EU)?

To what extent have you assessed whether your service providers are licensed to provide services to your EU customers?



Legal – Contracts

Brexit may mean you, your supplier or your customers are not able to perform the contract you have agreed. This may be due to the loss of a licence or authorisation you/they need.

More likely, some of the changes to the commercial and economic landscape within which this relationship sits will change the risk/benefit balance in the contract. Where margins are significantly impacted, end customer demand changes or competitive pressures change, you or your supplier/customer may want to review pricing, reduce volumes or even, exit the contract.

Reviewing your contracts against this scenario is important to protect your relationships, ensure business continuity and manage risk.

You probably have many contracts (whether written or not) and will need to prioritise where to start. Where you have an in-house legal team, they may not have the capacity to do this effectively.


In what depth have you identified contracts that may be at risk?

Have you assessed the key areas of risk in your current contracts?

Will you need to make changes to contracts to adjust pricing, SLAs or volumes or to correct territorial descriptions or restrictions? Will you need to put in place alternative or contingency arrangements?

How will you know if your supplier/customer may be looking to exit and what plans do you have to respond if that happens?


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

What assessment of your IP have you undertaken to understand whether there are additional steps you need to take to protect it and to continue to exploit it after the UK leaves the EU?

What assessment have you made of the regulations that apply to your business and to the products/services you sell or rely on having?

What steps do you need to take to ensure you can continue to trade/sell products and services in the EU after Brexit?

Have you reviewed your group structure to assess whether it is impacted by Brexit?



Data

The regulatory environment concerning data may change after Brexit.

For example, to process personal data you may need to align to a new EU based regulator.

Maintaining a clear data footprint is important as third party risk may arise if suppliers and contractors are inadvertently transferring data to and from the EEA.

Clients may only want to deal with organisations who can exclusively deal with the EEA and relocating activities to the EEA to avoid non-compliance will incur a cost.

If your business holds or processes large quantities of data, understanding the legal and financial implications is important for you to remain compliant.

This section will focus on the key areas to help you understand what information you need to gather next.


Have you assessed where your data centres and cloud servers are based?

What data mapping exists to validate where data is held and which data is transferred across borders?

What reviews have you undertaken of your contractual commitments with clients/customers/suppliers/third party providers to ensure they are transferring and processing data appropriately?

What safeguards are in place for the lawful transfer of data? Please consider both data transfers and intra company transfers.


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

GDPR introduced guidance on how to manage personal data. To what extent have you considered how to separate personal data when the UK becomes a third country?

Are you comfortable you have considered the need to update privacy notices if the UK’s status changes?

Have you updated your Records of Processing to reflect the change to the UK’s status following Brexit, particularly focusing on any changes to processing activities?

Have you secured an EORI number: The European Union’s registration and identification for businesses which undertake the import or export of goods into or out of the EU?



Contact Information

1 Once you have completed thisquestionnaire please save your changes as you are working through it and email a copy of this document to [email protected] and we will be in touch on next steps.

2 If you need assistance or have anyquestions with regards to how to complete this questionnaire, please contact David in the first instance.

3 For an up to date commentary on thelatest politics of Brexit and how KPMG can help, please Click Here.


Data

Workforce

Tax

Supply Chain

Legal

Finance

Pensions

David SlaterDirector – [email protected]+44 20 76945182

Justin [email protected]+44 20 73118415

Hannah CoolBrexit Risk Assurance [email protected]+44 20 76942661

mailto:[email protected]




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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Competing in a changing business environment · the UK’s business environment. The UK economy is inextricably linked to the global economy and issues such as a slowdown in growth

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