INFORMATION
Tackling Brexit: part two
Ron Mendes (pictured), MD of consultancy firm PROSPA (UK), follows up his piece in May’s magazine by looking at Brexit force field analysis, effective strategic decision making and paradigm shifts responses.
FORCE FIELD ANALYSIS An array of forces confronting businesses create and shape their future. These need to be recognised and exploited if beneficial and possible. If not possible, action needs to be taken to avoid or minimise any negative impacts. For Brexit purposes the three main forces are political, economic and societal. Businesses are a key constituent of the economic force, but Brexit-wise the political and societal forces take precedence unfortunately. Businesses therefore need to anticipate and respond to such forces, ahead of their impact.
EFFECTIVE STRATEGIC DECISION MAKING A critical precursor to business Brexit action (and Government nationally) is effective, strategic decision making. A business or nation is only successful when the total of its effective decisions exceeds its ineffective decisions. The converse also holds true. Great care is needed with major strategic decision making as one wrong decision can create a rapid slide from success. Therefore a structured decision-
making approach like PROSPA’s Strategic, Decision Making model is necessary. Critically, human decision making assisted by Artificial Intelligence (AI) is in the early stages of use by certain governments and multinational businesses but possibly not at the national level or, understandably, by most businesses for Brexit purposes. Even a basic axiomatic directive of
PROSPA's Strategic, Decision Making model may have been helpful - “Make a strategic decision for a strategic purpose or an operational
decision for an operational purpose. Do not make an operational decision for a strategic purpose.” The second line of the axiom is a
common example of ineffective decision making.
BUSINESS EXAMPLE A common Brexit decision is doing nothing until a final EU-UK agreement is reached. It constitutes an operational decision for a strategic purpose. Moreover, it magnifies and compounds similar examples of national decision making regarding Brexit, rather than nullifying them. Other business examples exist but it would be more illustrative to consider national examples and learn from them as overcoming and managing Brexit effects may be necessary well into the 2020s.
NATIONAL EXAMPLES 1. Binary decision on referendum Offering a yes/no option to the electorate is an example of an operational decision for a strategic purpose. It resulted in a reflex action (by both Brexiters and Remainers) instead of a strategic decision based on research, findings and extrapolation as evidence of future economic, political and social consequences. AI-enhanced research would have provided the latter critical information. Such technology was within the wherewithal of a G7 nation. In comparison, the Irish
Referendum on abortion falls outside the operational or strategic dimensions as it is based more on conscience and belief. That Referendum could therefore be truly binary and was legitimately so.
2. Red lines for no internal market and no Customs Union Again this was an operational decision for strategic purpose without seemingly much research, findings and extrapolation of the consequences. Again, AI-enhanced research, findings and extrapolation that accessed a variety of databases and Big Data may have advocated a different decision.
3. Early exercise of Article 50 This was again an operational decision for a strategic purpose. More deliberation before exercising Article 50 could have proved very beneficial. Not doing so prevented a more considered and well researched process. It resulted in a compressed timetable that squeezes out future proper strategic decisions for strategic purposes. Furthermore, the hurry encourages more ineffective operational decisions for strategic purposes at both national and business levels.
SUMMARY OF SUGGESTED KEY ACTIONS NEEDED BY BUSINESSES TO ACCOMMODATE BREXIT
1. Upgrade the organisation’s decision-making frameworks and methodology While critical for strategic decision making, the upgrade should also cover operational decision making as it is essential to distinguish between what is operational and what is strategic where key weaknesses can exist.
2. Ensure planning/action is not linear and sequential that waits for EU-UK negotiation results The business environment is increasingly unpredictable and volatile and linear business
planning may be inadequate. Sensitivity analysis and stress testing are variations of linear planning. Scenario planning should have increased importance.
3. Prepare for seven business paradigm shifts to accommodate the three national paradigm shifts post-Brexit Brexit will create three major national paradigm shifts of an economic, political, and legislative nature that the nation will begin to experience after March 2019. Simply carrying out, say, PROSPA's Vulnerability diagnostic tool and the Chamber’s Brexit Checklist is inadequate. Businesses need to deploy some, if not all, of the seven business paradigm shifts.
4. Migratory off-balance sheet risks Wrapped up in the seven business paradigm shifts are countermeasures against off- balance sheet risks. Such risks are strategic in nature and more insidious than on-balance sheet risks or process or compliance risks that underlie and dominate current Brexit activity by some. These risks are not easily visible or apparent and can occur in non-Brexit circumstances.
CONCLUDING COMMENTS It should be evident both pre and post Brexit what could be the consequences if appropriate responses to forces affecting businesses are not recognised and addressed in a timely manner - operational decisions are made instead of strategic ones, insufficient business paradigm shifts are deployed, and inadequate defences are erected against off- balance sheet risks.
business network July/August 2018 63
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