In the UK we are now plunged into a crisis in the operating environment (a macro risk) and whatever your feelings are on the subject, the UK is set on a path to the 23 June 2016 yes/no referendum.
The question for commercial organisations is what are the impacts of in or out? How should we be preparing? Well firstly this is a crisis – if you use the definition of crisis from BS11200 which is: “inherently abnormal and unstable situation that provides a threat to an organization’s strategic objectives, reputation or viability”. It is a ’no brainer’ as the ‘destructive forces’ which may be unleashed by EU referendum have already started to be felt, for example, Sterling and the Euro falls in the last week (I note for some they may not be destructive!).
How do you know what will happen to your strategic objectives or viability for an in or an out vote? Destructive forces or opportunities available? The whole situation is complex and with a high level uncertainty. Until the referendum result is announced we will have much uncertainty (Period 1) and when it is there will be a consequence period (Period 2 – bounce after yes? ‘downer’ for no? and up to 2 years for a divorce).
I have previously written about the impact of residual uncertainty (Ru) on crisis management (impact of uncertainty on crisis management). Situations with high Ru require some different thinking, approaches and tools. Each crisis has different drivers and factors depending on the organizations operating environment and what is good for one company is bad for another. There is no shortcut; the work needs to be done to understand the challenge. What interventions are required now, up to results announcement and afterwards? You may already have relevant work from a task force from the GREXIT/Euro crisis from the 1st half of 2015 (which ironically may outline how that crisis was handled).
The technique that stands the test of time for high uncertainty situations is scenario planning. Scenario planning provides the technique for identifying and framing the uncertainties for a plausible set of scenarios. At the best case it enables you to be proactive and understand the assumptions you have, see uncertainties more clearly and seek out the possible opportunities. At worse it brings your team together and allows you to start to rehearse responses. The real aim must be to examine the change in the environment to seek to identify possible opportunities that were not present before we embarked down the ‘in/out’ road! We need to be prepared for the possible range of destructive forces and opportunities. Agility does not come from being static!!
There is another technique which is appropriate if you are in a highly competitive or adversarial situation and that is war-gaming. If a consequence of ‘out’ is that competitors or joint venture (JV) partner relationships are fundamentally changed, then war-gaming their possible options and response is a technique which allows you to get inside their decision loop.
Scenario planning has a method and the definition of appropriate scenarios is critical to providing the right amount of challenge and ‘field of play’. You can either identify the requirements and ‘gap’ against current strategy or ‘test drive’ your current strategy and define deficiencies. Whatever the approach, it is unrealistic to expect all questions to be answered but at least knowing the range of possibilities if useful and positions on future vision can be taken. The FT article of 23 Feb 16 is useful (Three futures for Britain outside of the EU)
One last comment is that a ‘BREXIT task force’ needs to be working NOW. Where your task force leader reports also requires some thought. A crisis is like a war, it has twists and turns and is dynamic. Normal board and executive discussion process is unlikely to be responsive enough. An option is to use the crisis team leadership to sponsor the activity and report to the crisis team. This means that as events evolve we can ensure response is agile and we can be in the best position to prosper whatever the outcome. This work needs to be undertaken NOW! It cannot wait, the clock is ticking.
- Accept this is a crisis and get moving! Ignore your own feelings – it is a fact there is a referendum on 23rd June 2016!
- Review the process followed for the GREXIT crisis, can we reform the same group and start work ASAP and then add extra analysts/specialists as required? If you don’t have a GREXIT precedent to follow – put together a task force ASAP with the right leadership, process and advisors, start with a core team and develop it from the starting ‘line-up’.
- The ‘task force’ can report to the crisis team leader as the normal business decision making and discussional process may not be fast enough.
o Set objectives for the scenario planning – appoint your leader
o Identify key issues, use structure to evaluate scenarios against (e.g. value chain, up, downstream, range of share price fluctuation etc.)
o Build scenarios, analyse, map possible boundaries, evaluate core factors (financial resilience, credit rating, FX range etc.)
o Map implications and test, define possible actions
o ACT – put relevant action plan against time in place
- The right advisors are required as an integral part of the task force
- A crisis such as BREXIT is like a war it has twists and turns and is dynamic – your analysis must not be static and must be reviewed day by day as events unfold.