Brexit Emerging Strategic Options › fileadmin › user_upload › ... · 2016-11-18 · Brexit...

2016 Monitor Deloitte

Brexit – Emerging Strategic Options Dr. Florian Klein, 3rd November 2016


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What drives our future?

How to reduce complexity?

What is the right course of action?

Brexit – a tremendous challenge

2016 Monitor Deloitte 3

Perceive the drivers of the future

2016 Monitor Deloitte 3 Jan Seanredam: Plato’s Cave, 1604


Brexit scenario video

You can find the video here: https://www2.deloitte.com/de/de/pages/strategy/articles/brexit-szenarioanalyse.html

https://www2.deloitte.com/de/de/pages/strategy/articles/brexit-szenarioanalyse.html





Brexit scenario recap

A.Back to Square One

› EU breaks up; former members keep liberal relationships

› Free movement of people abolished

› Fall of the Euro leads to currency competition

› More varied, and often stricter, product standards

› Trade rules are dictated by others

B. European Federation

› EU sustained as an economic and monetary union

› Economic and political integration reinforced

› Liberal trade relationships are maintained with the UK

› Movement of people between the EU and UK limited

› UK contribution to the EU budget for access to single market

C. Fortress Europe

› EU is sustained as an economic and monetary union

› Political integration towards a transfer union

› Protective trade policies

› Rise in transaction cost, export nations suffer

› UK-based companies move to continental Europe

D. Shattered Dream

› EU and Euro have fallen

› Former EU member states introduce protective trade policies

› Free movement of people and workers is discontinued

› Customs and non-tariff trade barriers complicate trade

› Emphasis on bilateral free trade agreements

Relationship to UK

Futu

re o

f EU

Integration

Disintegration

Protectionism Free market


Cut trough complexity

2016 Monitor Deloitte 6 Giovanni Panini: Alexander the Great cutting the Gordian Knot, 1718


Brexit risk map

Demand

Risk

Market Access

Risk

Operational

Risk

Innovation

Risk

Purchasing

power (PP) &

GDP growth

Exchange rate

& market

prices

Free

movement of

goods

Freedom to

provide

services

Free

movement of

people

Free

movement of

capital

Public

tendering

R&D support &

subsidies IP protection

› EUR-GBP convergence and GDP

change increase EU and

decrease UK PP

› Exchange rate and market price

volatility increase uncertainty

› Impact on investments, trade

and demand

› Protective trade policies and

increasing regulatory divergence

restrict market access and

trade, increasing transaction

costs

› Impact on value chains, product

portfolios and customer groups

› Diverging national labor laws

limit access to talent and

movement of workers

› Restricted capital movement

hinders cross-border operations,

investments and partnerships

› Reduced EU budget and changes to eligibility

criteria impact the number and size of subsidies

› Increasing divergence of national laws endangers

patents, trademarks, copyrights, trade secrets and

intangible assets

› Impact on location strategy and business and

economic growth

Demand

Risk

Market Access

Risk

Operational

Risk

Significant impact on:

› Fast-moving consumer goods

› Tourism

› Real estate


› Financial services

› Energy and utilities

› Equipment

› Automotive


› Multi-national corporations


› Pharmaceuticals

› Start-ups


Brexit impact – Fast-moving consumer goods vs. financial services

130

140

120

110

0

80

70

100

90

01.09.2016 01.11.2016 01.03.2016 01.05.2016 01.01.2016 01.07.2016

Marks & Spencer

Unilever Dow Jones Personal & Household Goods Titans 30 Index

Beiersdorf

Share

develo

pm

ent,

% n

orm

alized

120

01.09.2016

130

140

110

70

80

01.03.2016

100

01.07.2016 01.01.2016

90

01.11.2016 01.05.2016

0

Share

develo

pm

ent,

% n

orm

alized

Prudential Barclays NASDAQ Financial 100

Allianz

Fast moving consumer goods Financial service providers

Sources: OnVista, Yahoo Finance


Scenario-specific risks and opportunity profiles

Risk Type Impact Short-term Mid-term Long-term

Demand Risks

-- › UK: Exports increase. Imports decrease. Initial uncertainty stops FDI and cross-

border business initiatives, offsetting short-term gains. As uncertainty is reduced, investments grow and benefits materialize.

› EU: Exports decrease. Imports increase. As export slumps are offset by new or strengthened continental European trade relationships, initial negative effects are reversed.

-

±

+

++

Market Access Risks

--

› UK & EU: The status quo is sustained until Brexit negotiations have been concluded. The EU and UK agree on liberal trade relationships to ensure free movement of goods and the freedom to provide services so that market access remains unchanged.

-

±

+

++

Operational Risks

-- › UK: The status quo is maintained until Brexit negotiations are concluded. Despite free trade, the UK discontinues free movement of people, significantly restricting its access to talent. In the long-term the UK is likely to absorb part of the risk

› EU: The status quo is maintained until Brexit negotiations are concluded. Despite free trade, the UK discontinues free movement of people. In the mid-term, European businesses realign recruiting and staffing of European employees in the UK, which they are likely to achieve in the long-term, offsetting negative impacts.

-

±

+

++

Innovation Risks

-- › UK: The status quo is maintained until Brexit negotiations are concluded. Though

staying part of the EU’s common market, it is likely that some EU subsidies for the UK will be reduced or completely discontinued.

› EU: As the EU continues to exist as an economic and monetary union, regulatory divergences between the UK and EU remain small and the UK continues to contribute to the EU budget, innovation risk is unlikely to impact the EU.

-

±

+

++

Scenario B – European Federation (EU integration; Free market)

EU

Short-term: Today | Mid-term: 2-3 years | Long-term: 5-10 years

Continental European Perspective UK Perspective

UK

UK

EU

EU

EU

UK

UK

EU

EU

UK UK

-- Big Risk to ++ Big Opportunity

EU UK

UK UK

EU EU


Choose your strategic position

2016 Monitor Deloitte 10 Statue of Leonidas at the Pass of Thermopylae


Strategy is a set of consistent choices

› Customers

› Consumer segments

› Target Industries

› Product and service range

› Geographic footprint

› Value proposition

› Competitive advantage

› Profit models

› Partnerships

› Organization and capabilities

› Asset configuration

› Sales and distribution configuration

› Purpose

› Financial objectives

› Non-financial objectives

Goals & Aspirations Where to play

How to win How to configure


Strategic options concerning competitive positioning



Brexit impact

› Demand risks

Currency risks

Demand risks

› Market access risks

EU passport

EU free trade agreements with non-EU countries

› Political and regulatory risks

Increasing regulatory divergence between EU and UK laws

Reduction or discontinuation of subsidies

Strategic options

› Portfolio management

Reassess target markets and customer segments

Reevaluate value chain positioning

Realign product and service portfolios

› Engage in industry-specific lobbying (e.g. equivalence regime)




Strategic options concerning the value proposition

Brexit impact


Consumer protection rules

Data transfer and protection

Liquidity requirements, stress testing


Partnerships with other FSI players or distribution channels

› Innovation risks

Access to R&D funding

Access to strategic talent

Strategic options

› Reevaluate revenue streams and profit model

› Review value proposition

› Review industrial partnerships

› Consider strategic relocation

› Race to the top vs. race to the bottom regarding regulatory standards




Strategic options concerning operations

Brexit impact


Consumer preferences and expectations

Data transfer and protection rules


Access to operational talent

Movement of staff

Reduction / discontinuation of EU / DE subsidies

Strategic options

› Currency or price hedging

› Register with the ESMA / obtain licenses in relevant jurisdictions

› Establish authorized branches / subsidiaries

› Adjust HR model

› Adjust control and reporting systems


Strategic priorities

Mitigate, assess, prepare

› Hedge currency and/or prices

› Determine business lines dependent on EU passporting and existence of equivalence regime

› Register with the ESMA to retain access to professional clients

› Obtain licenses in relevant jurisdictions in case of refused equivalence status

› Engage in industry-specific lobbying, e.g. equivalence regime, immigration policy, data protection, support schemes

› Prepare for strategic relocation or establishment of authorized branches / subsidiaries to retain access to retail clients

Transform

› Diversify business model, e.g. products and services, fin-tech, shadow banking

Re-position

› Execute strategic relocation / establish authorized branches / subsidiaries

› Portfolio management

Reassess target markets and customer segments

Reevaluate industry and value chain positioning

Realign product and service portfolios

› Realign value proposition (comprehensive service vs. increased focus)

› Reevaluate revenue streams and profit model

› Redesign HR model

› Establish alternative partnerships

Today 2020 2018


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Robust vision of the future

Clarity on risks and opportunities

Alignment on strategic measures

Brexit – a great opportunity


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Deloitte provides audit, tax, financial advisory and consulting services to public and private clients spanning multiple industries; legal advisory services in Germany are provided by Deloitte Legal. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to making an impact that matters.

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Deloitte 2016

Brexit Emerging Strategic Options › fileadmin › user_upload › ... · 2016-11-18 · Brexit...

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