A “no-deal Brexit” has significant implications on your company’s finance function!
In June 2016 the decision was made following a referendum to withdraw the United Kingdom from the European Union. Since then extensive negotiations have been held, the central outcome of which was the draft Brexit deal approved in November 2018, as well as a political declaration regarding the future relationships between the United Kingdom and the EU. In January 2019 that draft was rejected by a majority of the British House of Commons. Since then the negotiation partners have tried to find a solution for a regulated exit of the United Kingdom from the EU. However, at present such a “soft Brexit” is not yet clearly in sight, so a “no-deal Brexit” as of 29.03.2019 remains a realistic scenario.
So what exactly does a no-deal scenario mean for the finance function of your company?
Potential required action in the area of the finance function includes:
- a need to adapt your risk management system (RMS) and internal control system (ICS) on the basis of new regulatory requirements, strategic purchases of companies with their registered office in the United Kingdom and extended management report requirements (for all financial statements after 31.12.2018);
- a need to separate IT systems, data relevant to accounting and operational business processes due to the separation of a loss-making part of the company with its registered office in the United Kingdom;
- a need to implement business processes and IT systems for the preparation of financial statements of a German subsidiary of a parent company with its registered office in the United Kingdom due to the discontinuation of the simplification and exemption regulations (section 264 par. 3, 264b of the German Commercial Code (Handelsgesetzbuch));
- a need to verify and adapt commercial law valuation approaches in the balance sheet due to Brexit-induced reductions in the value of individual assets;
- a need to verify the extent of the change in the cost structures of parts of a company in the United Kingdom and make required going concern forecasts, as well as perform necessary restructuring activities;
- a review of ongoing M&A processes with regard to the change of key premises (e.g. revenue forecasts);
- a need to identify alternative financing possibilities for investment projects due to fact that access to financing sources in the United Kingdom will be hampered (“credit crunch”).
Our approach to a solution
With our “Quick Check” we analyze your individual impact profile for each Brexit scenario across all key subject areas and, in particular, support you in the conception and implementation of measures with respect to the optimum orientation of your finance function.
Our approach includes the following service components:
Brexit Quick Check
- Full screening of your individual business activities and, in particular, existing contractual relationships with business partners in the United Kingdom;
- An initial understanding of the actual extent of the impact on your company for each Brexit scenario (no-deal and soft Brexit);
- An initial assessment of resulting opportunities and risks;
- Establishment of areas of action specifically for your company.
Scenario analyses and preparing a decision
We will be happy to support you in an in-depth analysis of how Brexit will affect you and in the preparation of relevant management decisions, for example:
- Planning and carrying out process and data analyses (e.g. screening of the supplier structure) and presenting the results in a manner suitable for management staff;
- Calculation of your current customs duty burden for each group of products and the future customs duty burden for each Brexit scenario;
- Substantiated identification and valuation of Brexit-induced risks and opportunities by way of workshops/interviews;
- Support in the development and prioritizing of options for action.
Support in the implementation
As your expert for the area of finance we will support you in the operational implementation of decisions made and measures taken with regard to your company’s finance department. The scope of this support will be tailored entirely to your needs, for example:
- Support in the conception and implementation of your risk management system (RMS) for the ongoing determination, valuation, control, and external reporting of Brexit induced risks;
- Adapting your existing RMS for the integration of Brexit-related risks and opportunities;
- Support in setting up or adapting your internal control system (ICS) to new regulatory requirements;
- Conception and implementation of processes and IT systems for the initial drafting of correct annual financial statements for affected companies;
- Project support in the separation of IT systems and data, as well as the adaptation of business processes (carve-out);
- Analysis of the cost structures and needs-oriented support in planning and carrying out going concern forecasts and restructuring measures;
- Support in planning and carrying out a carve-out;
- Identification and valuation of potential takeover targets in the United Kingdom (due diligence) in order to exploit economic opportunities;
- Analysis and optimization of your currency risk management and identification of alternative financing possibilities for your investment projects.
Do you already have an internal project/initiative for addressing the challenges of Brexit?. No problem. With our wide-ranging experience and expertise we will support you as a sparring partner in the successful implementation of your planned measures or analyze them with our Brexit Quick Check in order to give you the necessary confidence in dealing with the challenges, and we will work with you to develop optimum solutions.
Where necessary we will also handle the coordination of your Brexit project/initiative and thus ease the burden on your resources.
We will be happy to help you if you have any questions relating to your financial system and accounting.
Do you have questions concerning customs or tax law? Our WTS colleagues will be happy to help you.