While the decision for the UK to leave the European Union (EU) might have come as a surprise and had markets and businesses scrambling to adapt as quickly as possible, CIOs may have several months to prepare for the potential implications of Brexit.
It appears that the negotiation to leave the EU will take place over the next two years and trade negotiations could take up to 10 years. “Faced with another wave of volatility and complexity, CIOs in the UK and Europe must remain calm, but not complacent,” says Lee Weldon, managing vice-president at Gartner.
“All decisions and actions should be framed in the context of a long-term view, avoiding short-term reactions driven by market instability.” With that in mind, CIOs should create a small task force or “Office of the Brexit” to examine key capabilities and plan for eventual changes and impacts in the following areas:
In the Gartner Peer Connect Community, CTOs and CIOs were initially most concerned about how Brexit would affect pricing for IT products, but were hopeful the prices would balance out in the long term. In many enterprises, Brexit will inevitably mean reduced or frozen spending budgets. Identify nonessential projects for 2016 and 2017 and discuss with business leaders whether any should be postponed until the full impact of Brexit can be assessed.
People and talent
Employees will inevitably be nervous due to the uncertainty caused by the vote. Clearly communicate with employees, in particular key employees whose roles look to be impacted, as you move through the prepping process and work with HR to provide guidance and support. Also review where key IT staff is located and how certain skill set hubs might be affected.
Brexit will increase complexity in the application and service delivery portfolio. Consider where applications are hosted and, in particular, transactions that cross the UK border. Collaborate with business users for challenges such as tariffs and cross-border value-added tax (VAT) management. Establish an analytics strategy that can provide insight on the implications of the Brexit vote, and ensure the right people are involved.
Suppliers and partners
Review all IT services and contracts for cross-border services that will be affected and identify where data is being stored to determine what might be affected by EU privacy data rules. Be aware of how UK-based IT contracts will be affected by various legal applications. No immediate action is required besides visibility to potential issues and identifying strategies for the future.
It is unclear whether the UK will remain in the European Economic Area (EEA), so CIOs should ensure that data still complies with new data regulations until more information is available. Postpone any decisions on data centers, and ensure transparency on currently stored data.
The lack of clarity on what Brexit means will ensure an immediate investment in diagnostic and predictive analytics. CIOs should engage senior leadership to establish an analytics strategy that can provide insight on the implications of the Brexit vote, and ensure the right people are involved. CIOs should also consider what projects can be paused to free up resources and funding for the analytics strategy.
Governance and operating model changes
Consider if the company needs a legal entity subsidiary in the UK, the EU countries or a non-EU nation to minimize disruption. If so, consider what this subsidiary would look like whether an actual operating subsidiary or paper-based arrangement following the business registration process.
Review current and potential risks with the IT leadership team and look at how Brexit could impact already-identified risk. Additionally, identify new risks that will affect the business from a skills, supply, data, business continuity or regulatory perspective.
This will allow CIOs to provide business insights to decisions being made in response to Brexit.