Member Article

SMEs Need To Manage Risk Better After Brexit

There are now many more unknowable unknowns than there were three months ago. Since we are no nearer knowing what Brexit means nor when it will happen, it is becoming increasingly important for all SMEs to identify and tackle the risks facing their business, warns commercial litigator John Flint of the Manchester office of Clarke Willmott LLP.

Mr Flint, a specialist in complex high profile commercial litigation disputes, particularly for SME’s, said: “Any period of economic and political uncertainty is likely to affect all SME’s and damage those who have not prepared for it.

“For those businesses who are already trading or have significant relationships with the EU, the risk factors may be all too readily apparent. But others who have no existing relationships and no plans to develop them may be thinking “so what?”

“That would be a dangerous trap to fall into. As a commercial litigator, I am often asked to advise SME’s about risk. Too often problems and disputes are left to fester in a business for way too long. In my experience the simple truth is that no problem gets better with time, only worse. Those businesses who deal with problems as and when they emerge prosper in periods of economic and political uncertainty, but those that sit on or bury them struggle and fail.

John Flint has identified five steps all SME’s should be taking now to help manage risk post-Brexit:

1. Identify your EU relationships, both internal and external If you have yet to devise or implement a plan to deal with exit from the EU, you need to be having the meetings, talking to your professional advisors, and making your post Brexit plan as soon as possible. Consider how any less favourable trading terms will affect you and other businesses in your supply chain. “It is particularly important for SMEs to think about regulation and not just the potential imposition of trade tariffs. “Leaving the EU will lead to the need to renegotiate commonly accepted regulatory frameworks with many trading partners, so you will need to plan how this is likely to affect your future trading relationships as either an importer or an exporter” says Mr Flint.

2. Review your contracts and trading terms . As Brexit demonstrates, long relied upon clauses can become obsolete overnight. Asking your lawyer to review your contracts and trading terms on a regular basis will prevent a very damaging dispute for an SME. “It is surprising how many otherwise well run SME’s rely upon contracts which have simply been downloaded from the internet or are left unsigned, or simply haven’t been reviewed by a lawyer for many years. Most disputes I come across are caused by one or more of these factors, and all of them were easily avoidable”.

For those businesses with existing EU relationships, consider whether your standard terms have a clear governing law and jurisdiction clauses. Might any contracts be difficult or uneconomic to perform or enforce outside the EU? Consider using this as an opportunity to renegotiate and secure your supply chains.

3. Identify all existing disputes and draw up a plan to resolve them. Disputes or complaints which end up in litigation can have a damaging impact upon the performance of your senior management team and be an unwelcome drain on both time and resources. Most disputes are better resolved quickly and effectively by instructing a specialist lawyer at an early stage. Not only will this help you identify and quantify the risks you are facing, it will also ensure that your lawyer is given the best opportunity to devise and implement the most cost effective legal strategy for dealing with it. In addition, make sure you have an effective document management and retrieval process.

Brexit now means there are additional legal uncertainties which need to be addressed for those already managing EU relationships. Litigating a dispute in an EU Court is likely to become far more problematic, with unfamiliar law and procedure, inconvenience, delay, language barriers and unpredictability. Businesses might find themselves dealing with expensive “parallel” proceedings, where two courts in different countries are engaged in the same or similar proceedings at the same time.

4. Learn from your mistakes, don’t bury them or blame Brexit. A healthy business culture will seek to openly and honestly identify processes or changes which will prevent the issue or complaint from arising again.“ It will be all too easy for an SME to fall into the trap of blaming their failings on a general post Brexit malaise, but in fact very few risks are genuinely wholly outside an SME’s control and influence“ says Mr Flint . Ask your professional advisor to contribute to the process as they will often be best placed to give you an objective and independent assessment.

5. Make a flexible business plan and keep it under review Given all the uncertainty, the great temptation for an SME is to sit tight in the hope that things will turn out better than expected or that the right decisions and choices will start to emerge. But doing nothing is seldom better than doing something.

“Decision paralysis usually leads to damaging failure” warns Mr Flint, “So encourage your business to make a plan for its short, medium and long term future.

“No business plan survives contact with the enemy so make sure your plan has inbuilt agility and flexibility, something which will be more important than ever post-Brexit” advises Mr Flint.

For further information, contact John Flint at Clarke Willmott’s Commercial & Private Litigation team in Manchester on: 0345 209 1079 or email: john.flint@clarkewillmott.com .

This was posted in Bdaily's Members' News section by Nicki Sampson .