Our survey results show that the majority of law firms have yet to create a meaningful Brexit strategy.
Despite the large number of unknowns, it’s imperative that firms formally assess the risks in the areas in which they are most exposed and understand the potential financial consequences.
As a minimum, we advise clients to carry out financial forecasting to assess their likely trading and cash positions, as well as the potential impact of exchange rate fluctuations. Accurate and timely management information is absolutely essential to help firms identify risks and take appropriate action and drive business performance.
For example, some may be considering how they can continue to provide advice to clients through EU- qualified lawyers. One option may be to send trainees on secondments to EU firms so they can gain their qualifications there.
Others may need more formal arrangements with EU-based firms or establish a new entity insured and regulated in the EU. What are the cost and revenue models of these arrangements?
Firms that are well prepared for the impact of the various Brexit scenarios may also be in a better position to advise their clients with EU exposure and could gain a significant competitive advantage.
Here are three simple steps to help get your firm ready:
- Take stock — Ensure your management information is accurate and gives a true picture of current financial health. Make sure your accounting package presents the key performance indicators that senior partners and management team need — and that they understand them.
- Forecast — Build robust financial models to help predict the impact of a range of scenarios on your business plan, budgets and cashflow so you can quantify the consequences and put in place mitigation strategies. Firms need to ensure the architecture and algorithms of financial models are fit for purpose, error-free and able to handle sensitivity analysis on key variables such as changes to forex and interest rates.
- Review regularly — Adapt your models to enable continual measurement and pre-emptive action to address emerging risks and exploit new opportunities.
Firms can’t afford to ignore the reality that the business environment will change once the UK leaves the EU. Financial models can’t be built overnight, so start now.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.