BPO Thought Process

BPO Thought Process

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Contract Management: Protecting Your Contractual Assets in Brexit or other Challenges

So Brexit is here … or maybe it isn’t. I’m not a political analyst or prognosticator but I do know that treaties, cross-border regulations, and currencies all appear to be in for changes based upon whatever the outcome is with Brexit, the knock-on effect in the EU, and whatever may occur in the US elections later this year. And as such, the best and first place to look for how these macro-geopolitical changes affect a business on the micro-level is to look at the contracts a company has in place.  
 
Now that most UK residents have come to grips with how this will affect the cost of their European holiday, here is a quick, non-exhaustive list of how all this could potentially affect your company going forward:
 

Price and Cost of Services:  

As the Euro and GBP lose value and create havoc for Forex traders, this will have a real effect on contracts that are set to pay in GBP or Euro but are linked to other currencies. For instance, if in your supply chain, you are dealing with services or goods tied to the Indian rupee or anything tied to USD, then there are going to be business case implications – particularly if you don’t have balanced currency clauses in your contracts.
 

Data Security, Privacy, Cybersecurity Regulations:

So now that all these expansive cross-border treaties might be unwinding in 1-2 years, what does this mean about data kept outside of the country from which is originates? I could guess. I have an idea. But until the new rules are set and the new treaties are signed, no one really knows. The betting houses in London predicted a “Remain” vote, so don’t go by them either.
 

Mobility of Workforce:  

Many companies have enjoyed freedom of movement and what this means when there is only relatively straightforward visa application systems for their workers. This may change. It may not. But I think we all know that the likelihood of change is certainly higher than it was in before June 2016.
 

Taxes & Tariffs:

The best thing about a global economy is that it is global and therefore more able to handle ebbs and flows in different countries. The bad thing about a global economy or supply chain is that ripples in the water have a tendency to hit all shores. A breakup, re-framing, or other change means that there could be new taxes on goods sold or services purchased. This probably wasn’t in your business case when you signed the contract in 2014.
 
So what do you do?  First thing’s first – get a hold of your contracts! If you are still working off of the C drive or a drawer, please elevate that quickly. This blog shows you some of the risks that 750 words can expose, but there are many more. The first thing to do is to examine the contracts so you can evaluate how these changes or risks could affect your contractual relationships.  
 
Second, look at the clauses to see where the risk is, and if you need to remediate the contracts, optimize your supplier base, or issue new clauses going forward that de-risk these uncertainties. There is no crime in not necessarily planning for a Brexit or other change when you signed a seven-year contract in 2013. But now that we know this is a possibility, it is important to read the signs and plan for it. There are clever provisions which can de-risk contracts; there is a fix that allows for contractual stability. But you have to know where to look and how to do it. We are continually in talks with our clients on 3rd party vendor management. Besides, solutions are more fun to talk about than risks.
 

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Craig Conte

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