4 Brexit trends that global CEOs must manage now

In the weeks following the United Kingdom’s historic vote to leave the European Union, the many questions raised by the referendum are far from answered.

Beyond the near-term impact, such as the emergence of Theresa May as the new prime minister, businesses face an unsettled and possibly complicated long-term picture. Indeed, there’s no precedent for what is to come. And it could take years of negotiations between the UK and the EU to work out the details of the transition.

Top management should prepare for four developments in particular:

Your workforce will change. Many firms will have thought through Brexit in terms of evaluating alternative locations for their UK operations. Some managers will opt to keep their presence in the UK, while others will move elsewhere.

Workforce plans now need to be carefully reviewed, since it is likely that restrictions will be placed on the movement of EU workers within the UK workforce. Skilled labour from EU countries makes up a large percentage of the workforce in the UK financial services sector, for example, particularly in London.

Less freedom of labour movement makes it all the more critical for talent managers to access smart tools such as workforce analytics and long-term strategic workforce planning to future-proof their organizations.

You will need deeper restructuring strategies. Relocating staff to new locations or creating entirely new centres of operations outside the UK may be complicated undertakings for organizations that decide to move some or all their business.

While dramatic exchange-rate movements may make some locations more or less attractive in the short term, few organizations will be basing investment decisions on volatile market and asset prices. Relocation decisions are more likely to be based on external labour-market fundamentals, which require in-depth analysis of key drivers such as local labour costs, current and future skills availability, comparative costs of living, and employment legislation.

Companies should, for example, consider the impact of an end to reciprocity on state healthcare costs for foreign nationals across member states. Robust internal and external data and insight is critical for making the right decision.

At Mercer, for example, multinational clients are encouraged to consider three Ms – mobilizing (getting organized and setting up a governance structure), mapping (conducting a risk and opportunities assessment and developing a corresponding mitigation strategy), and managing (conducting scenario planning and long-term monitoring to respond to new information) – as a framework for determining the strategies and actions that need to be taken.

Your compensation costs may rise. Attraction and retention strategies should also be reviewed as the fundamental employee value proposition may change. The UK banking sector, for example, is likely to seek changes in banking regulation, such as an end to bonus caps and other EU-sponsored controls.

Even without Brexit, workforce evolution is confronting top executives with new challenges. New skills are needed to meet the demands of ecommerce, digital innovation, and big data analytics.

Your retirement plans will demand more attention. Since the funding status of traditional defined benefit plans feeds directly to the balance sheets of plan sponsors as a potential liability, regulated firms are required to hold additional capital to mitigate that balance sheet risk.

Market volatility and uncertainty in the wake of the Brexit vote will have a major impact on the value of assets that are set aside to meet pension liabilities, with accompanying variability in capital costs.

And it doesn’t stop there. Defined contribution pension plans, in which the employee rather than the employer bears more of the risk of meeting future pension needs, will also be affected by market uncertainty as the underlying investments fluctuate in value.

As a result, communication on the part of the employer is critical to address the many concerns that employees may have about Brexit. A communication strategy that is aligned to overall business goals and objectives requires expert understanding of the issues involved.

Regardless of where they’re based, companies should pay heed as the Eurodrama unfolds. In a world that’s growing smaller by the day – where both labour and capital have grown used to crossing borders with equal ease – Brexit is everybody’s business.