Some dreamed of it and others dreaded it, but nobody actually expected the Brexit referendum result. As such, politicians and business leaders seemed unprepared for the negotiations and practicalities of Britain’s exit from the European Union.
Nassim Taleb wrote in "Black Swan" (part of his Incerto series) about unexpected, rare events that are hard or even impossible to predict and have a disproportionately large impact on society, business, finance, and history. Brexit seems to fit this bill. Yet, a key feature of the Brexit narrative, now and as academics build their careers explaining it, will be that with the benefit of hindsight, Brexit was inevitable— the signs were always there. Taleb points out that humans can adjust their rearview mirror and explain anything with hindsight. But looking back at uncertainty isn’t helpful.
The imperative for businesses (and individuals) is to make the best of Brexit now and to use the disruption and change that come with it to their advantage. Readers may ask, "But surely to capitalise on events, we must know what is to happen, to have an idea of what Brexit and the final deal will look like."
It would be great to have a clear idea of what the final deal will be in March 2019, but the crystal ball is in for repairs, and it seems that myriad outcomes are possible. If there’s one thing everyone should know by now, it is that the future is impossible to predict with any useful certainty. Trying to do so is a waste of time.
So how should one prepare for the uncertainty of Brexit? Deal or no deal? Hard or soft exit? Friendly or fractious? Boom or bust? Or even, reversal and remain?
The author and his clients take a leaf from Taleb. If one cannot predict an outcome, do not waste time and resources trying to do so. When planning for Brexit, or any uncertainty for that matter, it is prudent not to choose one outcome over another—especially if one has a clear pro- or anti- Brexit view, to dictate strategy and tactics. Such gambling is unwise in business.
Whether someone is an optimist or pessimist is immaterial to the reality of his or her situation. What is important, and the only thing that can be predicted with any certainty, are the consequences of any outcome. So, to prepare:
1 Make a list of the possible Brexit outcomes. It could be as simple as deal/no deal or reversal/remain.
2 Next to each, list the likely positive and negative impacts of that outcome on one’s industry, sector, and business, in that order.
3 Identify the worst impacts and costs for one’s business from the list, and in each case identify possible ways of mitigating them.
4 Similarly, identify the best opportunities each outcome may present for one’s business.
This exercise should provide a clear idea of the worst-case impacts of Brexit on one’s business, as well as a better idea of the best case. With a plan in place to cover the downside risks and capitalise on the upside opportunities, one can budget for the worst case and prepare for the best. Then decisions can be made and action taken, now and in the next few months, without worrying about whether or not there will be a Brexit deal. It won’t matter. In fact, armed with such a plan, one can even afford to make speculative bets, having covered downside risk and allowing for unlimited upside.
This is the definition of future-proof. As Taleb points out, prediction is a fool’s errand—preparation is the path to success. By concentrating on the latter, one will be ready for the next Black Swan, whatever and whenever that may be.