Changes are required to ensure compliance and support additional requirements across all business functions.
IT, systems and data underpin and interact with almost every aspect of business operating models. Regardless of whether a deal is agreed or not, change is coming after the Brexit transition period and that will impact IT, systems and data. Whilst the scale and impact of these changes may be unique to each organisation, perhaps unsurprisingly, this is an area that almost all businesses find especially challenging to assess and address. Indeed, less than a quarter surveyed understood the implications and have mitigations in place.
Particularly on data, and the UK’s third country status with the EU, there are clearly critical outstanding questions, including whether the EU grants the UK a data adequacy ruling (or some other separate legal agreement is reached). However, enough is known for organisations to undertake strategic, no-regrets actions in the time remaining. Taking urgent action now will ‘keep the lights on’ after 31 December 2020 but transformation is likely to reach into 2022 and beyond.
IT systems both underpin and point to Brexit change
Irrespective of company size, geography or sector, one theme dominates nearly every single aspect of an organisation’s Brexit preparation – that to address the new trading environment, change will be required to IT systems and data processes.
Conversely, looking to their IT systems and infrastructure, organisations can assess what additional requirements are needed by various business functions to implement the necessary Brexit changes, e.g., customs, procurement and HR. This includes not just the parent organisation, but also in-scope subsidiaries. Examples of this include the need for:
- A review of all business processes involving a movement of goods across a UK border to determine VAT and duty implications and to ensure appropriate customs and regulatory documentation is in place
- An assessment and update of key business master data, such as supplier, customer and product records, to ensure information such as Incoterms, health/safety certification and rules of origin is accurately recorded
- Tax teams to review rule changes in relation to withholding tax, import taxes and VAT registration requirements
- A company’s general counsel to ensure new regulatory reporting requirements are adhered to in areas such as Intrastat
- Human Resources to consider the new requirements of the UK points-based immigration system for EU nationals and undertake the necessary compliance procedures including ensuring appropriate data about employees is maintained and current
- IT teams to update IT systems to reflect the creation of new entities and operations
- Data processing requirements for third party countries
As well as the changes required to systems as a direct impact of Brexit, there will be a secondary set of indirect impacts to consider. For example, if the cost-of-goods increases, as a result of a duty being applied to cross-border glows, it might be necessary to change the customer pricing strategy, requiring mass updates to pricing and contract master data.
Brexit will trigger massive changes to the UK’s trading, regulatory, immigration and judicial systems. However, they will not all take effect at the same time. As new legislation comes into effect for different business functions, ongoing IT changes will be required to comply. Organisations in the UK will also need to monitor when reporting and registration bodies begin to take over from their EU equivalents throughout the course of 2021.
The volume and range of these changes are more concerning when combined with usual IT issues of incomplete or out-of-date inventories. Change will be required across multiple IT systems and providers; legacy systems that may not be easy to change; and, ‘grey IT’ that an organisation may not be fully aware of.