Water cooler and triangular chairs.

GCs – are you future-proofing your business?

09 July 2015

In the last two blogs I looked at the Mass of Ambiguous legislation that is coming towards us as a result of the Queen's Speech and some of the Opportunities that these present for the GC who thinks like a Navigator and helps proactively and strategically to guide their CEO/Captain on the best route to their destination.

In this blog I look at the Threats – the many things that are coming up that could put a hole below the waterline of the GC's team or of the business as a whole if the GC is not good at their job.

In the last blog I mentioned that devolution leads to difference and there will be a very substantial degree of cumulative difference between your costs, taxes and operating models five years from now than there is today.  While there is a lot of potential for GCs to shine by helping their companies to make strategic moves – there is also a lot of potential to get it wrong or to fail to act in time.

Keep your options open

The current government five year plan will take at least seven or eight years to fully play out – far more if an EU referendum results in an opt out and – so you will need to have options to change, to re-price, to exit, to find new suppliers and new customers on the procurement side and on the sales side. It may also be that some of your products and services are themselves affected, need adaption or even become uneconomic.

This is especially relevant as many of the things that may be affected – people, property, IT, outsourcing (e. helpdesk, cloud computing) etc – are long lead time to change and long contractual commitment items.

Should we pity the GC who fails to insert a break clause in a Manchester lease or who fails to inform the business about changes in law that may affect the value of or the viability of a service purchased or sold?  If you have staff in London and Glasgow, would you take a five year contract on a payroll system if you do not know that it will be able to cope with differences in employment taxes between England and Scotland? Procurement cannot afford to be a "Cinderella Subject" in your team.

Show me the money

It is also worth asking where’s the money coming from? The Queen’s Speech has indicated that many aspects of Income Tax and National Insurance (both employee and employer) and VAT are frozen for five years – although Scotland will have flexibility.  Some money is likely to come from re-privatising state holdings of bank shares.  But the rest is going to have to come from cuts, in public spending (worrying if you are a supplier - as NHS staffing supply agencies are already finding out), and other taxes that affect companies.

As the July summer budget has just announced there will be extensive further work by HMRC, accompanied by additional resource and additional revenue receipt target to make small and large corporate avoidance and national and multi-national tax planning look increasingly like evasion – especially if it is “aggressive” or “persistent” – there is even going to be a “voluntary” Code of Practice on how large corporates should work with HMRC.  As some multi-national companies have committed to changing their tax arrangements a future of creating “tax certainty arrangements”, “reputational risk mitigation overpayments” and “tax structure simplification” must surely be imminent for many companies large and small – and, as this type of restructuring tends to go wrong if rushed – it’s probably better to start sooner rather than wait for tax law changes that may well be implemented with immediate effect.

MI5 Martini

If this is making you want to have a drink then you should consider the “MI5 Martini” (“any time, any place, anywhere” as the advert used to say) as interception of communications is back on the agenda. In 2008 The Telegraph reported that 600 public bodies had powers to monitor private communications and that 1,000 state sanctioned bugging operations a day were taking place – what will these statistics be a decade on in 2018?

As a more general point, it is clear that, increasingly, what is recorded audibly, pictorially or in writing anywhere on your systems – whether it be a poorly written document or a naughty employee's act ­– is increasingly likely to be capable of being found and to be searched for.  So training, systems and records management are going to be increasingly important. Equally, an understanding how your IT works will be essential (before you have to explain how you have searched it to a regulator or a litigant) and ensuring that, for example, mandated record destruction policies are actually being complied with so that you do not have to review 1m redundant historic documents in order to prove that they were redundant and historic. 

Contract management

And finally … contracts and policies management?! What are they doing about that?! Well nothing directly – but everything indirectly. Indirectly?! Well yes because if there is one consistent theme underpinning all of the comments above it is the need to be on top of what your company does internally; has contracted to do externally; and has contracted others to do for it.

This is especially true if you are advising managers in the increasing number of areas where personal culpability is starting to occur at law for not understanding how the areas that they manage work – even if they are working properly (eg http://www.fca.org.uk/news/fca-fines-reckitt-benckiser-for-listing-rule-failures).

So if you are not confident that you know what is in all of your contracts and policies; what the non-standard provisions are; when the review dates are; what the break options are; when Force Majeure applies etc, and who, internally, owns the decisions to exercise those options, then it might not be a bad idea to start resolving that issue now as, with the probable exception of the VAT clause, it is likely that you will be wanting to consider many of the other aspects over the next five years. 

At the start of this series of blogs is proposed a mathematical formula for achieving Energy ("E") and Success ("S") in your role in the coming years: (MxA)x(O/T)= S&E.

Now you know what each of the letters represents, it is time to do the calculation as it applies to you, your team and your company and then use the result to start plotting your course and that of your team and your business for the next five years

Good luck!