With Brexit just three months away, the lack of clarity presents an unprecedented challenge for in-house lawyers planning for the worst-case scenario.

Global corporate legal leaders from across Europe gathered in London last month, eager to hear the steps other companies are taking to prepare.

Beyond the political circus and the relentless doom-laden headlines, what concrete actions are companies taking, and what role can the in-house legal team play?

Monitoring developments and planning for the worst

While most global in-house legal teams identified their focal points of Brexit preparation many months ago, scenario planning continues. For example, at last month's gathering, many companies across several sectors voiced concerns of disruption to manufacturing. If they manufacture in the UK or procure product components made in the EU, the concern is delays in shipments into and out of the UK.

The continuing lack of clarity as to future trade terms between the UK and EU has prompted some manufacturers to stockpile inventory to avoid manufacturing disruptions.

Many companies mentioned holding off on investment decisions in the UK. Some have already opened offices elsewhere. When the 'divorce terms' are finally clarified, outside counsel are likely to see a significant increase in demand for Brexit advice. Clients will want counsel to help identify and evaluate options, so they can prioritise actions and decide mitigation steps for risks specific to their industry sector and their supply chain.

“We’re considering various scenarios,” said Michael Going, the Chicago-based chief compliance officer and corporate secretary of capital goods multinational CNH Industrial. “We are planning as if it may be a hard Brexit, but we hope reasonable minds in the UK and EU prevail and we have something much less potentially disruptive.”

Brexit uncertainty makes UK employees nervous

At the discussion in London, several UK-based general counsel noted increasing concerns over potential disruption or chaos when the country officially exits the EU in March next year.

They are thinking through ways to avoid distraction or even disruption at work in a no-deal Brexit. It’s plausible that daily access to many goods and services could become difficult, and employees are increasingly asking 'what if?' questions.

Many legal leaders are part of multi-disciplinary Brexit committees in their organisations. Such committees are often led by the COO or chief risk officer. The cross-functional teams consider what the potential Brexit implications may be and what actions should be taken - and at what cost - to address the potential negative effects.

One general counsel of a global company said that her trade compliance team is actively assessing the implications of the worst-case scenario - a hard Brexit - and options to mitigate the potential financial and operational impact to their businesses.

Francesco Giobbe, group general counsel of MBDA, a defence industry leader in Europe with nearly 1,500 UK-based employees, shared important concerns over which MBDA has turned to law firms for advice. “The major issues are the eligibility of our group to access EU funds for research and development, because one of our three shareholders is a British PLC, and the treatment of IP developed with these EU funds in our cooperative programs between our three EU-based subsidiaries and the British one,” Giobbe explained.

According to Giobbe, MBDA’s in-house team worked with finance, HR and programs functions to conduct a joint analysis of the financial impact of a hard Brexit situation on taxes, customs and employee travel across the channel.

Some companies are in businesses that feel less likely to experience a big Brexit impact. Daragh Fagan, group general counsel & company secretary of FTSE 100 company Rentokil Initial, said, “We updated our review for the board a couple of months ago, but have not kept looking at it through all the twists and turns of the news cycle. Largely, our business is insulated by being local-to-local services with limited cross-border travel or product shipping, etc.”

Fagan said that the main impact his companies see is tightening of the labour market in the UK for frontline staff. He added: “We have done some selected, small-scale inventory building in a few countries and in our European warehouses in case of short-term disruption around 29 March 2019.”

E Leigh Dance consults with large global corporate legal and compliance leaders and their teams on managing changes in legal service delivery, responding to multi-jurisdiction regulation and strategic priorities in digital transformation. She divides her time between bases in New York and Brussels. Two of the three leaders quoted in this article are members of the Global Counsel Leaders Circle which Dance founded and directs.