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Polls, forecasts and business strategies: lessons from Brexit

brexit-flagsExpectations are no guarantee of events. The United Kingdom’s referendum on European Union membership hammered this home, bringing with it a tsunami of consequences that are still to be determined. To make matters worse, just hours earlier, no one saw this coming.

The issue of a possible Brexit had garnered plenty of attention in the first few months of the year, but in recent weeks a sense of calm had taken hold. There was a mood of confidence that the British people would opt to stay in the EU, fuelled by the majority of the polls conducted and forecasts from leading institutions. The widespread belief was that the British would surely think twice before plunging themselves into the unknown.

Reality has flown in the face of all expectations, unleashing seismic tremors with London at their epicentre and which have – by virtue of a domino effect – reached places as far-flung as Japan, Mexico and China.

 

The importance of contingency plans

As tends to be the case with this sort of shocks, companies with an international presence have been the first to feel the ground beneath them shake. Nevertheless, some of them have managed to minimise the intensity of the impact:

  • Companies that used the polls as the basis for their contingency planning, while contemplating the possibility of things unfolding differently, were able to safeguard their financial needs ahead of the tsunami. They have minimised their losses and possess a competitive advantage when it comes to adapting to the new landscape.
  • Firms that placed 100% faith in the polls and failed to draw up a contingency plan could face serious problems. The plummeting pound is going to shrink profit margins among European companies that export to the UK and British companies with subsidiaries in the EU. Those that rely strategically on the UK are now confronted with a major challenge.

We are entering a new period in which uncertainty and volatility will be the norm, at least for the coming months. Against this backdrop, staying on top of developments in the currencies market and capitalising on favourable trading conditions will be more necessary than ever. Whoever manages to swim in these troubled waters, including with the support of experts in the field, will see their efforts rewarded at the end of the year.

However, it will be equally important to hedge against what lies ahead. If over-confidence in a Bremain victory has left you bruised, don’t make the same mistake with the polls for the US elections, otherwise Mr Trump could give you another nasty surprise in the coming months