It's not about Brexit anymore: EU Summit serves as important reminder for businesses that political due diligence must be broader than Brexit

However, according to Hogan Lovells, the EU Council Summit is a sharp reminder that organizations need to adapt to an upheaval of the political norm globally, not just in relation to Brexit. Major events such as the UK's Conservative Party leadership race, Angela Merkel's looming retirement in 2021, the UK's trade deal with South Korea and Marine Le Pen’s National Rally party topping the European election vote, all potentially have a major impact on business strategy and planning.

Charles Brasted, partner at Hogan Lovells, said:

“Businesses need to ensure that they understand the political and regulatory environment they are operating in globally. Brexit shocked the system, but we've been working in the shadow of a possible Brexit for three years now. Many businesses have prepared for any scenario and have become accustomed to living with Brexit uncertainty as 'the new normal'. 

"However, what has emerged as a major new area of focus and concern for businesses is the global political environment and the way they engage with governments. Whether your Board is looking at what investments to make, which deal to close or what the growth plans are for the next five years, you need to learn to live, and thrive, in this new political and regulatory environment.

"Conducting regular political due diligence exercises at a local, EU and global level is now critical to business survival and should become standard practice."

Lourdes Catrain, trade partner in the Brussels office of Hogan Lovells, added:

“Although the UK Government as well as the European Commission and the Member States have been encouraging firms to prepare for a no-deal outcome, the reality is that some are more prepared than others, as levels of understanding, risk-appetite and capacity to address no-deal preparedness vary from sector-to-sector.

“Failure to prepare properly for Brexit or any other political upheaval could be extremely problematic for businesses. No-deal Brexit will be very disruptive, as many of the legal and regulatory frameworks currently in force in the UK by virtue of, or in some way intertwined with, EU law – from importing vehicles and components to pharmaceuticals or providing financial services – would cease to operate in the same way overnight.”

Robert D. Kyle, trade partner in the Washington D.C. office of Hogan Lovells, said: 

"The last few years have marked a dramatic change in the landscape of American politics, with major changes in US trade policy and other areas. Navigating the changed landscape requires the ability to interact effectively with Congress, the Trump Administration and key regulators. Companies also need to know how to adapt to the twists and turns of US policy - and to understand what changes are lasting, what changes may be reversed soon. Many companies are revising their business strategies to adapt to the changing environment. Strategic and flexible thinking is absolutely critical in today's context."

The latest Hogan Lovells Brexit blog outlines the UK’s current position on Brexit and provides the latest updates in key areas including:

• What happens on 31 October 2019 and how the Article 50 period could be extended;
• How the infamous backstop arrangements might come into play;
• What preparations have been made on both sides of the Channel for a no-deal outcome.