Even if you don’t live in the UK, you are probably fed up of hearing about Brexit and now to add to the complications, we have Operation Yellowhammer.
Over the weekend (oh dear), I had a chance to look through all 6 pages (!) of Operation Yellowhammer.
Before I dive in, I must emphasise the following:
- This article focuses on risk analysis. It is based upon my interpretation of Operation Yellowhammer and not my views or stance on Brexit. That’s a world of pain!
- This article is a primer in that it provides an quick approach. I could have added a lot more material, but let’s keep it simple for now.
What is Operation Yellowhammer?
In simple terms, Operation Yellowhammer is the name that is being used for the contingency plan in the event of a no deal Brexit. It was first revealed in Sept 2018 and has now taken more prominence after the vote in the commons making it public.
What is Risk Analysis?
ISO 31000 defines Risk Analysis as “Process to comprehend the nature of risk and to determine the level of risk“. But that raises another question.
What is Risk Level?
ISO 31000 defines Risk Level as “Magnitude of risk or combination of risks, expressed in terms of the combination of consequences and their likelihood“.
We need a Risk Equation….
The Risk Equation
In a previous article, I outlined What is Risk and The Risk Equation.
In its simplest form, we can consider risk in the following equation format:
Risk = [Consequence] * [Likelihood]
The Risk Equation therefore requires 2 key inputs, namely “Consequences” and “Likelihood“.
Brexit Operation Yellowhammer – Consequences
Operation Yellowhammer document outlines (or warns) of specific consequences in the event of a “no deal” scenario and these include:
- Three months of disruption at Channel crossings
- Two-and-a-half day delays for lorries entering the UK
- Immigration delays for UK tourists heading to Europe
- Rise in protests and public disorder
- Disruption to fuel supplies
- ‘Significant’ electricity price rises
- ‘Severe extended delays’ to medicine supplies
- Animal disease outbreaks
- Reduction in supplies of fresh food
- Supermarket price rises
- Lack of clean water due to failure in supply of chemicals
- Breakdown in sharing of law enforcement data with EU countries
- Gibraltar not prepared enough
- Fishing wars between UK and EU vessels
- Hard border in Ireland
This list is not exhaustive and is based on information readily available in the public domain.
Brexit Operation Yellowhammer – Likelihood
Unfortunately, there are no details regarding “Likelihood” (i.e., probability).
This uncertainty is most likely fuelling “Project Fear”, because no one (especially markets) likes uncertainty, albeit this does depend on your risk appetite.
The default position is therefore to assume a 100% likelihood that these consequences will happen.
Brexit Operation Yellowhammer – Risk Analysis
If you are a Micro, Small or Medium Sized Enterprise you may not have at your disposal vast resources for risks analysis and contingency planning. So, what can you do…?
Here are my suggestions towards your risk analysis in the event of a “no deal” scenario based on the consequence as outlined in Operation Yellowhammer.
- Step 1: Identify parts of your business that are potentially “Brexit vulnerable” (i.e., create a Risk Profile for your business).
- Step 2: Take a look through the Consequences and ask if it’s applicable to the “Brexit vulnerable part” of your business.
- Step 3: If the Consequence is applicable (and there might be more than one), what is the Likelihood (i.e chance) of each Consequence affecting your business.
- Step 4: Based on that Consequence and Likelihood pairing, what will be the impact on your business (use the template below as a starting point if you don’t have)?
- Step 5: Make a list of all the risks you have identified and rank them relative to impact (i.e., high to low).
- Step 6: Depends on what your cut off is (i.e., all high risks only), decide what actions you can take to mitigate, if possible.
- Step 7: Do these actions make any difference? Revisit the Consequence and Likelihood pairing assessment you did in Step 3. Has it changed the impact? Is it now acceptable? If not, can you do anything more? If you can do more…check what’s the difference in impact with the new actions.
In relation to Step 7, I haven’t outlined Risk Evaluation (i.e., based on your risk acceptability criteria). This is because it’s very unique to you and your your business. If you don’t have any risk acceptability criteria, take some time out and reflect on the question “what is my risk appetite…am I risk averse, neutral or seeking”.
For Likelihood (Step 3), use the following for guidance only, modify if needed.
- Very unlikely – Has not influence on my business.
- Unlikely – Has a minor minor influence but should not affect my business.
- Possible – There are some aspects that will influence my business.
- Likely – There are lots of aspects that will influence my business.
- Very Likely – Yes, this will significantly influence my business.
Be brutal but fair – don’t just default to the “Very Likely” option. That’s just reinventing the wheel…
To gauge impact, use the following as a template for starters and then improve if necessary. Replace the numbers with Consequences that are relevant to your business.
On a final note.
Regardless of “no deal, deal, dumb deal” …whatever…there are consequences associated with all of these events.
Not that enlightening, but the best advice that I can offer is:
Plan for the worst and hope for the best.
Get in touch with me if you need any more details or specific guidance on issues related to risk management.