Are You Prepared for the Eurozone Crisis?
Following closely on the theme of their previous joint article (Changing Markets Demand Changing Roles), Simon Brown and Stuart Martin comment on potentially far-reaching external factors that could radically impact Europe’s Shared Services arena.
Note: please take the brief "Eurozone Crisis" survey (7 short questions) at the end of this article.
What impact will the Eurozone crisis have on your Shared Services Organisation?
As we witness the Eurozone lurch into crisis-mode – including the dramatic, simultaneous credit downgrade of nine European countries in a single day – surely the question Shared Services and Operational executives are asking themselves is:
Are your contingency plans set up to deal with the impact of this?
Whilst the Eurozone crisis has been on the political and business agenda for approximately two years, the initial slow burn of changes may have induced a "wait and see approach" for many of us in shared services management, with no real call to action on contingency or scenario planning. Until now, that is!
Our challenge here is that to do nothing in response to the escalating crisis in Greece, Spain, Italy and other countries is a high risk option, and we argue that scenario-based contingency planning right now is even more critical to ensure business success during 2012 and beyond.
Stuart sets out some possible scenarios to provoke our thoughts:
Scenario One sees Greece default on its debt and return to its former drachma currency, triggering a rash of new tax and labour policies. The resultant domino effect sees more countries follow, with some stronger countries closing ranks to create a new, smaller Eurozone, while the weaker countries disperse and struggle with their currency, debt and legislative framework. We start to deal with a two-tier Eurozone.
Scenario Two sees a rapid move to a political type of federation, similar to the US and a convergence of financial and legislative policies and laws. Brussels becomes a more prominent capital and central authority is vested here. More members start to join quickly and current national legislative and tax frameworks undergo rapid change.
Scenario Three sees the Eurozone remain intact, but with rampant inflation and unemployment and runaway employment cost. Infrastructure investment grinds to a halt and civil unrest is more frequent and debilitating. This is a very slow, haphazard recovery, which may last more than a decade, and with the stronger countries carrying the financial burden.
So ask yourself these questions…
In your organisation, have you started your contingency planning and mapped out these or other possible scenarios? Or is your organisation more inclined to accept lowered budgets/forecasts, reduced investments, delayed decisions and a continued "let’s wait and see how this all pans out" attitude?
Where contingency planning has been done:
- Do you have a well-defined set of guidelines to follow to ensure a comprehensive understanding of all implications regarding the magnitude of the impact?
Who will be on the team and do they have the requisite skills and experience to accurately represent the function and understand the Legal, Financial and Human Resources implications and impact on the business?
- Do you have corporate input?
- Do you have Finance, HR, IT and Procurement representation?
- Do you have your outsourcing partners on board? Who else are they working with?
- How do you ensure priority service from your outsourced providers when they have to deal with multiple clients with similar issues?
- Have you mapped out any of the above scenarios? If yes, are they too optimistic or too conservative?
Have you been realistic in determining the magnitude of change?
- If there is civil unrest in some countries are you set up to support your employees?
- Do you have the resources to move from a single currency and set of employment and legal frameworks to multiple frameworks?
- How will this influence your capacity to maintain your SLAs?
- Can you quickly handle updates to contracts with new and different currencies, compensation, benefits and laws?
- What are the legal and IT lead times needed to effect the necessary changes?
- Do you have back up resources to continue operations while the core team manages this fast moving situation?
And if you actually operate a Shared Services Centre in one of the affected countries …
Should you retain this as a location?
Do the reasons for establishing the centre there still hold true?
- Tax efficient?
- Access to resources?
- Political and civil stability?
- Infrastructure investments?
- Ease of access?
- What are the risks of having all your functions’ (IT, Procurement, Finance, HR, GBS) service centres based in these locations?
- Do the reasons for establishing the centre there still hold true?
And finally …
We welcome your views on this topic. It certainly isn’t going away soon, and sharing views across the Shared Services & Outsourcing Network can help us all to develop thinking in this space. Click here to complete a short survey on the Eurozone Crisis, and we will send you the full survey report.
Simon Brown has over 25 years of international experience in HR Management, working in change management, talent acquisition and talent management with a range of global organisations including Duracell Batteries, GlaxoSmithKline, Premier Farnell, The Coca-Cola Company, and NCR Corporation. He has been involved in the full design and deployment of HR Transformation including Shared Services six times since 1995, including vendor selection for outsourced partners. Simon has worked with both onshore captives, off-shore, outsourced, and virtual teams. He has been a leader in a Centre of Expertise, a European HR Director, a Recruitment Director, a strategic HR business partner and a member of Global HR Leadership Teams, as well as a Shared Services Director. email@example.com
Stuart Martin has extensive international experience in the successful deployment of large-scale business transformation initiatives, both in developed and emerging markets. He is currently HR Director for Europe at Becton, Dickinson. He has also worked for Coca-Cola and Accenture.