With the March 29 deadline for a
Brexit deal quickly approaching, companies around the globe are contemplating the regulatory implications on their operations and infrastructure. One of the chief concerns by financial services organizations worldwide is the movement of data across borders between the UK and the EU. The UK government intends to seek an adequacy decision under EU Directive 95/46/EC, thus allowing for the free flow of data to and from all EU States and European Economic Area member countries – but that tactic is far from guaranteed and any decision will likely be far past the Brexit deal deadline. This and many other queries remain unanswered for now, but we are getting closer to the time when things are going to see activity. While your guess is as good as mine as to what impact some of these changes may have, let's look at what is being prioritized behind the scenes.
Planning – But Waiting
Despite the uncertainty, we see that FSOs are responding to this challenge in several ways. Of course, each firm will individually evaluate its own business model, potential risk, future organizational evolution, and other factors when weighing an appropriate course of action - if in fact any action will become necessary. But nonetheless, strategists are playing out various scenarios and are ready to face any number of adjustments that may become necessary once things roll out.
First, since highly-regulated sectors do not traditionally do well with uncertainty, we have observed that many of our own customers are reserving making any definitive moves or taking clear-cut actions until expectations are more firmly established. This course of action is shared by many firms in the UK and Europe which may be potentially impacted by Brexit's enactment. Interestingly, in a report entitled, Attitudes to Brexit, In-house Lawyers' Perspectives from Europe, 63 percent of respondents indicated as negotiations continue it was "business as usual." Ultimately, firms abstaining from immediate action seem to require greater color into the current political situation before choosing a direction. The disadvantage to this standpoint is the unknown, but these firms typically value regulatory guidance over the immediate cost of preemptive action.
Preemptive Action – Data Silos and the Cloud
A minority of firms, we think, are choosing to preemptively act. In some cases, we have seen that redundant data silos were created within the EU. In other cases, customers have chosen to move data centers altogether. The primary benefit of these actions is stability, allowing for longer term implementation planning and development globally. Additionally, these actions eliminate the political impact of Brexit negotiations on long term projects.
The obvious disadvantage to preemptive cloning or transfer is the unanticipated cost. Many firms have not calculated this level of expenditure into previous budgets, making internal conversations to approve these measures critical. In these instances, customers seem to value future stability over cost of ownership or immediate budget concerns.
An underlined commonality among the financial services organizations with which we have discussed these issues, has been the evaluation of their current cloud data infrastructure. Clearly, the FSOs that know where their data is, to whom that data flows, and across which jurisdictional lines that data is transmitted should have a significant competitive advantage when adjusting to the new normal.
In the end, the market will reflect two camps. We will see that the firms waiting for greater clarity will ultimately require a thorough assessment of their infrastructure to effectively apply any future guidance. In the other camp, those firms taking preemptive action will require knowledge of their complete data picture to successfully and seamlessly ensure uninterrupted service across all lines of business.
Regardless of what direction your firms' future takes, discussion of your data and cloud related strategy should be prioritized – not just because of Brexit, but because no matter what transpires, this is what will best affect your operations, cost savings and compliance programs in the future.