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Most economists, including the UK Treasury, argue that being in the European Union has a strong positive effect on trade and as a result the UK’s trade would be worse off if it left.
Surveys of leading economists show overwhelming agreement that Brexit will likely reduce the UK’s real per-capita income level. A 2017 survey of existing academic literature found “the research literature displays a broad consensus that in the long run Brexit will make the United Kingdom poorer because it will create new barriers to trade, foreign direct investment, and immigration.
However, there is substantial uncertainty over how large the effect will be, with plausible estimates of the cost ranging between 1 and 10 percent of the UK's income per capita.” These estimates differ depending on whether the UK stays in the European Single Market (for instance, by joining the European Economic Area, makes a free trade agreement with the European Union, or reverts to the trade rules that govern relations between all World Trade Organization members. Prior to the referendum, the UK treasury estimated that leaving the EU would be bad for the UK’s trade.
On 10 August the Institute for Fiscal Studies published a report funded by the Economic and Social Research Council which warned that Britain faced some very difficult choices as it couldn’t retain the benefits of full European Union membership whilst restricting migration. The IFS claimed the cost of reduced economic growth would cost the UK around £70 billion, more than the £8 billion savings in membership fees. It did not expect new trade deals to make up the difference.
On 5 January 2017, Andy Haldane, the Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, said that the Bank of England's own forecast predicting an immediate economic downturn due to the referendum result was inaccurate and noted strong market performance immediately after the referendum, although some have pointed to prices rising faster than wages.
Haldane said the forecast was only inaccurate in its near-term assessment, and that over time, Brexit would harm economic growth.
London School of Economics economist Thomas Sampson notes that it is hard to assess the impact that the transition process to Brexit will have.
Though there are progressive improvements in managing conventional risks faced by businesses, there is a growing need for risk management and mitigation to handle complex risks arising from interconnected systems that reinforce the developments of organisations, economies, communities and the environment (IRGC 2013). There are growing instances of strains on this system which test their absorptive capacities. When risk flows across such complex system, it results not only in incremental damage but also a runaway collapse of the ecosystem or an unforeseen transition to a suboptimal status quo. The prevalent global risks require the attention of the entire ecosystem of organisations. However, the collective actions are affected by developing a coordinated response to these issues (Zurich Insurance Group 2018). This report assesses the various global risks encountered by businesses which impact its continuity and survival. Based on the analysis, risk mitigation plans that would minimize business impacts are identified.
1. Business Objectives and Stakeholders
The objective of value creation of organisations requires a higher degree of acceptance when compared to the organizational objective of value maximization and is often associated as the corporate scorecard to assess the success or failure attributed to the change in long-term market value (Jensen 2010). The corporate vision, strategy and action plans that create cooperation among the organizational participants to gain prominence in the competitive industrial landscape are complementary to this objective. An organization would be unable to maximize its value by ignoring stakeholders' interests.
Considering the stakeholder theory, it consistently portrays the value-seeking behaviour wherein the managers have to focus on all constituencies of the organization that has an influence on the value of it. It is to be noted that managers have the select the constituents of the organization as they have varying and conflicting interests. Customers need high quality products and services at low prices with total customer support activities whereas employees want higher wages, fringe benefits and favourable working conditions. Investors want high monetary returns at low risk whereas suppliers aim for business continuity, the value for money and long term association. Communities expect philanthropic contributions, environmental protection, local investments creating stable employment and social expenditure to benefit the society. In terms of value maximization, managers have a single objective, whereas in stakeholder theory managers have to 'many masters' (Jensen 2010). This requires clarity of the organizational mission related to the single-valued objective function to ensure the smooth management of stakeholders. Due to the complexity of this system, there are higher chances of managerial confusion, conflict, inefficiency, and competitive failure arising from business risks.
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