5 factors that must be considered when relocating an operation

24 November 2016 Consultancy.uk

Amid widespread uncertainty following Brexit, companies throughout the UK, in particular in the financial services sector, are considering moving some or all of their operations out of the UK to ensure preferential treatment and continued access to key markets. Relocation will however come with a hefty price tag, and requires careful planning and delivery, writes Naomi Crawford, a Director at Brickendon Consulting. 

Cost savings are not the only thing to consider when relocating your business. Applications, systems, hardware and people are all being moved and a seamless transition is essential to ensure there is no downtime and no risk to your reputation or finances. Most people see international relocation as a cost-saving initiative but if that is your only driver you could be left very disappointed. Many things such as the country’s infrastructure, legal environment, currency risks and ability for people to successfully relocate to that location, should be taken into account as they are all areas which pose a risk to the organisation. 

Five core factors that must be considered when relocating or establishing an operating base in a new market:

Infrastructure: From a technology point of view, one of the most important things to consider is the country’s infrastructure. Access to a 24/7 power supply is crucial for most financial institutions and something that many of us take for granted. It is important to consider how reliable the power supply is and whether a back-up generator is needed.

Five factors that must be considered when relocating an operation

In some locations it is normal for servers to be located in the basement of the same building the company is operating out of, and if you are based in a monsoon area that is susceptible to flooding you may need to have a back-up plan. Off-shore teams have in the past been unable to work in the new location as basement server rooms were flooded, and teams in the original source location have had to cover until the building gets back up and running. In other situations it may be necessary for local employees to work from home if they can’t get into the office, so a stable internet service is essential.

Legal and regulatory structure: A good knowledge of the target markets’ legal and regulatory structure is a must, as is finding a local trusted advisor. In some cases it could be easier to relocate partnering with a local vendor, for example local partnerships are the norm in Ukraine, whereas in India a captive market is much more enticing for resources.

Exchange rate and country risk: Complexity comes with exchange rate movements and government restrictions on movement of funds can affect the business case and profitability of the venture. For example, Russia and Greece have recently imposed capital restrictions which would affect business plans.

It is also important to consider where your data comes from, where it is going and not to overlook any data protection laws. In Switzerland, for example, data is not allowed to be used outside of the country. This can cause issues when it comes to relocation of technology. Legal terms and conditions need to be carefully reviewed and specifics such as intellectual property rights and contracts considered, as these could be used as enticements for that location for a short period of time, but change a few years later.

Infrastructure | Legal and regulatory structure | Exchange rate and country risk | People | Hidden costs

Your key resource, people: Seeding resources in the new location is standard, as this ensures the culture of the firm is embedded. Considering if the location is safe for families, is there a high level of corruption or is the country stable, can all influence your decision. Your location has to contain a good supply of resources, with the appropriate educational level and skill requirements. This can be done by yourself or with a partner organisation. Avoiding managing multiple people in multiple cities in the same country is a must, as it is hard to ensure critical mass in any one location. Ensuring that the local universities have courses in the development languages you are intending to use is crucial, being in an area where QA is studied at university won’t be much use if you use Java in your business.

Hidden costs: Travel costs, loss of knowledge and longer hand-over periods all make international relocation more expensive than originally planned. Every organisation plans for these, but always under-estimates the cost, especially around the loss of knowledge as this is very hard to quantify. Team morale is also affected, which makes hand-overs taxing, as the current location does not want to do the write ups as information is in people’s heads and handing over face to face is easier, rather than online training sessions and the like.

These are but a few of the risks which need to be thought through, as the reputational damage which can be done by moving out of a location can be long lasting, and should not be forgotten about.

Related: British bankers confident London will remain EU's financial centre.

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