The unexpected results of the U.S. Presidential Election quickly injected uncertainty and risk in business enterprises across many industries. Executives now face the challenge of assessing the implications of the election results on their respective businesses— some may see unexpected opportunity while others see increased uncertainty and risk. The questions that every executive must now answer are: (1.) What does it mean for your business? and, (2.) What actions do you need to take?
Potential Risk Drivers
Perhaps most vexing is the lack of specificity on many of the issues that have been discussed during the campaign. The lack of specificity means that most companies need to prepare for an extended period of change. While many of these changes are yet to be fully defined, there are seven key issues that all companies should consider explicitly:
1. Market Instability
The recent Brexit action suggests an initial shock and then the market may settle—for a while. Unlike Brexit, some of the global impacts of the proposed shift in U.S. trade policy may result in a series of shudders. Based on the single Brexit vote, the UK has been experiencing historic lows in the value of the pound, loss of its AAA credit rating, and an imbalance in the industry’s most impacted by the decision to leave the EU, like manufacturing, services and agriculture.
2. Business Tax Cuts
The proposed tax plan would lower the business tax rate from 35 percent to 15 percent, eliminate corporate alternative minimum tax, and offer a repatriation of corporate profits held offshore at a one-time tax rate of 10 percent. The plan, as described during the campaign, will also eliminate most corporate tax expenditures except for the Research and Development Credit.
3. Trade Agreements
Trade agreements provide a stable structure for companies to plan against as they weigh various market actions. Given the potential for existing trade agreements to be upended, there are short and long-term implications to be considered.
4. Immigration Reform
Immigration has been a heated topic throughout the campaign and the impact of the suggested changes are considerable. In particular, the tech industry must begin to consider how to meet its future hiring needs given its reliance on global access to talent through the use of H1-B visas. But, the tech industry is not alone. With the rise of digital, many industrial companies are actively building their software and technology capabilities, further driving demand for tech skills well beyond available and projected domestic supply. In May 2016, CNN Money reported that the U.S. had around 5.75 million job openings but employers were having difficulty finding qualified applicants.
5. International Security Accords
U.S. businesses have interests around the world and existing security accords provide some level of stability for corporate investment planning. It has been suggested that U.S. may shift its collective security commitments considerably in a number of key global markets. The geopolitical risk to global supply chains will need to explicitly consider this reality.
A key focus of the campaign was the impact the last several decades of globalization have had on domestic job creation and loss. While the actual drivers of the shift in manufacturing from the U.S. to China and Mexico will continue to be debated, it has been suggested that there may be some form of corporate tariffs for future globalization. During the campaign, tariffs as high as 35 percentage for goods manufactured in Mexico and up to 45 percentage on goods coming from China were proffered. While this level of tariffs may be unrealistic, it does suggest that the impact of a range of tariffs should be considered.
7. Technology Policy
During the campaign there was no clear technology policy. A number of important concerns were highlighted like Net Neutrality, Cyber Protection, Data Rights, and Internet Controls—but there were no definitive positions or proposed regulatory requirements to plan against.