Be prepared to act
For both tax reform and trade-related issues, many companies are now in a holding pattern, awaiting guidance and action by government regulators before responding. On trade, while some actions will have recently gone into effect, others—such as trade tensions with China—are ongoing. This gives companies time to fully understand and analyze their business, partners and supply chains. Companies should consider a range of options, including business unit reorganizations, and be ready to act quickly to realize potential gains from changes to the tax code or trade environment. Prepared companies can rapidly realize advantages over their competitors by taking such actions as reorganizing business units to reduce tax liabilities.
Use tax savings to position for success
Some healthcare companies will have access to a substantial amount of capital to help them gain a competitive advantage. Before tax reform enactment, healthcare companies in the S&P 500 held an estimated $186 billion in cash overseas at the end of 2016, according to a Credit Suisse analysis, and they may now begin repatriating those funds at favorable rates.2
Companies can spend their tax savings in different ways, including reinvestment, acquisitions and stock buybacks. How they spend that money will affect the public’s perception of them, according to respondents to an HRI survey. Sixty to 72 percent of respondents would have a positive opinion of a life sciences company, health insurer or hospital that used its tax savings to hire more staff, while 38 to 39 percent would have a negative opinion if the same company were to repurchase shares of its stock from investors.3
Figure out what operational changes the new tax law will require
Companies must come to terms with a simple fact: The old way of doing business no longer may be the most effective or efficient way under the new code. The changes may require new supply chains, business unit reorganizations, benefit redesigns for executives and staff, investments in technology, and staff training. Operational agility will permit companies to act quickly when necessary, but that will require planning and creativity.