7 lessons learned
1. The private sector has emerged as a foreign policy tool
Corporate exits from Russia showed the power of the private sector as an actor in geopolitical crises. In lieu of boots on the ground, Western governments calculated that financial pressure would help deter Putin and imposed far-reaching sanctions to precipitate this. Sanctions were complemented by private-sector divestment or full exit from Russia, as companies faced intense reputational pressure from their governments as well as media, consumers and their own employees. Pressure was particularly intense for those “iconic” companies with strong ties to their countries of origin who opposed the invasion. Western governments are now mindful of using such firms as an economic weapon – making it imperative that companies have a plan or a “corporate foreign policy” for when this powerful tactic is redeployed in another geopolitical crisis.
2. Anticipate 360-degree pressures
Russia’s invasion of Ukraine triggered operational, regulatory and reputational pressures for the private sector. Within hours, exit routes from Russia were impacted as aviation was grounded. Services were hindered as other major supply chains, such as those across the energy industry, broke down, while new sanctions forced costly exits from Russia in financial and professional services among others. Putin’s defiant response, including the threats to take control of Western businesses assets and nationalize them, deepened the sense of crisis. Firms had to rapidly plan around this disruption, while under intense scrutiny from media and other critical stakeholders. Advance scenario planning means you can better protect your people and your business from 360-degree risk.
3. Prepare crisis communications and benchmark peers
Many companies were forced into expensive exits despite having vowed to remain in Russia weeks earlier. To avoid mismanagement of geopolitical risks, internal preparation is critical: Best-in-class practice includes proactive risk assessments and scenario planning, and creating a clear crisis decision-making protocol. Polling consumers on key issues and building communication structures for an eventual response will also give firms a valuable head start. Tracking peer announcements and decisions, media reporting and regulatory changes in real time are also crucial to inform your company’s strategy as the situation evolves and expectations change.
4. Estimate reputational costs by sector and geography
Reputational costs related to a company’s decision to stay, leave or hedge varied widely by geography and industry. Western firms (especially in the US and UK) were much more vulnerable than their Asian counterparts. Certain sectors were more sensitive to political pressures, with Western companies engaged in the energy and financial industries among the most likely to exit in the first few months due to greater reputational risk. Companies should conduct comprehensive stakeholder mapping to assess the evolving expectations of key constituencies.
5. Be clear and accountable on financials
Companies faced a range of questions over their profits, investments, dividends and tax payments in Russia or to sanctioned individuals. Clear and accountable communication is critical: While many firms found compromises short of divestment (e.g. mothballing operations or selling their business to locals with buy-back clauses) or did not follow through on exit commitments, both strategies drew continuous scrutiny, and in some cases, reputational costs.
6. Consider immediate and arising humanitarian concerns
For companies with operations in Ukraine, the safety of employees was paramount, which meant shuttering operations and relocating staff. Additionally, the moral imperative to ensure the longer-term financial stability of displaced staff meant continuing to pay salaries for mothballed operations. Rapid exits from Russia gave rise to similar questions on longer-term obligations to employees. Those opting to remain in Russia to maintain the supply of essential medical and food items faced prolonged scrutiny, and companies whose products were deemed to fall outside of the scope of essentiality were called out in the media, leading to backlash and boycotts in other markets. More recently, for those who remain, the issue of conscription to the Russian army presented a moral dilemma. Planning for the variety of inflection points that arise in a crisis of this magnitude in advance is essential in preparing your response.
7. Plan for targeted and opportunistic cybersecurity incidents
Cyber activities often accompany kinetic conflict. Critical infrastructure, including energy and water facilities, were among the prime targets, but foreign media, telecommunications and others were also in the crosshairs of Russia’s cyber-enabled espionage and sabotage campaigns. Hacktivist groups also chose to take advantage of this chaotic cyber environment to launch their own attacks on businesses, including those not necessarily critical to national infrastructure. Companies should not only include cybersecurity incidents in their communications and operational response frameworks, but also conduct regular cybersecurity-related exercises and workshops to pressure test their ability to manage cyber incidents.
How we can help
Brunswick has 27 offices across the globe, with leading experts to assist your geopolitical, crisis, cyber, regulatory, communications, and other needs. Our Geopolitical Practice product offerings include risk mapping and stakeholder communications, crisis simulations, scenario planning, bespoke briefings by Senior Advisors and real-time support during geopolitical crises.
