March 14, 2022 – Fighting around the world has been a fact of life for centuries. Today, when cultures clash, and armies move in, the geopolitical implications for global businesses can become decidedly complicated. Customers, supply chains, jobs, and employees are all in the firing line. Now, a crisis is unfolding in real time.
Over the past 30 years, war has come to many regions of the world. But for the most part, the global economy was unaffected, as was commerce, and corporate leaders didn’t have to worry about the geopolitical machinations of great powers. That changed when Russia sent troops into Ukraine. Now these leaders, many of whom are exhausted from two years of managing through a global pandemic, are being asked to confront a new crisis, one they have no control over. “This is something that CEOs haven’t seen before,” said Retired Lt. Gen. William Mayville, a Korn Ferry consultant who during his military career was deputy commander for U.S. Cyber Command.
Even though most leaders haven’t been in management positions during this type of crisis, experts say some lessons they learned from managing through the COVID-19 pandemic can apply here: move fast, protect the health of employees, and maintain clear lines of communication. Korn Ferry canvassed experts across the world for their perspective on these and other positive actions leaders can take.
Ensure That Your Employees are OK
Safety, of course, trumps anything else, experts say. Some companies have chartered flights to get employees and their families away from the region. Others have transferred employees to different offices. Leaders are also taking multiple actions to aid employees who can’t get out of the area, including using connections to deliver food and medical supplies. Some have bought satellite phones for employees in regions that have lost power.
Korn Ferry found that a few organizations have moved beyond safety to ensure that impacted employees can eventually resettle. They are printing out and storing documents, such as employment agreements, identification records, or real estate papers, giving these employees one less thing to be anxious about.
Get Up to Speed on Geopolitics
CEOs and board directors are paid to be risk managers, but outside of commodities-related businesses, most leaders in recent years could get by with only a basic understanding of “Cold War-esque geopolitical risk,” according to the Korn Ferry report. That period is over, experts say. A new era has started that, pending quick resolutions, could last for months or years.
As many did with COVID-19, leaders will need to consult outside experts, in this instance selecting analysts with backgrounds in economics and international relations rather than public health and safety. “Importantly, leaders should not just be fixated on what’s going on now but instead asking about the potential future consequences of current events,” said Dennis Carey, a vice chair of Korn Ferry’s board and CEO services practice. “Getting a sense of what might happen will give leaders the ability to make more strategic decisions on future investments.”
Decide What to do About Business in the Region
Numerous companies have put their business with Russia on hold or are closing factories in Ukraine. For some companies, the decision is easy. But it’s a far more difficult situation for others, particularly consumer-product firms that both employ and sell to ordinary citizens in the region, said Korn Ferry.
Cutting employees off may not be an option. “If you have thousands of people on the ground, denying them their livelihood isn’t a humanitarian response,” said Juan Pablo González, Korn Ferry senior client partner and leader of the firm’s professional services practice. “A possible option: suspend or cancel business while continuing to pay employees for a time,” he said. “It’s also important to communicate with those employees and offer an objective source of information, something that they might not be getting from media outlets in the region. Maintain communication and let them know what the rest of the world knows.”
The risk of cybercrime to organizations of all sizes is escalating, with significant costs, and can no longer be ignored by business leaders. The Russian invasion of Ukraine, experts predict, will soon reach far beyond that country’s borders, and affect us far more than at the gas pump. The Department of Homeland Security is warning citizens and businesses across the U.S. to be on high alert for cyberattacks from Russia. Cybersecurity Ventures, a leading researcher and online resource for the global cyber economy, projects global cybercrime costs to increase by 15 percent per year, reaching $10.5 trillion annually by 2025. And according to global cybersecurity leader Trend Micro Inc., in its Cyber Risk Index Report – an annual survey of 2,800 IT managers and practitioners from the U.S., Europe, and Asia-Pacific – 26 percent of global corporations fell victim to seven or more cyberattacks in the past year, and over 80 percent of these expect such attacks to be “somewhat” or “very likely” to succeed.
Companies most likely are also going to have to state a position one way or another, experts say, because their stakeholders are demanding one. “Employees are speaking very loudly to their management teams about this,” said Tierney Remick, vice chair of Korn Ferry’s board and CEO services practice.
Adjust Supply Chains and Cost Forecasts as Needed
While Russia is a major exporter of oil, natural gas, copper, and other minerals, and both Russia and Ukraine are major suppliers of corn and wheat, not many U.S.-based firms have their most important suppliers based in either country. However, experts say, companies have countless smaller suppliers—or suppliers to their suppliers—that have operations in those countries in particular and Eastern Europe in general. “Companies should already have been monitoring this,” said Cheryl D’Cruz Young, a Korn Ferry senior client partner who specializes in recruiting chief procurement officers. “Resiliency will be tested once again.”
Much as they did during the initial waves of COVID, supply chain leaders should be searching for alternative suppliers of essential materials. “That might mean shifting personnel around the world, as some suppliers close while other outlets open,” said Ms. D’Cruz Young. “The conflict also will almost certainly continue to push some commodity prices higher. Firms should be reevaluating their price forecasts; ultimately leaders also have to decide whether to eat those cost increases or try to pass them along to customers.”
Shore Up Cybersecurity Efforts
Korn Ferry notes that during the war hackers have disrupted websites and other businesses across the world, and experts say there will be more to come. “These attacks likely aren’t one-offs but coordinated efforts by nations,” said Michael Franzino, leader of Korn Ferry’s global financial services practice.
The attacks can also target seemingly benign systems that nonetheless have an outsized impact. Korn Ferry points to an attack last spring on the billing system of a U.S. pipeline company that disrupted gasoline supplies for days. “Leaders need to realize that, regardless of what business they are in or where they operate, they can get impacted,” said Mr. Mayville. “The idea that you somehow are not connected to what’s going on here is a mistake.”
Mr. Mayville recommends that companies go beyond just being in compliance. Leaders should push for cyberattack rehearsal drills and sit down with their security leaders to go over plans. “You have to be ready,” said Mr. Mayville. “That’s a higher performance standard, and CEOs have to drive that higher standard.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media