The unprovoked invasion of Ukraine by Russia has led to a major humanitarian crisis, with numerous lives lost and several millions of people displaced as they have fled for their safety.
As one of the most significant geopolitical crises of our time continues, businesses — whether or not they have operations or exposures in Ukraine or Russia — are facing new and escalating challenges.
Their immediate attention should remain focused on the safety and wellbeing of staff and their families in that region and beyond. But consideration should also be given to what this crisis means for longer-term business resilience.
The Ukraine crisis is taking place at a time when countries around the world are still dealing with the repercussions of the COVID-19 pandemic. While primarily a human crisis, the pandemic demonstrated the fragility of the global economy and modern supply chains when faced with big macro shocks. The Russia-Ukraine crisis is further stressing these fragile supply chains, an issue exacerbated by the highly complex and evolving set of sanctions and counter-sanctions involving Russia and restrictions on air, sea, and land transportation in the region.
As the conflict continues, many raw materials and agriculture commodities are becoming more expensive and there may be shortages. And single points of failure will be put into sharp focus. Nickel, for example, which is critical for the battery revolution, is heavily sourced from Russia and a large portion of the neon gas used in semiconductor production is sourced from Ukraine.
For countries and businesses that rely on imports of wheat, corn, and sunflower oil from Russia and Ukraine, there may be more severe impacts, such as potential food scarcity and price stability issues that could lead to social and political unrest. Similar concerns have been raised in relation to the increasing costs or shortages of fertilizer — of which Russia is a major exporter. This could impact crop yields in other countries at a time when the Ukraine harvest is affected by the ongoing war, and extend the impact of the crisis well beyond the region.
An escalation of events in Ukraine could draw bordering countries directly into the conflict and could lead to the conscription of eligible employees to shore up local defense forces. There are also wider implications for locations many miles away from the region that could be heavily impacted by macro changes to geopolitical risk.
In addition, the threat of cyberattacks, either directly targeting entire industries or organizations, or where companies become collateral damage, has also been elevated.
Organizations need to adapt to this new reality, paying particular attention to how these events may challenge business models and strategies in the region and globally. For example, locations that have previously represented a relatively benign risk may now present an increased threat of disruption to an organization’s operations.
While the situation remains fluid and there is no certainty as to what may happen in the short or long term, organizations can be more prepared both for the ongoing crisis and future disruptions through five main actions.
As senior leaders continue addressing the immediate challenges, they should not allow today’s priorities to stop them from preparing themselves for tomorrow’s problems. Instead, they should continue improving longer-term resilience by focusing on two time-horizons:
Scenario analysis can be an important part of business planning. By structuring how impacts are likely to materialize over time, businesses should become more proactive in their approach to dealing with issues just over the horizon.
As they focus on improving today’s outcomes while also preparing for tomorrow’s risks, organizations should:
The Russia-Ukraine crisis and the COVID-19 pandemic have shown us how unexpected shocks can impact organizations and test their resilience plans. Resilience is about adaptation, so it is critical to continuously learn from exercises and actual crises. And then, by implementing those learnings within your resilience strategy, you can emerge stronger, more agile, and better prepared and alert to changing circumstances that may demonstrate elevated risks and course correct as needed.