The Ukraine Crisis Hits Home—Wherever Home Is

Russia’s economy is only the 11^th largest in the world. Ukraine’s isn’t even in the top 50. But that doesn’t mean that a conflict between the two nations couldn’t have significant impacts on companies and their employees around the world. As Alan Guarino, vice chair of Korn Ferry’s Board & CEO Services practice sees it, risk management is part of a CEO’s job every day. “But with high-stakes geopolitical events, CEO’s have no control,” he says. “That makes their jobs that much more difficult.”

Certainly, it’s still too early to know how events will evolve, and much of the global economy will not be affected at this stage. But experts say corporate leaders must prepare for impacts in Europe and for rippling effects beyond. "A lot is at stake with this situation," says Brad Jardine, a Korn Ferry senior client partner who works with the firm’s Global Energy and Global Industrial practices. Here are five to consider:

Collateral cyber damage.

The prospect of tanks rolling across lands can be terrifying, but modern conflicts between nations are often fought using hacks, denial-of-service attacks and other weapons of cyberwarfare. These actions could, intentionally or otherwise, disrupt businesses worldwide. For instance, it took only a hack of a billing system of a US oil pipeline firm to create a week-long curtailment in supplies of gasoline in many states. “Cybersecurity is top of mind on boards right now,” says Sonamara Jeffreys, Korn Ferry’s co-president for EMEA. “But for the unprepared it’ll be hard to catch up.”

Back to game planning.

Corporate strategists have spent the last two years creating scenarios around the various impacts of a global pandemic. Now it’s back to the drawing board to plan for a more familiar crisis: geopolitical tensions.

Worst-case scenarios, such as global oil disruptions and much higher inflation, should be on the table for discussion. “’What if’ scenario planning has just become more complicated,” says Dennis Carey, vice chair of Korn Ferry’s Board & CEO Services practice.

Commodity conundrum?

Russia is the largest supplier of natural gas to Europe, and most analysts expect oil and natural gas prices to rise the longer the crisis persists. “In the short term, sourcing natural gas from elsewhere could be a problem,” says Eric Wenzel, senior client partner for Korn Ferry’s  Advisory practice in Hamburg.

Supplies of other commodities could fall, resulting in higher prices, especially if the West bans trade with Russia. Ukraine and Russia together account for almost 30% of global wheat exports. Russia also controls significant production of copper, nickel, platinum, and rare earth metals. “A lot of industrial businesses will be hurt by price increases,” Wenzel says. Indeed, Cheryl D’Cruz-Young, who heads the firm’s Chief Procurement Officer practice, says the events will surely test some firms’ resiliency in supply chain management. Given supply constraints already created by the pandemic, she says, “any tightening in supplies is bound to have an outsized impact on both availability and prices.”

The ripple effect of sanctions.

This week Western countries modestly added to existing sanctions on Russia. Many were aimed at punishing Putin and his allies. But these efforts may have unintended consequences, says AJ van den Berg, a Korn Ferry Workforce Transformation expert. “I wouldn’t underestimate the power of China in cutting new deals with Russia,” he says. “Or the possibility of a rise in the use of cryptocurrency to circumvent restrictions.”

The impact on employees.

Just because a company doesn’t have any customers or employees in Eastern Europe doesn’t inoculate it from a potential impact on its employees. Millions of people have friends and family in Ukraine and Russia, while millions more have Russian or Ukrainian backgrounds. Plus, the threat of a major global conflict tends to put many people justifiably on edge. “Be careful of your statements, and have a deep appreciation for the different people and diversity in your business,” Jardine says.