3 Learnings From the Ukraine Crisis, Making Structural Changes Happen

The war in Ukraine is putting pressure on the fragile gains of international law as well as the timid climatic efforts undertaken in recent years. Major Human Rights violations in Ukraine also remind each and every one of us how much these gains warrant constant vigilance. From all the countries that have the chance to benefit from them and should as a result lead other countries towards societal progress.

It is All Connected and Predictable

Once again, everything is connected. Here at Ksapa, we see how the war in Ukraine obviously puts our business and investment community under pressure. They all have had to make strategic and tactical choices in response to the pressures associated with their activities in Russia and the broader region. They all have had to face the exceptional tensions generated by this crisis on the energy, raw materials and agri-food markets. All sectors are affected and must react urgently.

But just what kind of emergency are we talking about?

• For the past 30 years, reports have repeatedly called for energy and carbon sobriety in response to climate issues. With the ongoing exceptional rise in the price of fuel, building materials, cereals and other highly carbon-intensive products, companies and investors must face the music: their assets and production tools are still far too carbon-intensive. Organizing and implementing robust climate plans devoid of ESG-washing suspicions means working on the very resilience of their assets and reducing their subservience to global hazards that hike their costs and reduce their overall competitiveness.

• For the past 20 years, numerous indicators have pointed to the high risk and lack of ethics in business relationships with many Russian partners – particularly in gas and mining. The geopolitical risks tied to energy dependence are not new, either. The European Union is now rallying to reorganize itself and reduce this commercial dependence – only now, it is an emergency and immensely difficult. Ethics and corruption tools, such as FCPA in the US or OECD recommendations managing risks of corruption, do not exist only to ensure compliance. They must also assist strategic decisions to organize, as much as possible, reliable and sustainable value chains. The goal? Avoiding having to hurriedly adapt to fairly predictable risks.

• For the past 10 years, multiple studies have shown how globalized supply chains generate exponential risks wherever they structured exclusively around the pursuit of tax and labor cost optimization. The resulting costs are infinitely higher than the expected savings. Just consider the geopolitical risks of having strategic assets blocked in geographies that offer little legal protection. The regulatory risks that id complex and costly traceability efforts. The social risks of operating in unstable territories where corporate divestment has so heightened inequalities…

3 Learnings From the Ukraine Crisis, Making Structural Changes Happen

The war in Ukraine is dramatic. Ksapa therefore encourages its community of companies and investors to ponder the following 3 learnings:

1. Put values at the heart of strategic decisions, effectively cementing collective venture. Much-vaunted corporate values must translate in the way they manage the Russo-Ukrainian conflict.

2. Reorganize and secure your strategic supply chains to meet increasing regulatory requirements while better controlling these strategic components. Consider, for example, investing in workers’, farmers’ and temporary laborers’ access to training to bolster the quality, predictability and productivity of the services your company produces or outsources.

3. Actively decarbonize. Strengthening financing to accelerate the decarbonization of strategic assets and extended supply chain ultimately provides a structural response to numerous cyclical issues.

Moving Forward

These concrete activities and programs are at the heart of Ksapa’s activities and broader ecosystem. With our global network of 150+ experts located across G20 markets, Pacific Asia and Africa, we look forward to continuing these conversation in the near future.