Ukraine: Corporate Decisions in Wartime
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Ukraine: Corporate Decisions in Wartime

ANDREA COLLI PREPARED A READING, BASED ON DATABASES AND SCHOLARLY LITERATURE, WITH THREE SUGGESTIONS FOR COMPANIES WHOSE OPERATIONS ARE AFFECTED BY CONFLICTS

Companies have been facing hard choices after the Russia-Ukraine conflict started. Corporate leaders were forced to make strategic decisions in an extremely uncertain environment, which caught them unprepared since they were “used to taking decisions in the smoothy and relatively riskless environment of the ‘great global economy’ which followed the fall of the Berlin Wall,” according to Andrea Colli, Full Professor at Bocconi’s Department of Social and Political Sciences.
 
Based on an extensive analysis of databases and scholarly literature, Professor Colli prepared the reading “In case of war – How companies turn to emerging strategies amidst geopolitical crises,” with the aim of stimulating reflections about strategic actions to take in uncertain environments, such as in wartime.
 
The reading provides an extensive overview of the emerging risks and threats for companies, which influence not only the countries directly involved in the conflict, but also those that are considered “neutral” economies.
 
Moreover, from the various presented examples, Professor Colli illustrates a set of suggestions, which provide an orientation useful for corporate decision-makers in cases with such a level of uncertainty. Specifically, there are three main points to consider when leaders need to make a strategic response.
 
Firstly, it is important to carefully consider the structure of a company’s value chain. Particularly when the most strategic links of the value chain are geographically located in places with high geopolitical instability. Therefore, when possible, one alternative is reshoring. In some cases, broadening the diversification of a company’s value chain is probably an even better alternative in order to maintain the advantages of value chains while diversifying the source of risk.
 
Secondly, be aware of who the stakeholders of a company are. Companies with “significant blockholders,” who are individuals, institutions and bodies controlling sizeable portions of the share capital, may be more easily put under pressure than those characterized by dispersed shareholdings in the hands of a vast public with very little voice. Particularly, institutional investors may exert strong pressure on top management. For example, the Norwegian oil company Equinor, in which the Norwegian state has a controlling stake of 67%, has officially started the process of disinvesting from all its ventures in Russia.
 
The third suggestion is to try to leave some doors open for an eventual comeback. Sooner or later the conflict will be over and it is reasonable to think those most facilitated in the comeback process will be those able to keep some links in the country, as well as some kind of reputation among consumers and employees. This is the reason why companies such as McDonald’s, Starbucks’ and PepsiCo, kept payrolls open even when their operations have been suspended. Strategies aiming at consolidating the company’s public image must therefore not only be designed to cope with reputation “at home”, but also inside the country which the company is going to leave or significantly scale-back the its operations.

by Weiwei Chen
Bocconi Knowledge newsletter

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