It’s been almost 4 months since Moscow’s invasion of Ukraine in late February, and since then the US and its allies have imposed a series of financial, trade, and travel sanctions on Russia. We now have 4 months’ worth of data, and scrutiny, to help aid decision makers in assessing the economic impact of these sanctions, and to look at whether increasing pressure on Russia with new sanctions may help to put an end to the war or further promulgate dire consequences.
The impact of this war has had wide reaching consequences, both Russia and Ukraine are key global suppliers. How can business leaders better prepare themselves for mitigating the risks amidst uncertainty?
Business leaders are in a unique position, to be able to leverage their vital data driven insights and analysis and bring it to the fore. With renewing their focus on key priorities such as robust scenario planning, cost reduction and planning for divestment, if need be, and delving deeply into looking at new and expected risks, it will be possible for them to stay on track for growth with limited impact on their business. Let’s take a brief look at some of the areas discussed above.
Risky business
First and foremost, the most fundamental area of business that needs to be looked at is operational risk. This global crisis affects an organization’s risk profile across the board, such as business continuity, financial crime, ESG risk, third party risk and cyber security risk. It’s important for CRO’s and CCO’s to work together with their teams to review exposure across these areas.
Maintaining your value chain
Secondly, if your organization has major operations in Russia and Ukraine, cutting costs is of paramount importance. It is essential to look at your value chain. One of the effects on business may be due to pressures from inflation. If this is the case, it’s essential to monitor your cost structures, bearing in mind both direct exposures to higher energy and raw material costs, and indirect exposure to inflation. You need to make informed decisions, perhaps you may need to look into renting rather than owning assets, or even reduce capacity, staff or look into outsource as much as possible. This should help set you up for the reality of the “new normal” because countries are quick to dish out sanctions, while the removal of sanctions is often a lengthy process. It is full of political and economic negotiations that are long and drawn out. We have seen the rise in the cost of cross border trade due to this crisis, and this may continue to be the case for some time. Although cost cutting is important, it’s important for these measures to allow for strategic assets, there was already a lack of competent resources and talent before the war and there is more of a shortage now.
Hope for the best, but plan for the worst
Thirdly, a lot of businesses talk about disaster planning, however scenario planning is critical at uncertain times like this. The more insights and data you have, the better equipped you are to navigate these treacherous waters against a backdrop of uncertainty.
It is critical to work with key stakeholders across the organization and work on scenario modeling. You can ensure that your models are relevant and focused both on internal and external factors, by creating cross organizational teams.
Leveraging AI and machine learning technology as a productivity superpower to speed up the decision making, and planning process can be extremely beneficial to the business.
Your models need to focus enterprise wide and take into consideration all areas of the business, including finance, risk, supply chain, procurements etc. Areas to look at in your modeling scenarios may vary depending on your business type and industry sector, but key areas should include: operational impact, changes in energy prices, raw materials, supply chain implications, fluctuations in customer demand and consumer confidence, looking at resources (staffing) shortages, and hybrid working scenarios.
Last but never least
Finally, a lot of organizations who had ties to Russia, have either suspended their operations there, or have permanently left the country. The decision to leave or suspend operations is a complex one and it is all dependent on your business model. However, these decisions will not only impact your employees and how you support them through this transition; they will also have a deep impact on your organization from a legal perspective. This may leave gaps in your possible withdrawal or business capabilities.
Considerations
We still don’t know how this war will pan out, will there be more pressure and more sanctions? How will Russia respond to existing or potential sanctions? The answers to these questions will all reveal the extent of the economic impact of this war. We know that during times of uncertainty not only do commodity prices rise, the cost of doing business also increases, and many organizations in their attempt at being risk averse, tend to delay making important or critical business or investment decisions. Besides the economic impact, the global geopolitical framework is rapidly shifting. We may see a lot of government spending on defense, and questions around taxation and spending priorities will be at the fore. In addition to all of this, the fact that the impact on energy will be tremendous cannot be denied, so we should expect to be in for lengthy discussions around energy policies.
There are many challenges and uncertainties still to come and their impact will be discussed and debated for months or even years to come. But one thing is certain, and that is that we are in a new era, now, what will the outcome of this new age be? At this point in time, it’s unpredictable.
About Nirvana Farhadi
Nirvana Farhadi is a Compliance.ai expert advisor, thought leader, pioneer and a recognized global influencer in the RegTech sector, with more than 20 years of experience in financial services. She has developed, built, and advised on multiple RegTech solutions. She was most recently with Hitachi as their Global Head of Financial Services, RegTech Risk and Regulatory Compliance Affairs; and she worked with KPMG as their Head of Regulatory Reporting. She has covered areas such as GDPR, CCPA, and multiple global data privacy regulations, regulatory reporting, record keeping, AML, and data governance. In addition to her RegTech expertise, Nirvana is an author, keynote speaker, and industry collaborator.
Asif Alam is the Chief Executive Officer at Compliance.ai. A leader in shaping disruptive technology, his experience includes building products using AI and natural language processing for GRC, payments, lending, risk, trading, and new solutions, from Fortune 500 companies to startups.
In his most recent role, he served as the Chief Strategy Officer of ThoughtTrace, unlocking new revenue streams and markets, and reignite portfolio growth. ThoughTrace was then acquired by Thomson Reuters in 2021.
He brings more than 20 years of management and business experience; increasing profitability, unlocking new revenue streams and markets, and reignite portfolio growth for companies like Thomson Reuters, Crux Informatics, and Finastra. Asif is a forward-thinking expert driving engagement via client forums, public presentations, and white papers.
Cesar Lee is a Principal at WRV, a venture capital fund focused on early-stage investments in hardware, semiconductor, and other technology-related companies. Previously, he was an investment professional at Riverwood Capital, a technology-focused, late-stage venture capital, and private equity fund. He began his career at RBC Capital Markets, where he was part of the Mergers & Acquisitions group for two years and the Equity-linked & Derivatives group for one year. While at RBC, Cesar spent a majority of his time working on M&A advisory transactions for technology companies.
Cesar’s investment experience includes buyouts, later stage, early stage and seed rounds. Cesar has completed transaction in the U.S., Latin America, and Asia, and in technology sectors including data centers, software, semiconductors, consumer electronics, robotics, big data, and internet.
Maria Devassy is a RegTech, Content, and Technology leader with over 20 years of experience helping companies bridge the gap between technology, product, and business. Maria has held leadership positions with MetricStream, KPMG, Oracle Corporation, and other technology companies. She has launched several successful RegTech products, business partnerships, and advised Fortune 100 clients on risk management, audit, advisory, and compliance business across Industries.
Hugh Cadden is a recognized expert in derivative financial and trading markets including futures, options, and swaps. Hugh is currently a senior consultant and expert with OnPoint Analytics, Inc. an economic, finance and statistical consultancy specializing in expert testimony for complex litigation. He has been specializing in the organization, operation, and regulation of financial and trading markets for over 40 years. Hugh’s experience includes both the public and private sectors and he has held senior level positions with the U.S. Commodity Futures Trading Commission including serving as Director of the Division of Trading and Markets and Deputy Director of Enforcement. He has been qualified as an expert on financial and trading market matters before the Commodity Futures Trading Commission, the Securities and Exchange Commission, the U.S. Tax Court, Financial Industry Regulatory Authority, National Futures Association, American Arbitration Association and federal courts.
Drake Ross is a former bank regulator who specialized in compliance with consumer protection regulations while at the OCC, FDIC, and OTS. While at these agencies, he provided extensive training and guidance and developed materials to ensure full comprehension and proper application of rules, laws, policies, and guidance, and served as a Subject Matter Expert in numerous areas. Because of his expertise, he often presented at agency and industry events. He also played a significant role in successful windup of the 2008 IndyMac Bank failure, where because of his extensive knowledge of the FDIC deposit insurance regulations, he was called upon to administer highly-complex insurance determinations.
Carliss Chatman is an Assistant Professor of Law teaching Contracts, Agency and Unincorporated Entities, Corporations, and Transactional Skills. Her work is influenced by over two decades of service on non-profit boards and involvement with community organizations. Through leadership positions, she has developed expertise in corporate governance and non-profit regulation. She has also been instrumental in strategic planning and fundraising efforts. Prior to law teaching, Professor Chatman was a commercial litigation attorney in Houston, Texas. In practice, she focused on trial law, appeals and arbitration in pharmaceutical, health care, mass torts, product liability, as well as oil, gas, and mineral law. In addition to negotiating settlements and obtaining successful verdicts, Professor Chatman has also analyzed and drafted position statements regarding the constitutionality of statutes and the impact of statutory revisions for presentation to the Texas Legislature.
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Mariam is an Operating Principal at Cota Capital. Mariam has experience providing guidance on strategic and operational planning to Venture and Growth stage companies. Prior to Cota Capital, Mariam spent her career in management consulting as a Director at KPMG. She has experience leading global transformation programs and developing innovative service offerings for Fortune 500 companies in the Technology sector. Mariam has an MBA from UCLA’s Anderson school of management with an emphasis in Finance and Entrepreneurship. She has a Bachelors in Science in Finance and a Bachelors in Science in Economics from Santa Clara University.
Chris Callison-Burch is an Associate Professor in Computer and Information Science Department at the University of Pennsylvania. His research interests include natural language understanding and crowdsourcing. He has served the Association for Computational Linguistics as the General Chair for the ACL 2017 conference, as an action editor for the Transactions of the ACL, as an editorial board member for the Computational Linguistics journal, and an officer for NAACL (the North American chapter of the ACL) and for SIGDAT (the special interest group for linguistic data and corpus-based approaches to natural language processing)
Tom Ladt is an experienced executive and investor. Tom has lead and served on the boards of several public and private companies serving highly regulated industries such as technology, healthcare, real estate, and food processing. Tom has also served in key governmental roles and on numerous community boards.
Jeroen Plink is a global executive with a proven track record of developing and growing businesses, teams, and technologies with innovation and passion. Jeroen was CEO of Practical Law US during its acquisition by Thomson Reuters. He now serves on numerous boards and acts as a strategic consultants for start-ups.
Global Legal and Compliance executive with 15+ years of success in the SaaS technology and financial services industries. Partner to the CEO and executive team in corporate transactions, business development, product expansion, and regulatory navigation during periods of intense growth and organizational change. An advocate of effective risk management that starts with sound business practices and putting the customer first.
Richard Dupree has held multiple Risk, Compliance and Operations positions at regional, national, and global financial services firms including Wells Fargo, Silicon Valley Bank, Bank of the West and BNP Paribas. Rick currently advises FinTechs and RegTechs and sits on industry panels, contributes to industry whitepapers, thought leadership efforts, and speaks at industry seminars on Risk and Compliance challenges faced by banks and FinTechs.
Brian advises clients on legal and regulatory compliance in the financial, tech, and procurement sectors. His passion is helping businesses succeed in heavily regulated environments. As counsel and trusted advisor to businesses of all sizes, and as a former regulator, policymaker, and federal official, Brian acutely understands the unintended burdens that even well-intentioned government requirements can put on innovation and business growth, as well as how to create policies that strike the right balance.
Brian served as National Ombudsman in the Obama Administration, leading the federal Office of Regulatory Enforcement Fairness in assisting hundreds of startups, entrepreneurs, and small business owners in every industry and every state.
Dr. Marsha Ershaghi Hames is Managing Director of Strategy & Development at LRN, a leader in advising and educating organizations about ethics and regulatory compliance, as well as corporate culture, governance and leadership. With the focus of inspired behavior versus required behavior, LRN is a leading voice in the industry for companies to build ethical cultures instead of “check-the-box” compliance approaches. She’s advised Department of Justice corporate monitors on successful program transformation under CIAs (Corporate Integrity Agreements. With over 20 years of experience in leading multinational ethics and compliance strategies, Marsha has become a highly sought-after thought leader on leading Corporate Compliance and Ethics practices.
Carla Carriveau is currently the Senior Managing Counsel at Wealthfront, an automatic investment service firm in Redwood City, California. Carla was previously Senior Counsel, Division of Trading and Markets, at the United States Securities and Exchange Commission. As a former regulator with over 15 years of experience in helping small businesses navigate legal and regulatory needs in the financial services sector, Carla advises Compliance.ai on financial services regulation, the regulatory landscape and industry practices.
