How is the Ukraine and Russia war impacting the global economy and what role do corporate governance specialists play?

The invasion of Ukraine is having devastating impacts. While the EU / UK and individual countries impose sanctions, European accountants need to step up and address how these, and other consequences of the war, affect their activities.?

I was deep into a conversation with my other half who works within the financial services sector discussing the implications of the Russia and Ukraine war on the economy and businesses. I was keen to know what that means for auditors or wider corporate governance teams over the last few weeks. As the situation evolves, my view is that professional accountants must continue applying their ethical values and social responsibility.?

To do the right thing in these difficult times, professionals will have to consider different dimensions from risk management to ethics, legal questions, and corporate citizenship. The situation can raise difficult questions that may require seeking further legal advice (which this article does not provide).

The Russia-Ukraine conflict began 24th February 2022, it’s clear that this war sent shockwaves to global markets and led to an unprecedented response from countries around the world in the form of economic sanctions and other restrictive measures.?

Risk management leaders in Europe and worldwide are either already experiencing impacts from the war in Ukraine and the sanctions imposed on Russian and Belarusian oligarchs. Speaking to my contacts across various teams that sit within corporate governance functions it’s evident that there are multiple areas of implications for many businesses to keep an eye on. As such, I thought it would be beneficial for my network to have some insight into this.

Below I will draw upon key implications that have been coming up in recent conversations I’ve had with various stakeholders within accounting, audit, and risk management teams.

Accounting & reporting implications:

The economic effects of the war can have an impact on accounting, reporting, and auditing financial statements of the companies or groups concerned, especially SMEs. However, the impact on companies will differ. Companies that might be particularly affected if they a) trade with companies in Russia, Belarus or Ukraine, b) have subsidiaries or assets in Russia, Belarus or Ukraine, or c) are linked with organisations or individuals under sanctions.?

Supply chain:

I hate to say this but be prepared for more supply chain disruption. Yes, I said it, just when it looked like the global supply chain woes might be easing, the war in Ukraine has dealt another blow to the global economy. Firms should prepare for shortages, supply disruptions, and sanctions to destabilise supply chains for at least 24 months. A commodity risk specialist mentioned given Russia supplies more than a third of Europe’s natural gas and is the world’s second-largest oil exporter you’re likely already bracing for higher fuel prices and possible shortages, however did highlight ‘what goes up, must come down' so we can take some faith in all this balancing out.?

Auditing implications:

Depending on the circumstances and business of the company, the auditor’s risk assessment might need to be revised because of the threat of new significant risks, for instance, the company’s liquidity. As the current situation is very fluid, it will need to be constantly reconsidered during the audit.?

Risk teams should increase the frequency of frontline reporting:

Businesses are implementing a quick turnaround risk “deep dive” report for the executive risk committee and the board of directors. Be sure to make note of Russia’s invasion of Ukraine in existing risk reports to highlight new and amplified risks.

To conclude, corporate governance professionals are needed now more than ever in this economic climate and play a key role within any business, but it leads me to ask you as a professional in this area, what are you doing in your current role to combat against these implications businesses face?