16-11-2022 10:12

Managing business risk from the Russia-Ukraine war

How are Nordic corporates handling the risks from their business exposure to Russia, Ukraine and Belarus? We asked them in our Treasury Survey 2022: Re-assessing risk.
Ukrainian flag waving in the wind in Kiev

A significant share of Nordic corporates have exposure to Russia, Ukraine or Belarus and are thus faced with business risk stemming from Russia’s invasion of Ukraine.

That’s one of the findings of Nordea’s latest Treasury Survey, which took the pulse of around 160 Nordic corporates on the changing risk landscape amid rising geopolitical tension, soaring inflation and climbing interest rates.

Almost half (43%) of the surveyed companies reported having business exposure to Russia, Ukraine or Belarus. Of these companies, two-thirds reported a “low” share of revenue coming from one or more of these countries. One-third reported a “low” share of sourcing from these places.

While not huge, Nordic corporates’ exposure is meaningful, says Viktor Sonebäck from the Nordea Thematics team and one of the study’s authors.

“Overall, it’s not a major problem that dominates the agenda for Nordic corporates, but it’s a significant enough issue that they need to find ways of managing it,” he says.

What are the typical challenges companies face?

Russia’s invasion of Ukraine in February triggered sweeping Western sanctions, raising a host of problems around transactions. Companies’ top-reported challenges are payments (60% of respondents) followed by sanctions (54% of respondents). Close behind are issues around trapped cash, compliance, FX exposure and local legal requirements related to business suspension or closure.

How are companies managing the business risk?

The vast majority of Nordic corporates (94%) are choosing to freeze or exit, with 48% mothballing and 46% leaving. Only 6% are continuing with business as usual.

Nordic corporates seem to take the view that normalisation is not on the horizon, says Sonebäck.

“Nobody knows when or how the war in Ukraine will end, but there is virtually no expectation of business in Russia reverting to anywhere near pre-war normal in the foreseeable future, regardless of how the conflict ends,” he says.

See the full highlights from Treasury Survey 2022: Re-assessing risk.

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