C-suite eyes disruptive impacts, threats of Russian-Ukraine conflict

In response to the disruptive impact of the Russian invasion of Ukraine on the global marketplace, companies are placing a heightened emphasis on strengthening their approaches to cyber risk, supply chains, renewable energy, and crisis and contingency planning, according to a new survey of C-suite members around the world.

“C-Suite View of Volatility, War, Risks, and Growth for Global Business,” a survey conducted in May by nonpartisan think tank the Conference Board, focused on the impacts of the Russia-Ukraine conflict on the global business environment and firm-level operations. Unsurprisingly, the survey found that the conflict’s effects are far-reaching. In the survey of 750 CEOs and other C-suite executives, only 9% of respondents said the war would have no material impact on their business operations in the year ahead.

“The Russian invasion of Ukraine is proving to be the ultimate “gray swan” event — an event whose possible occurrence may be predicted but whose probability is considered small — creating extraordinary volatility and uncertainty with global ramifications for national economies, the business environment, consumers, and humanitarian relief,” the report said.

Among the chief findings of the survey was that C-suite executives believe the war is fueling inflation through energy price volatility and higher costs for scarce inputs. Executives are also wary of the war’s potential to increase the risk of cyberattacks, while almost a third of the CEOs surveyed believe existing supply chain disruptions will be made worse by the war. In response, organizations are striving to make their supply chains more resilient and socially responsible, reevaluating their corporate risk and crisis management programs and taking steps toward expanding their use of renewable energy, according to respondents.

C-suite executives also are keeping a close eye on the prospect of a recession. More than 60% of CEOs said they anticipate a recession in their primary region of operations before the end of 2023, while 15% believe their region has already entered a recession.

Despite concerns that existing sanctions against Russia because of the conflict could “set the stage for a fractured global economy and world order,” most of the CEOs in the survey favor introducing secondary sanctions.

“One possible explanation for their sentiments is that many CEOs may view secondary sanctions as an incremental increase since existing sanctions, such as constraints on dollar transactions and the U.S Foreign Direct Product Rule (for technology exchanges), already cover this ground,” the report said. “Another is that since firms are going through the pain of sanctions, governments need to close gaps, especially for big economies like China and India, for them to be effective against Russia.”

CEOs said their corporate citizenship responses to the conflict in Ukraine largely have been limited to supporting volunteer efforts and sending money to international relief organizations.

“As we’ve seen before with natural disasters, a relatively small percentage of companies are prepared to deal with the long-term, direct effects of the war,” the report’s authors said. “Given the conflict’s duration, it may be time to revise your overall Ukraine relief plan — support now needs to be viewed as a long-term proposition.”

Although most respondents said they were somewhat rather than highly concerned about the escalation of the war, 43% of CEOs said they were highly concerned about the threat of Russian retaliation through cyberattacks. On a related note, a separate survey by the Conference Board released in January found that less than 40% of CEOs believed their organizations were well prepared to meet challenges associated with a major cybersecurity crisis.

Executives provided insight through the survey into their mindsets for the best ways to counteract inflation. More than half of respondents advocated for passing higher input costs to consumers, while 47% favored cutting costs and 36% cited absorbing price increases into profit margins.

Nearly a third of CEOs say the war is accelerating a need to redirect sourcing and supply chains, which were already strained because of the COVID-19 pandemic. In fact, 78% of CEOs with supply chains in Russia and 72% of CEOs with supply chains in Ukraine say they are focused on making their supply chains more resilient, compared to 53% of CEOs globally.

In addition, the report said a strengthened commitment by companies to enhance risk management and crisis management plans is influenced by the ongoing supply chain “shocks.”

“Contingency planning is now a mission-critical risk management and business planning requirement for multinational companies,” the report said. “CEOs and boards can use the conflict as a catalyst to address risk management and crisis management plans and processes and to have a candid discussion at both management and board levels about where people feel their organization is falling short in this area.”