Since the 24th of February, Russia has been invading Ukraine, resulting in the largest European refugee crisis since World War II. One-third of the Ukraine population was displaced from Ukraine to neighboring and safer countries. Reports of devastation and war crimes have continued to shock the world as the war continues nearly five months later.

Corporations and countries are reacting, showing support for Ukraine and disappointment with Russia, with over 1,000 companies pulling their business or services from Russia, according to Yale. In addition, the assets of significant Russian individuals have been frozen, globally or in certain countries at least.

A European attendee on a recent Meet the Boss roundtable discussed with fellow panelists how challenging the resulting paper shortage has been for business, as Ukraine was a core supplier for wood and paper goods. There’s also been the human impact, the attendee shared, as one of their offices needed to close due to the bombings in Ukrainian cities. Other panelists described similar challenges, including shortages of other supplies. It’s clear the war is having a mammoth effect on already suffering supply chains. So, what does business look like with Russia and Ukraine at war?

The World’s Breadbasket 

McKinsey offers a very good and detailed report on the effects the war has had on businesses. One key area of impact is the food industry, as “the two countries produce roughly a third of the world’s ammonia and potassium exports, essential ingredients in fertilizer.” Ukraine and Russia are both important suppliers for the world’s bread makers, as well, having accounted for “30 percent of global exports of wheat and barley, 65 percent of sunflower seed oil, and 15 percent of corn.”

The Mckinsey report was published in May, and the impact, now two months out from the report, is being felt globally in rising food prices. With fertilizer being higher in price and harder to get a hold of, many farmers’ futures are looking bleak. Governments are looking at schemes to help these challenges.

Accelerating Raw Materials Challenges 

Of course, it’s not just food exports that Ukraine and Russia impact. Natural resources like precious metals and energy resources are also widely affected. For example, in the markets of coal, steel and nickel, the two countries have combined shares of up to 50 percent. With palladium, 48 percent.

Prior to February, business executives attending our events were looking for solutions to the materials shortages. War has only tightened those challenges, as prices for materials continue to rise. It is, however, causing some industries to look for a more global balance in supplies, relying less heavily on certain countries.

‘Friend-Shoring’ Supply Chains 

Going back to just a year ago, a particular Meet the Boss roundtable stands out. The topic was on supply chains, and a senior executive from Walmart had joined the conversation. When asked how COVID-19 had affected his supply chain efforts, and whether automation was helping with this hindrance, the executive (after a quick joke on toilet paper) spoke about how COVID was a disruption, yes, but so was the Suez Canal. So too, were the Australian wildfires in early 2020 and the protests across America. The reality of the supply chain, said the executive, is that we need to be prepared for the unexpected.

Supply chain resilience has truly been tested in recent years and the war has crystalized the need to rethink supply chain strategies for the future. Technology and construction companies are looking at nearshoring to help with some of the supply chain challenges, but there’s also a new trend appearing that allowed Canada and Mexico to eclipse China as the largest trading partners with the United States. US Treasury Secretary Janet Yellen has proposed ‘Friend-Shoring’ – where a group of counties with shared values deploy policies encouraging companies to spread their manufacturing within that group of countries – as a way of insulating global supply chains from external disruptions or economic coercion. For more information on ‘friend-shoring’, Bloomberg wrote an article on this only a month ago.

Not so Meta Fast

Another industry taking a hit is technology. From social media outlets reacting to quick action governance laws from each county to general internet infrastructure being affected for both civilians and military. What have technology companies learned from the wake of the war? Lots of questions remain about how these companies reacted and how they will move forward. With more social media companies remaining or being privately owned, the conversation around leaking sharing, or creating conspiracy and fake news poses a real challenge for businesses and governments alike. Both Russian and Ukraine tried to regulate the internet for each country, but this was not allowed, the companies expressed the importance of civilians needing that contact with the internet and the outside world. To hear more about these conversations, Brookings wrote an article about private technology companies in Russia and Ukraine.

The media industry has also taken a hit. After years of independent news and media outlets increasing, the current censorship and loss of business have the numbers taking a nosedive. Forbes reports that in 2021, advertising in Russian media grew by 22 percent. By mid-April of this year, the market was looking at a 40-50 percent loss, with predictions for further losses of another 20-25% right around the corner.

There are endless business disruptions from this war between Russia and Ukraine. As the effects become more apparent, and as more external pressure grows due to demands for exports from Russia and Ukraine, it becomes a test for the governments and businesses that began the freezes back in March, as to whether they will keep to their initiatives. This is a moving space, so for now we look to resilience across supply chains, new ways of resourcing, and testing new technology across what we had considered reliable and nice to have.

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