The imposition of financial sanctions in respect of the crisis in Ukraine is causing many to re-evaluate their approach to financial sanctions.
Paul Robertson is joined by Ben Luddington and David Whitehouse as they have a short discussion on the impact of sanctions in Ukraine, from a financial and trade perspective.
Paul: We're going to talk about our collective experience in helping organisations respond to some of the issues which the evolving situation in the Ukraine is creating for business. Our experience is that organisations have a tendency to defer planning for crisis until it's too late and are then on a back foot reacting to events rather than having already considered and planned for the eventuality. In our view organisations should already be analysing their current exposures to identify the priority issues and then seeking to work with the emerging risks and developing action plans to deal with them should it become necessary. Lastly, organisations who take the time to build in future resilience through scenario planning are best placed to navigate in difficult times. One of the most talked about outcomes of the crisis has been the imposition of financial sanctions. Ben what are your thoughts on this?
Ben: Thanks Paul. I think it is fair to say that the primary response by the EU and the US has been the imposition of financial sanctions. They're becoming the policy tool of choice. They were used extensively in the Libya crisis and the Iran crisis and I think this will be a real test of how effective they can be at bringing about change. But for now they are a reality and organisations have to deal with them, and they are very challenging. Not least because there are multiple regimes and there is differences between how the US have imposed their regimes and how the EU have imposed their regime. And there are numerous others such as the Swiss and the Canadians, who were in fact the first to impose sanctions. It's a challenging environment because of the speed of change and simply compliance is becoming more and more difficult for organisations.
Paul: That's a really big picture in terms of the sanctions but what can organisations practically do?
Ben: I think the first thing they've got to do is make sure that their lists are up to date and that they are checking every payment flow that needs to go through those lists. What we often see is that a type of payment is not being screened properly. It's evolving fast so you need to know what MI you have as management to make sure you are looking at the right payments for screening and lastly, when did you last think about testing your system; is it looking at what you think it's looking at and is it working?
Paul: David the situation is still evolving what about the potential emergence of trade sanctions?
David: Well it's clear that the next step may be trade sanctions and one of the challenges that companies will face, as Ben has mentioned, will be the way that these trade sanctions will be imposed through multiple jurisdictions and regulatory systems. So a company operating here in the UK, for instance, would need to comply with national and UK legislation; it would need to comply with EU regulations; it would also need to comply with extra territorial US regulations or national regulations in all of the territories in which their global supply chain touches. And this adds a layer of complexity and companies will need to adapt to these overlapping regulatory systems. And I think some of the key themes for companies will be: how they build a trade compliance framework that allows them to control the end-to-end business process; where and when they screen in the end-to-end business process; and perhaps most importantly how they adapt their trade compliance programme and their supply chain to cope with any eventuality, whether they be regulatory outcomes or changes on the ground in the Ukraine or Russia. And I know that's something Paul that you help clients deal with; how they adapt to emerging crisis situations.
Paul: Indeed, one of the areas we've been looking at is companies face all sorts of disruption, whether it be operational or indeed strategic around potential growth in the area, around Ukraine particularly, but part of that is being able to paint the picture of a future landscape for the organisation and that really relies on having really good corporate intelligence, the ability to understand exactly what the future landscape is going to look like both politically and indeed corporately for a business going forward and that corporate intelligence piece is just vital.
Ben: I think that's a really good point. I mean one of the biggest issues we see is people just don't have up-to-date and relevant business information and that corporate intelligence piece is just so vital to that.
Paul: Well thanks David, Ben for sharing your thoughts in this challenging area. What I've heard is that organisations which are not properly considering the strategic implications for their business of the situation in Ukraine are going to face tough times ahead. Financial sanctions can't be ignored but there are some simple steps that institutions can be taking now to minimise their risks and lastly, the situation may deteriorate, trade sanctions may be introduced and if that happens is your organisation prepared?
The on-going crisis in Ukraine poses a number of challenges for businesses invested in the region. Not least of these issues is the rapid pace of change both on the ground and in the nature and extent of the regulatory responses adopted by the EU and US and the uncertainty which that creates.
Our team have the expertise of former government regulators and industry leaders with extensive experience in effectively addressing a variety of sanctions compliance needs. They can help you in all aspects of international trade compliance – from assessing and managing compliance risk, to compliance support and integrating compliance into daily work and value streams. We’re also highly experienced in advising financial services companies on how to navigate the complexities of multijurisdictional sanctions regimes.
Read our paper or watch the short video above to help you understand the current and potential exposure to the crisis in Ukraine and how to manage operational and practical issues, such as risk.