War in Ukraine: European Businesses are Feeling the Heat
In 2020, the Covid-19 pandemic caused supply chain disruption the world over, forcing many businesses to find alternative suppliers, adopt new technology and conduct audits to ascertain the financial health of their key suppliers.
17 March, 2022
Now, for the second time in two years, the war in Ukraine is putting the global supply chain and businesses’ resilience to the test.
Not only has Russia’s invasion of Ukraine caused a humanitarian crisis and led to tragic loss of live and livelihoods in Ukraine itself, but the war and world’s reaction to it is having a significant impact on multiple industries.
Sanctions, import/export bans and supply route disruption are impacting trade, prices and business confidence.
While Russia accounts for less than 2% of global GDP, and Ukraine accounts for only 0.14% and they have little direct impact on global supply chains, they do supply the world with a few key products – energy, grains and semiconductors. Add to that the widescale sanctioning of Russian affiliated businesses and the impact reaches much further.
In Europe, Russia provides around 40% of the continent’s natural gas supply and 2.5 million barrels of Russian crude oil arrive in Europe each day.
The UK has taken the decision to phase out Russian oil imports by the end of 2022, and the EU, while not banning imports, is set to adopt new sanctions against Russia’s major oil companies Rosneft, Transneft and Gazprom Neft as well as reduce its dependence on Russian energy over the next 10 years.
Not surprisingly, the price of oil has skyrocketed, reaching record highs and having a significant knock-on effect on multiple industries throughout Europe. Shipping companies such as FedEx have increased their surcharge and Maersk, one of the world’s largest shipping and logistics groups, says the war has increased the cost of shipping due to the closure of some transport routes, fuel price increases and the fact that some carriers are imposing “war risk surcharges”. Customs authorities in the EU are also now inspecting all units to/from Russia to identify sanctioned and restricted shipments which is causing significant delays.
Companies have been pulling out of their Russian investments in droves, an action which will see many suffer significant losses or even bankruptcy. In fact, the Swiss-based company that built the Nord Stream 2 gas pipeline from Russia to Germany is rumoured to be considering filing for insolvency.
With its complex supply chain, the automotive industry is also particularly exposed to disruption. Europe’s largest car manufacturer, Volkswagen, has had to stop production at its Zwickau and Dresden factories in Germany and has also had to halt orders on several of its plug-in hybrid models due to interrupted deliveries of critical parts from western Ukraine. Ukraine produces much of the semiconductor-grade neon needed to make semiconductors and while some car manufacturers have secured enough components to maintain production output, once their supplies run dry, scarcity will drive up prices.
With disruption set to continue, businesses across all industries would do well to conduct fresh supply chain audits, assess their vulnerabilities and identify alternative sources of their critical materials and goods.
Unfortunately for many European businesses, Covid-19 related supply issues prompted a switch from Asian suppliers to suppliers closer to home in Europe which may now be presenting problems.
Seek help from a CTP
The effects of this war are likely to keep spreading to impact more industries and companies, particularly in Europe. Business leaders seeking to ensure the survival of their companies must be proactive.
Certified Turnaround Professionals (CTPs) have the skills and experience to assist businesses in these troubled times. CTPs are accredited experts in turnaround, saving value, stabilising cash flow and delivering rescue solutions.
CTPs exist all over Europe and you can use the EACTP website to search for CTPs by country, specialism or company.
Search the CTP directory here.
About the EACTP
The focus of the EACTP is to educate, train and certify turnaround professionals and for the CTP qualification to be recognised as an industry-standard ‘kitemark’ of quality in the practice of turnaround and restructuring.
It aims to promote turnaround ahead of insolvency, thus saving more jobs and value in the public and national interest.
The EACTP promotes the benefits of turnaround ahead of insolvency through engagement with shareholders, company directors, business management organisations, creditor groups and governments.