OK I fibbed. There are actually six actions, and this final post explores two actions that need to be taken immediately due to the conflict in the Ukraine.
Are there investors, partners (such as joint ventures), or stakeholders domiciled or resident in jurisdictions affected by conflicts?
Do Today: Review disclosures and names to see if rules affect you.
Enterprises may be exposed to regulatory effects from their investors, ownership, or joint venture partners. Control or operations by named enterprises (not individuals) may expose enterprises to regulatory constraint, reporting, or other risks during conflicts. Lists of restricted, constrained, or banned individuals and enterprises may be inconsistent in the US, EU, and China. Foreign investment in national security sensitive areas, (those regulated by CFIUS in the US), create vulnerabilities and unanticipated effects. EU, UK, US, Chinese, or other regulatory review uncertainties can cripple funding schedules (critical in conflict periods). Uncertainties expose production capacity problems and access to critical people. Lists of named entities (corporate or individual), domestic rules on controlled groups, and unified views from banking groups can also lead to unexpected breaches. (Challenges to ARM’s divestiture by SoftBank, proposed changes for critical materials like polysilicon, and investment transactions limited by CFIUS.) A key concept is that relationships and actions not previously a problem can be transformed into a problem overnight in government reactions to a conflict.
Do your enterprise partners, suppliers, or arrangements have logistic, supply chain, or indirect connections affected by conflicts?
Do Today: Get key procurement, operations, and product/service people to look for impacts and build a master list from their input.
Logistics enterprises will be affected as global logistics networks are disrupted by conflict zones. Logistics changes will affect supply chain from longer transit times, changed availability of shipping capacity, and expediting activity. Prior conflicts (Arabian/Persian Gulf, offshore east Africa) have disrupted transport performance. Enterprises must become informed of specific impacts from logistics changes on their movements and impacts on supply chain participants.
Supply chain impacts occur from direct breaches in logistics, production plants, or staff. Military mobilization, even selected call-ups, can affect supply chains in otherwise non-critical low-volume suppliers. These staff disruptions are infrequent and thus less planned for by enterprises.
Specific dialogue with critical suppliers is needed to find indirect connections. Indirect connections affected can include producers dependent on commodity materials disrupted by conflicts. Dependency on material availability might occur from end-product production equipment (such as chemical catalysts or specialty lubricants). Disruption of supply capacity can occur as government priority orders consume production capacity. The indirect connections are not obvious even to operational staff.
You can read the take action series at our website – www.ekalore.com/ars
If you’re interested you can book time with a senior analyst at www.ekalore.com/contact
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