War on Ukraine

BCG Executive Perspectives: War in Ukraine

This special edition of the BCG Executive Perspectives series assesses the economic impact of the war in Ukraine and the implications it bears for companies and governments.

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Perspective on the Refugee Crisis

Russia’s invasion of Ukraine is causing one of the largest humanitarian crises since World War II, triggering a mass mobilization of 5 million refugees. Neighboring European countries are straining to provide for this population. So far, companies have responded effectively to the immediate crisis. They must now move decisively to help civil society meet refugees’ longer-term needs, such as employment, financial assistance, health care, housing, schooling.

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War in Ukraine - Executive Perspectives: Perspective on the Refugee Crisis

Impact on the Industrial Sector

Russia’s invasion of Ukraine is exacerbating a crisis among industries that were already struggling to cope with supply chain bottlenecks, soaring costs, and critical material shortages stemming from the pandemic. The ripple effects could include reduced automobile production, delays in big infrastructure projects, major shifts in global trade, and a food crisis in Africa.

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War in Ukraine - Executive Perspectives: Industrial Sector Impact

Impact on Risk

The war in Ukraine marks a tectonic shift in the global business landscape, bearing multiple short- and long-term strategic implications for companies. Leaders must mitigate the risks to their business models caused by price shocks, supply disruptions, sudden shifts in demand, and potential cyber attacks. They must also navigate reputational risks as they comply with sanctions and grapple with the decision of suspending operations in Russia or pulling out of the country entirely. As the war unfolds, companies will need to reassess their global operations, portfolios, and longer-term strategies based on a range of scenarios.

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War in Ukraine Executive Perspectives - Risk

Impact on Financial Institutions

Financial sanctions will have a harsh, deepening impact on Russia’s banks—and could very well force the country to default on its foreign debts. Yet, because of their limited exposure to Russia, most international financial institutions are likely to experience only minimal impact. The longer the war continues, however, the greater the risk of serious implications. Persistently high interest rates, inflation, and market volatility could hit the top and bottom lines of commercial banks, investment banks, asset managers, payment platforms, and other firms. Financial institutions should therefore reassess their loan portfolios, international operations, and growth prospects.

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War in Ukraine Executive Perspectives - Financial Institutions

Impact on Energy

Global energy supplies were already limited before Russia invaded Ukraine. Now, sanctions on Russia—a leading exporter of natural gas, oil, and coal—and uncertainty over the risks ahead are throwing energy markets into greater turmoil. The transition to alternative energy sources will be particularly challenging for Europe, which depends heavily on Russian natural gas. The war is already raising energy costs for industries such as steel, chemicals, and transportation. The second-order effects—on supply chains, consumer prices, agriculture, and beyond—will likely intensify. As they seek to mitigate the immediate fallout, companies must also review their supply footprints, investments, and energy consumption for the longer term.

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War in Ukraine Executive Perspectives - Energy

Impact on Supply Chains

Russia and Ukraine account for only a small percentage of global trade. But the war will have an outsize impact on industrial supply chains that have already been disrupted by the pandemic. Soaring prices and shortages of steel, nickel, fertilizers, and wheat will hobble industries from electric vehicles to agribusiness. The disruption of Ukrainian and Russian cargo routes will raise logistical costs and exacerbate bottlenecks. While companies are taking immediate actions to mitigate supply chain risks, the invasion will heighten the need for organizations to become more resilient to future disruptions.

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War in Ukraine Executive Perspectives - Supply Chain

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BCG Executive Perspectives: War in Ukraine