Economic Impacts of Russia’s Invasion in Ukraine
Although Russia invaded Ukraine quite recently, the economic repercussions are already taking a toll on the global economy especially producers of commodities and global supply chains. Globally, Ukraine is a leader in agriculture is the world’s “breadbasket”, producing a large amount of wheat, barley, potatoes, and rye because of its highly fertile soil. In addition, Ukraine ranks as one of the top global producers of natural resources such as titanium, manganese, gas, and coal. These resources are often utilized in our computer chips and electronics, which further increases the pressures on the chip shortage. Making matters worse, because many shipping companies have suspended service to Russia and have to avoid the Black Sea due to active conflict, the already fragile supply chain is increasingly strained.
What’s the result of all this? Well, we see skyrocketing oil and gas prices, increasing freight rates, and an inflationary economy that seems to have no end. Many companies including American Eagle and Kohl’s state that they are expecting lower earnings because of the war. Also, retail companies like Nike and H&M, oil giants like Shell and Exxon, and technology companies like Google are standing in solidarity to stop sales in Russia. However, none of these actions are able to fully stop Russia, which means business leaders must prepare for the inevitably unpredictable times ahead.
So, what can business leaders do to minimize the impacts of the war combined with the inflationary economy? Leaders must be able to look for alternative suppliers, gauge future demands given the uncertainty, and leverage data and technology to be able to source, manufacture, and deliver in the most efficient manner possible. They must be adaptive to global circumstances and develop contingency plans to deal with the higher costs of energy and oil as well as the suspension of sales in Russia. Lastly, companies must recognize the importance of the human element of the conflict and prioritize human well-being and sustainability over the bottom line during these tumultuous times.