Official sanctions are just the tip of the iceberg

The world continues to watch in horror and sadness as the crisis in Ukraine lengthens and deepens. On the back of reports of potential war crimes, the European Union, the United States, and other countries this week prepared a fifth wave of sanctions against entities and individuals linked to the Russian government.

With the current sanctions regime, we have moved into truly uncharted waters. Sanctions imposed against Russia are unprecedented in their scope, their speed of implementation, and the effectiveness of international coordination. The West has been remarkably united in its response to Russian aggression.

At the same time, because these sanctions are surgical and not comprehensive, companies find compliance necessarily more complicated. Even for permissible transactions, there are practical and logistical issues, such as whether you can find a bank willing to process payments, insurance companies willing to cover shipments, and breaks in your supply chain. And with disparities across regions (like the Chinese Anti-Foreign Sanctions Law enacted last year), complying with such sanctions could put companies in potential jeopardy in other jurisdictions.

Due to this extreme complexity, AlixPartners has worked with 30 international banks to form Global Screening Services (GSS) to improve sanctions screening of transactions. GSS will pool decades of experience to improve effectiveness and efficiency while reducing customer friction.

What has struck me most, though, has been the appetite by many companies to move ahead of regulation—to do what is right, not merely what is legally compliant. This is obviously tricky ground, and what is right for one firm isn’t right for another. Companies with large operations, workforces, and commitments in Russia will of course find this the most difficult to navigate.

I would remind all business leaders that a values-led approach is essential in the current environment. A broad group of stakeholders will closely watch all of our actions during this period, and the reputational bar will be a high one. Of all of your company’s assets, your reputation is one of the most valuable and difficult to repair when damaged.

To take a closer look at what leaders need to consider as they navigate the complex sanctions landscape, we convened an AlixTalks earlier this week, which was moderated by former Dow Jones CEO William Lewis and included AlixPartners Managing Director and GSS CEO Tom Scampion, SmartSearch CEO Guy Harrison, and Steptoe Partner Wendy Wysong.

We all hope for a swift and peaceful end to this tragic conflict. In the meantime, AlixPartners will continue to gather the right experts from within and beyond our firm to provide insights into the impacts of this crisis, and I invite you to join us in those discussions.