Three biggest challenges for Ukrainian business
One of the most difficult realizations is that 2024 will also be a year of war. The war, not the recovery, will be the biggest challenge for Ukrainian business.
Rising security costs
According to the Kyiv School of Economics, Ukraine has suffered direct losses of more than $150 billion in just a year and a half. Of these, $36.6 billion and $11.4 billion are infrastructure and business losses due to fully or partially destroyed enterprises.
Businesses lost even more due to lost revenues and additional costs associated with the war. Such indirect losses range from $23 billion to $52 billion in various industries. This is not the end of it. The risk of a missile or enemy UAV hitting a company, warehouse, or office remains very high throughout Ukraine, and in the frontline regions, it is even more so.
To avoid problems in the future, alternative logistics routes should be developed now
Therefore, the line item "security costs" in Ukrainian companies' budgets will grow. One example is Nova Poshta, which plans to install special shelter capsules to save employees' lives after a rocket hit its Kharkiv sorting terminal. The company will install similar capsules at other terminals located in areas of constant shelling. As long as the war continues, most companies will spend money that could be spent on defense development.
Working under the new rules
While addressing security and survival issues in the domestic market, Ukrainian companies will continue to look for ways to enter foreign markets. The priority is European ones, given Ukraine's official status as an EU candidate. However, there is a feeling that entrepreneurs do not fully understand the scale of changes on the path to European integration. Not only the state, but also each individual company must change. To become a full-fledged player in the single European market, you need to get your production regulated and your goods quality certified. It is possible to do this, but changes are sometimes needed in production technologies. The certification audit procedure takes one to three months, not including the preparation time, which can last for a year. Costs depend on the business size and can range from $5-7 thousand for SMEs to $50-75 thousand for large companies.
It is vital for international partners at the state and company level to answer the question: "How do we fight corruption?" The answer for private companies should be to implement internal anti-corruption procedures, codes of ethics, and procurement rules. This also requires investment of time and money, but without this component, losses will be more significant.
Of course, exports directly depend on logistics. It has suffered substantial losses. The skies are still closed, ports are blocked, railroad capacity is insufficient, and the only available option is road transport. At the same time, the load at border crossing points is growing, as is the competition among carriers. During the month of the strike by Polish carriers alone, Ukraine suffered losses of 400 million euros. To avoid problems in the future, alternative logistics routes should be developed now: demand that the authorities open additional checkpoints along the western border, as well as resume air travel, for example, from Uzhhorod.
Thinking about human resources
A long-term war means, on the one hand, inevitable further mobilization, and, on the other hand, demobilization of soldiers in different physical and psychological conditions. We need to be ready to replace employees quickly, review their work, and distribute it in a new way. In addition, the problem of recruitment is already becoming more acute. Every third company faces difficulties in finding staff. The reasons are well-known: migration and discrepancies between demand and supply.
Another challenge is overcoming war fatigue. It is no coincidence that psychology identifies a crisis of three years as the period when fatigue accumulates, and crisis changes in character and behavior are formed. According to the Ministry of Health, 20-30% of Ukrainians have PTSD, and the rest are suffering from stress. Since we have not developed a culture of health care, many people ignore their condition simply because they are used to it. Therefore, owners and top managers will be responsible for conducting at least educational work among employees to maintain mental health. This could include in-depth work with the staff, including various aspects and ways of interaction.
The text was published in the special issue of NV magazine, “The World Ahead 2024” under the exclusive license of The Economist. Reproduction is prohibited.
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