10 August 2022

“Companies that left Russia because of war with Ukraine are unlikely to come back there,” Denys Dovgopoly, founder and CEO of the Unicorn Nest and MIM-Kyiv MBA shared his perspective on the ongoing corporate exodus from russia on the national TV show.

798 companies have exited the Russian market since it invaded Ukraine. 245 international organizations, mostly from the US, France, and Germany stay there. Denys Dovgopoly targets those businesses to force them out of the Russian market and thus stopped supporting the invasion by stopping economic activities.

On strategic objectives

Some form our group believe that ruining the Russian economy rather than mere ousting from their market is our top priority. They believe that complete loss of statehood, complete decline of all institutions, social unrest, and famine may stop the war. 5 – 10 thousand people are working for that. They target those businesses that may seriously damage the economic or political situation there, e.g. large employers or military industry companies, or are in critical imports. If the bearing manufacturer does not work, tens of millions of dollars are lost and elevators, escalators, manufacturing lines, etc. do not work. When dealing with large companies, various players including the Ministry of Foreign Affairs participated in the ousting efforts.

On returning to the Russian market

Most companies are leaving for good. Boards and shareholders who make final decisions have long memories. If they suffered losses from leaving markets, they would think twice to enter them again. In my opinion, the companies that entered the Russian market in 90-ies of the last century, and exited it several months ago, would not come back earlier than several years after the collapse of the political regime in Russia. The regime collapse is likely to be followed by social unrest. Only after the upheaval is over, they may start considering re-entering the market. It may take up to 10 years. Moreover, I believe Russia is going to suffer serious economic problems in autumn. They classified all macroeconomic data which is usually a sign of serious turmoil. We did our best to facilitate the economic crisis there. An economic downturn is usually the wrong time to enter the market even if it is possible in terms of legal and economic actions.

On motivation to stay or to leave

Many companies exited because of political reasons. Nobody wants to make bloody money. As one of the directors of the exiting company said: “It was in 1986 when we were last accused of working with Hitler. Do you want to be reminded of working with the bloody putin regime for 45 years more? We’d better leave.” That was the last argument for the board. There are companies and people with very high ethical standards. They left at once. There are companies and people who assess financial and reputational losses. Auchan, one of our failures is a good illustration. We tarnished their reputation in Europe but… It is a family-owned company, 30% of its revenues are from the Russian market. They are ready to sacrifice their reputation. We could have forced out ten companies with the resources we wasted on Auchan. That’s why we are assessing our chances of success more accurately.

On Russia destroying businesses

Sanctions kill an economy. As a result, the demand is falling. Those companies that work in Russia should explain to the stakeholder why they are suffering losses and reputational damages. Russia helps to force the companies out through their legal and regulatory actions. For example, Avito, the online classifieds that helped recruit soldiers for the war in Ukraine. We could not do anything about it. However, their Duma helped us by adopting legislation on the nationalization of such services or limiting their activities. It is a good way to exert pressure on their shareholders from South Africa who are used to working in a toxic environment and being constantly accused of racism, sexism, etc. They did not care about the blood of Ukrainians or litigation in the Netherlands. It was the Duma that forced them out. Besides, when Russian “elites” had a chance to snap successful technological companies for a Euro they could not resist the temptation regardless of any bad consequences.