Scenario Planning and Trust Amidst a Time of War
Karan Gupta, Head of Strategy, KG International FZCO​
How to build Trust​
Providing authentic leadership and strategic governance
Employ effective and active compliance, safety, security, and protection programs​
Developing technology and scope for innovation​
Accountability and consistent adherence to ethical standards​
Collaboration, transparency and accountability with workers at all levels ​
Prioritize customer relationship and product quality​
Proactive and transparent in financial reporting​
Promoting employee mental and physical health​
Proactively manage third-party relationships and value chain risk​
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Economic Impacts of the Russia Ukraine War ​
Surge in commodities and raw material prices
Commodities prices could jump owing to three factors:​
- Supply constraints​
- Destruction of physical infrastructure​
- Sanctions​
Price is disproportionately impacted globally since Russia is a major producer of metals and energy.
Supply chain disruptions
Disruption to upstream suppliers in Russia and Ukraine will further weaken global supply chains, exasperating backlogs that were already persistent due to COVID. Visibility into this extended network thus becomes key to tackle potential risks.
Sanctions on Russia​
The United States, Canada, the U.K. and the European Union have imposed several rounds of sanctions targeting Russian banks, oligarchs and energy.​
These penalties will have a severe impact on the Russian economy, which estimated that the country’s GDP will fall by 8.5% this year.
Companies boycotting Russia​
Heightened global inflation​
Global growth slowed down​
Scenarios for the Future ​
Factors Impacting the Future​
Impact on Ability to do Business​
KG’s Perspective on the Likelihood of the Four Scenarios: ​
Based on our current market knowledge and perspectives of various industry leaders, we have assigned the following probabilities to each of the scenarios. We will present all four scenarios so that our customers can apply their own judgement and respond accordingly. ​
Unlikely ​
Highly Likely ​
Key Characteristics and Responses to Each Scenario
Characteristics​
Sustained ​ Adversity
- Matters continue to get worse and business in Russia is materially impacted for the long run. ​
- It becomes unfeasible and unviable to operate there.
Speedy ​ Resolution
- A resolution is found soon resulting in restrictions subsiding.
- Business ability and demand returns to normal.
Industry ​ Contraction
- Though business restrictions subside, there has been substantial impact to key industries.
- This would cause multiple closures and long term decrease in bearing demand.
Industry ​ Contraction
- Though bearing demand sustains, international trade remains halted.
- Companies find it increasingly difficult to operate in the region.
Impacts​​
- Many businesses drastically decrease their business footprint in Russia​
- Global supply to be reprioritized across industries easing current constraints and congestions
- Businesses with disproportionately large exposure in Russia start to close down
- Impact on bearing price due to overstocked goods intended for Russia and unused supply
- Businesses quickly recover from short term impacts and resume stocking
- Global supply remains to be constrained
- No material impacts to price in the short term or long term
- Global demand forced to be reallocated resulting in short term overstocking and cash flow concerns
- Businesses forced to make decisions on feasibility of maintaining business exposure in Russia
- Global bearing supply can be reallocated resulting in possibility to ease current delivery constraints
- Increased credit risk
- Business forced to find new ways to cater to Russian demand
- Short-term easing of global supply as companies reallocate supply in the short term while stakeholders find clarity on how to operate in Russia
- Price increases required due to increased time, effort, and cost of operating in Russia
- Increased credit riskÂ
Characteristics​
Sustained ​ Adversity
- Matters continue to get worse and business in Russia is materially impacted for the long run. ​
- It becomes unfeasible and unviable to operate there.
Speedy ​ Resolution
- A resolution is found soon resulting in restrictions subsiding.
- Business ability and demand returns to normal.
Industry ​ Contraction
- Though business restrictions subside, there has been substantial impact to key industries.
- This would cause multiple closures and long term decrease in bearing demand.
Industry ​ Contraction
- Though bearing demand sustains, international trade remains halted.
- Companies find it increasingly difficult to operate in the region.
Impacts​​
Sustained ​ Adversity
- Many businesses drastically decrease their business footprint in Russia​
- Global supply to be reprioritized across industries easing current constraints and congestions
- Businesses with disproportionately large exposure in Russia start to close down
- Impact on bearing price due to overstocked goods intended for Russia and unused supply
Speedy ​ Resolution
- Businesses quickly recover from short term impacts and resume stocking
- Global supply remains to be constrained
- No material impacts to price in the short term or long term
Industry ​ Contraction
- Global demand forced to be reallocated resulting in short term overstocking and cash flow concerns
- Businesses forced to make decisions on feasibility of maintaining business exposure in Russia
- Global bearing supply can be reallocated resulting in possibility to ease current delivery constraints
- Increased credit risk
Industry ​ Contraction
- Business forced to find new ways to cater to Russian demand
- Short-term easing of global supply as companies reallocate supply in the short term while stakeholders find clarity on how to operate in Russia
- Price increases required due to increased time, effort, and cost of operating in Russia
- Increased credit riskÂ
No Regret Actions
Improve Business ​
Planning
Manage Customer and End
User Expectations
Increased Transparency ​
and Trust
Bring a Problem-Solving
Attitude to Relationships​
Reduction of Credit Risk in
Russia & Ukraine​
Redo business sales and
purchase planning ​
How Trust Drives Business Value ​
According to a PwC survey of 503 business leaders, building trust can have significant impact to company performance across a variety of indicators: ​
Customer Loyalty​
Customer Loyalty​
Positive Reputation​
Positive Reputation​
Expanding into new areas/ markets​
Expanding into new areas/ markets​
Revenue Growth​
Revenue Growth​
Growing customer base​
Growing customer base​
Brand equity/ brand protection​
Brand equity/ brand protection​
Employee recruiting/ retention​
Employee recruiting/ retention​
Access to capital/ financing ​
Access to capital/ financing ​
How to build Trust​
Providing authentic leadership and strategic governance
Employ effective and active compliance, safety, security, and protection programs​
Developing technology and scope for innovation​
Accountability and consistent adherence to ethical standards​
Collaboration, transparency and accountability with workers at all levels ​
Prioritize customer relationship and product quality​
Proactive and transparent in financial reporting​
Promoting employee mental and physical health​
Proactively manage third-party relationships and value chain risk​
Author & Acknowledgements
Head of Strategy
Karan obtained degrees in Mechanical Engineering and Applied Mathematics from the University of California, Riverside where he focused his research on Fault Modeling of Bearings and Induction Motors.
- Rohit Gupta, CEO
- Mazhar Hussein, Head of Procurement
- Ashish Jain, Purchasing Manager
- Reema Dsouza, Strategy Analyst
- Vihan Thakkar, Strategy Analyst
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