War in Ukraine: Steps Member Firms Should Consider Taking
PrimeGlobal Supports UkraineMarch 18, 2022
PrimeGlobal’s Chair of the Board, Mark Worsey, opened our in-person Technical Conference in Budapest last week with an important statement that PrimeGlobal strongly condemns Putin’s aggression and attack on Ukraine.
Our Statement highlighted that long lasting impact will be achieved by the actions PrimeGlobal member firms take. We trust the integrity of all our member firms across Europe, and the rest of the world, to avoid doing business that could support the war.
The Conference provided an opportunity to discuss with attendees the steps our firms should be considering. The main points are summarized below.
Organizations may face a range of losses dues to sanctions and the inability to transact with Russian entities. This could include provisions against debt, impairments, fair value adjustment, covenant breaches and going concern issues. It may also be difficult to obtain audit evidence. One attendee noted that their auditing authority has stated that no audits should be completed of Russian entities due to high levels of uncertainty. It is important to review guidance issued by national regulatory authorities.
The discussion highlighted that know your client (KYC) procedures will need to be more rigorous. Firms will need to be transparent about this and highlight to potential clients the cost of completing these procedures. It might be necessary to charge a potential client for the additional checks.
Maintaining a strong CRM system will be important for firms.
During the pandemic our member firms’ clients turned to them for trusted advice. It is the responsibility of trusted advisors to anticipate and proactively support clients. Member firms need to step up again to help their clients with emerging risks relating to the war in Ukraine:
- Firms should approach clients to encourage them to review their client base. This includes identifying and mapping out direct exposure to Belarus, Russia-based and Russian third parties, which could be through suppliers, clients, agents, distributors, and financial institutions in other countries. In addition, firms and their clients should sweep customer databases to identify all clients physically based in Russia and Belarus or connected to sanctioned individuals and entities.
- Firms and their clients need to be aware of the increased risk from money laundering. Enhancing Anti Money Laundering procedures will be necessary. Firms can help their clients understand what action can be taken to help avoid money laundering.
- Cyber-attacks are likely to increase. Firms and their clients need to be aware of possible disinformation. Many small and medium-sized enterprises (SMEs) might not have readily available plans to respond to such cyber-attacks. Firms can support them by helping them take steps to reduce the risks, particularly training to be alert for attacks.
- Firms can help their clients assess risk and scenario plan. Firms can help clients assess their exposure levels; for example, cyber-attacks could lead to payment systems failing preventing access to funds. Firms can help clients consider how they would respond and reduce risk.
The discussion highlighted the need to be sensitive to different cultures and backgrounds within teams. For example, some member firm’s teams include people from Russia and Ukraine. It is important in communications not to stigmatize people because of their country of origin.
It was also noted that teams need positive messages during such a difficult period. Emphasizing the role firms have to support business and help sanctions work is motivating for teams as it helps with a sense of purpose.
A few member firms noted that they are setting up Ukraine groups in their firms to monitor and consider the impact of the war on their firms and clients.
We will continue to share examples of what firms are doing to stimulate thought leadership and issue other guidance on our PrimeGlobal Supports Ukraine hub.
Members can access updates, resources and best practice, including information on sanctions and client due diligence, on our Ukraine hub. The hub provides a platform for our members to share knowledge and learn from each other. We encourage firms to send any updates or articles they create on this topic to firstname.lastname@example.org and we will share on the hub for all members to access.