Consistently negative headlines out of Ukraine paint an unpleasant picture of the country. A war in the East, high inflation and considerable debt levels constitute just some of the issues the country is facing. This reality is paralyzing multinationals invested in Ukraine and clouding their perception of the country’s future, leaving their operational plans uncertain amid the instability. Despite high levels of uncertainty and numerous downside risks, multinationals need to end their “wait-and-see” approach, formulate plans for 2016 and beyond, and act on them.

The time for waiting and seeing is over, and plans must be made. While the market remains depressed, significant positive developments with regard to Ukraine’s most pressing concerns have taken hold, allowing some mild optimism for the beginning of a potential return to growth as early as 2016. The IMF has provided its promised funding thus far, based upon the notable reform progress. Ukraine also recently achieved a deal with its private creditors to restructure its loans. Meanwhile, the conflict in the East appears to have settled along a line of control and is unlikely to resurge into an all-out war, despite periodic upticks in violence. These positive developments increased foreign exchange reserves and stabilized the hryvnia over the past half year.

Optimism still needs to be managed, however, as the market will continue to struggle with prolonged high inflation, frozen lending and declining wages lasting into next year. Threats – ranging from Russia’s meddling to popular discontent to political instability – will continue to plague the market for the medium term. Unfortunately, there will be no distinct signposts indicating a decisive turn in the market that will give your firm total confidence in its investment decision. FSG can help multinational companies develop a more nuanced view of the market, beyond the popular perceptions and crude generalizations, that balances Ukraine’s significant improvements with its ongoing challenges.

As multinationals abandon their wait-and-see position toward the market and plan for 2016, they should consider the following operational recommendations:

• Distributors: First and foremost, multinationals need to work closely with their distributors, who are suffering in the market yet increasingly relied upon. Given market volatility, multinationals should monitor their distributors frequently and consider providing financial support, through methods such as lending or alternative payment schemes. The viability of these relationships should also be reassessed in this changing environment.
• Customer Segmentation: Consumer behavior has changed for the long term. Multinationals should reassess their customers’ needs and preferences and segment their customers accordingly.
• Talent: Firms should avoid cutting critical local staff, as they are invaluable to understanding market dynamics. In fact, multinational companies should consider the crisis as an opportunity to attract inexpensive talent.
• Donbass: Firms operating in the East should assist their local partners by registering them in rump Ukraine, obtaining bank accounts for them and/or offering financial support. Also, multinationals should create contingency plans for potential periodic upticks in violence.

The time for multinational companies to make and implement their long-term plans for Ukraine is now. Only ambitious firms with a strategic vision for the country will be able to capitalize on opportunities and take market share from competitors.

For help in understanding how to operate in this tough market, FSG clients can access our latest report on Ukraine: Building Your 2016 Ukraine Plan. Not a client? Contact us at info@frontierstrategygroup.com.