Professional services firms under pressure to cut Russia ties
Under pressure to sever ties with Russia, several of the world’s largest professional services firms have closed their Russian offices. Grant Thornton and Accenture have ceased to trade in the country, while KPMG, PwC, Kearney and Oliver Wyman have also since cut ties.
Following a rapid breakdown of relations with NATO and the West, the government of Vladimir Putin launched a full-scale invasion of Ukraine in late February. Russian troops have quickly expanded east since, with fighting since reaching the capital of Kyiv and many other Ukrainian cities, while the key southern city of Kherson is now reportedly under occupied control.
As the global condemnations of this war of aggression mounts, the relationships of corporate entities with the Putin regime has been thrust under the microscope. Along with a wide-ranging list of sanctions that have encompassed everything from the super-yacht trade, to football club sponsorship, consultants in the Western world are now having to account for their actions in Russia.
Following the collapse of the Soviet Union, the rapid privatisation of the state’s assets drew swathes of consultants eastward, from the early 1990s onward. The fire-sale saw ordinary Russians handed vouchers representing shares in state assets, but in the desperation many of them lived, most surrendered these assets to bids well below their actual value. Meanwhile, a small class of individuals – particularly oil and gas executives – who were able to accrue lucrative public infrastructure for a fraction of their actual value, and without any means of being held accountable.
The power of incumbent governments has since become tied to these oligarchs – making doing business with them open to moral questions even before Russia’s invasion of Ukraine. Professional services firms have capitalised on work from such businesses – and indeed, government entities, for the last three decades, though, leaving them in a particularly sensitive position now.
At the end of February, this saw Bain & Company, Boston Consulting Group and McKinsey & Company announce they would no longer work for government entities in Russia. However, none of the MBB shut its operations in the country or stopped working for state-owned companies. In the days since, it has been called into question as to whether that is enough.
Pressure growing
As of the beginning of March, Grant Thornton became the first large professional services firm to formally cut ties with FBK, its 500-person Russian member firm. FBK audits state oil company Gazprom – which lost its role as one of Uefa’s biggest Champions League sponsors around the same time – with Grant Thornton issuing a statement on the decision which also cited the conflict in Ukraine.
The firm’s statement also commented, “We are shocked and saddened by the events in Ukraine and our focus at Grant Thornton continues to be on supporting our colleagues at this very difficult time. Grant Thornton Ukraine is receiving offers of support from Grant Thornton firms around the world and our thoughts remain with our colleagues and their families in Ukraine at this distressing time.”
Since then, McKinsey has announced it will suspend all client work in Russia once its previous projects end. Meanwhile, BCG said it was similarly suspending its work with Russian clients – though it would keep staff based there on. The firm’s staff will be offered the chance to relocate outside Russia, or to work on internal projects or for non-Russian clients, according to internal sources quoted in the Financial Times.
A memo from BCG CEO Christoph Schweizer meanwhile stated, “While honouring our contractual obligations, we have already started to wind down work where possible… We will not take on any new work.”
Going further, Accenture has announced it will close its Russian operations, in light of the war in Ukraine. The firm has placed its entire 2,300 headcount in Russia on its notice period, while asserting they would receive “generous” severance payments according to people close to the story. A statement on the company’s website added that it stands with the people of Ukraine and the governments, companies and individuals around the world in “calling for the immediate end to the unlawful and horrific attack on the people of Ukraine and their freedom.”
As a result, “Accenture is discontinuing our business in Russia. We thank our nearly 2,300 colleagues in Russia for their dedication and service to Accenture over the years. We will be providing support to our Russian colleagues. While Accenture does not have a business in Ukraine, we will continue our efforts to help our Ukrainian colleagues working around the globe at Accenture and their extended families; we are providing telehealth for those in Ukraine, and helping resettle family members who leave Ukraine.”
The technology and consulting firm also announced it would be donating $5 million to non-profit relief organisations working to help people in Ukraine, as well as entities helping the millions are being displaced into Poland, Romania, Slovakia, Hungary and the Czech Republic. Accenture will also match 100% of the donations those organisations receive from its staff.
Elsewhere, the Big Four accounting and advisory brands are split on their approach. Deloitte, EY, KPMG and PwC have released statements condemning the war, but at time of writing, only PwC and KPMG have cut ties with their Russian member firms. Deloitte has noted it is reviewing its “business and presence in Russia” according to a statement earlier in March. Prior to the war, the four firms employed a combined 13,000 people in Russia, roughly 1.1% of their global workforce.
Strategy consultancy Kearney has also reviewed its position in light of the conflict. Global Managing Partner Alex Liu took to LinkedIn to note that "as a native of Taiwan," he recognised "the spectrum of passion, time and heartache related to all issues of sovereignty," before adding the firm "will not serve any government entities in Russia and... will comply with these international sanctions."
Liu explained, "While we are always vigilant in vetting potential assignments and clients, we are currently reviewing all commitments and contracts with our clients in Russia to make sure we embed our strong sense of “essential rightness” to our continued operations."
Fellow strategy consultancy Oliver Wyman has since explained its own position on Russia. While CEO Nick Studer noted that the firm had "briefed extensively internally" and explained its position to clients, he noted, "I realise that I should have been on here earlier as well," and praised the "clarity and care" of Liu's statement; which prompted him to make his own.
Studer concluded, "Over the past few days, an array of sanctions have been imposed on numerous Russian entities and individuals in response to this attack. We support, and will rigorously comply with, these sanctions. But well beyond this we have long had a firm-wide project suitability process which monitors every engagement we take on, seeking to ensure they are in alignment with our values. We have also already committed to our staff that Oliver Wyman will not work with the Russian government’s state-owned organisations, anywhere in the world."
