The shocking war in Ukraine continues unabated to our great dismay. The current developments indicate that we cannot expect any improvement in the emergency situation. In addition to the human suffering, the Russian invasion has also had far-reaching effects on many of the process areas of global companies. The financial services sector, due to its highly-integrated global network, is also severely affected by the sanctions imposed on Russia.
We therefore urge companies to analyse their process landscape as carefully as possible as a first step to determine how they will be impacted by these events. How strongly the processes will be affected depends in varying degrees on the individual entity. It is safe to assume that the main areas affected will be risk management, accounting, and IT. Nevertheless, other processes should be reviewed as well.
To help you quickly and easily determine where to start your analysis and make changes where needed, we have listed a few of the key processes as well as related topics for you. We think you should focus on these issues first. The priorities can, of course, vary from entity to entity.
The most important processes and topics at a glance:
Lending business (in particular: credit, trading, holdings)
- Analysis of existing business dealings in Russia, Belarus, and Ukraine and, if necessary, in Eastern Europe in general: Limits, exposures, collateral
- Ongoing analysis, taking into consideration the geographical, human, entity-specific sanctions and restrictions
- Handling of loans/assets affected by the sanctions: Watchlist, processing
- Impact of Russia and, if applicable, Belarus being excluded from SWIFT
- Handling of planned, but now unfeasible, transactions
- Assurance that no transactions (short-term, unintentional) are carried out via SWIFT or an alternative means
- Balance sheet and income statement effects, in particular liquid assets, receivables customers/credit institutes, securities, holdings, provisions, value adjustments, and FX effects
- Disclosures: Information in the appendix and management report
- Coordination with statutory auditors on adjusting events occurring after the balance sheet date
- Review and, if necessary, adapt the risk strategy and perform an ad-hoc risk inventory
- Financial risks: Analysis, in particular, of the FX risk, counterparty risk, counterparty default risk, market price risk, and liquidity risk
- Non-financial risks: Operational risks including conduct risk and IT (especially cybersecurity threat risks & IT security), and risks to reputation, operations, strategy, and reporting
- Review and, if necessary, adapt the IT strategy
- Analyse the IT infrastructure (e.g. hosting, cloud operations)
- Strengthen IT security and continuously monitor for cyberattacks (phishing, hacker attacks), especially in the area of critical infrastructure (KRITIS)
Compliance & Law
- Review of customer relationship regard to OFAC, the EU sanctions list, the UN list, and the US list
- Ensure compliance with sanctions
- Increased vigilance with regard to money laundering and other criminal acts
- Ad-hoc risk analysis of the primary outsourcing operations
- Critical examination of the sub-contractors
- Handling or settlement of service relationships affected by the sanctions
If you have any questions regarding the legal and economic impact of the Ukraine war, our experts are here to assist you. Our experts are in constant dialogue with our international colleagues, sharing ideas in interdisciplinary discussions to support you during the crisis and provide updates on developments and legal requirements.