Editor's Choice Interview Lessons for business

To be successful in Ukraine, you need to forget everything you’ve ever known before entering its market

In this interview, the founder and CEO of S&P Investment Risk Management Agency, Mykola Siutkin, told about the unique experience of multi-year investment protection, the imperfection of the present business system and commented on the high-profile case of persecution of 40 national largest companies on charges of capital withdrawal. 

: What is S&P Agency, what kind of company is that?

Siutkin: Our company was founded more than 10 years ago and was originally known as Siutkin and Partners. Much of these years was spent on protecting big businesses in corporate wars and protecting of companies from hostile takeovers. The resulting vast experience allowed us to go further. We have always understood that conflict is more than a hostile takeover, it is simply impossible to find a way out of conflict using only one tool (for example, legal or PR). Therefore, our legal company has transformed itself into S&P Investment Risk Management Agency, the only agency in Ukraine that has a closed cycle of business conflict resolution and fully replaces the crisis committee with all its participants. Today we provide all types of services and successfully apply all kinds of tools necessary for the successful withdrawal of business from the conflict. We provide our customers with everything they need: coaching and mentoring, legal, management and GR tools, PR and reputation protection, crisis management when needed.

In the completely transformed service system, the legal part equals 45% of the entire spectrum. We realized through our practical experience that jurisprudence is one of many tools. It is important, but it will be successful only if it is skillfully combined with other equally important tools.

The years spent on solving conflicts and crises have allowed us to accumulate unique knowledge, and now it has already turned into silent knowledge. We can already see a lot from the start of our work. There is a concept of ten thousand hours spent on a certain matter to become a master. You become a master of the masters, if you have spent twenty thousand hours on your favourite business. So, we are already in this last category, because the entire conscious life was spent on improving ourselves and our skills.

By the way, in most cases, we work only with CEO – the decision maker, because 85% of the conflict are managerial decisions and only 15% are legal. Without the control and personal involvement of CEO, it is impossible to get out of the conflict correctly.

: If S&P does such work for business, then what do the company’s full-time lawyers do then?

Siutkin: We do not replace company’s lawyers, we do not have such a purpose and need. We come only when it is needed in thearea where there are no staff experts with such experience as ours. In addition, we train them and increase the effectiveness of their work, they pass through the conflict together with us. Believe me, they are growing professionally.

Using a medical analogy, we can say that, for example, there is a therapist, without whom no vital everyday issue will be solved. Is it important? Yes, even very much. Although, there are other specialists with focused expertise, for example, a heart surgeon, who is involved in the process, when conventional treatment is not enough. A full-time lawyer is a good therapist who must fully accompany the company’s current life, so without his daily efforts, a ship called “business” will not float. We belong to narrow-profile specialists who come to the stage of a crisis or its possible occurrence, we work in a team, we train them for the benefit of a joint positive result.

Unfortunately, in Ukraine, it is considered that lawyers should know and be able to do everything. It’s very often the case: both legal companies and full-time lawyers practice all areas, from registration of companies to complex anti-raider activities. In the West, there is a clear specialization and the company that takes care of everything raises doubts. Narrow specialization is the only correct approach to the creation of quality services. Returning to medicine, a specialist who is a dentist, a surgeon and a therapist in one person, would clearly raise doubts about his professionalism.

: Should CEO track the effectiveness of staff or freelancers? Should he invest his time in such processes?

Siutkin: Ukraine is a country of risky investments. Rules and norms do not work in our country, more accurate to say that they work in different interpretations in each situation differently. Everything that foreign business knew before coming to Ukraine, you haveto forget, here is specific “habitat” and the rules of doing business. Unfortunately, the personal involvement of CEO in various processes, including those related to the economic activities of enterprises, is a real necessity. Talking about conflicts or other serious issues with different kinds of risks, CEO should invest 35-40% of the personal time to resolve such issues.

For example, the prosecutor’s office has opened a criminal investigation against more than 40 foreign companies that were in contractual relations with the Promotion Staff LLC and Promotion Outsourcing LLC companies. We are closely acquainted with the leaders of some of these companies, communicated with them on this painful topic for them. However, communicating with CEOs of foreign companies, we see that they often take an interesting position: until the problem gets deeper, we will not take any measures. Such a position cannot be correct for Ukraine. In Ukraine, in order to be a step ahead, you need to take active actions, especially when it comes to the possible fault of the company and its heads for committing a criminal offence. Therefore, my clear answer is: yes, CEO has to invest his personal time in solving complex problems and he also needs to monitor the effectiveness of the staff.

: We know that the S&P Agency has a training HUB. What kind of training courses does the company held and for whom?

Siutkin: We develop and holdvarious trainings, for example, for CEO we have created a closed business training on conflicts. We show what conflicts are, their types, managerial mistakes, mistakes in identifying the conflict and the depth of possible consequences. This training is very useful, especially for those managers who are used to delegate important decisions to other divisions of the company, including legal ones. We also held this training in the framework of the Swiss Business Meeting for heads of 42 large Swiss businesses.

The feedback was very high, the training clearly showed what management mistakes CEO does, what should be considered, what decisions to make, but the main thing is how much the leader has to interfere with the conflict.

We also have trainings for heads of legal departments, CFOs and security service chiefs. These are more substantive trainings, we disassemble individual cases for atoms, model scenarios for the course of events and how the decision-making will affect the company and its financial performance. Well, in a week we are holding a training session on the Promotion Staff LLC loud case. We will share our views and increase the efficiency of our participants.

: What are the competitive strengths of the S&P Agency?

Siutkin: We have created a unique mechanism, a closed cycle to bring the company out of the crisis. We do not need anybody, no lawyers, no PR agencies, no security services, because we include all this, we are the crisis committeein one person. That’swhy we are very effective. Our main advantage is that we are flexible and mobile.

The standard scheme for withdrawing a company from a crisis is the creation of a crisis committee, which usually includes full-time and external lawyers, communication agencies, PR specialists, security services.

Apart from being a fairly financially costly association, it also has a number of shortcomings. This is a very complicated mechanism, an absolutely unwieldy ship, a lot of people from different areas, who meet, discuss and argue… PR insist that a publication is necessary, lawyers deny and say no, it is not needed… This is comparable to the plot “Swan, Pike and Crawfish” from Krylov’s famous fable.

Well, we act differently. Our mobility and flexibility lie in the fact that we are developing a strategy taking into account all the necessary tools, including PR, GR, crisis communication, security and legal know-how. We have a complete understanding within the team. Moreover, we know that if some instruments are not used, it is impossible to take the company out of the crisis. We choose the tools, their order and change our strategy depending on the smallest changes in circumstances. We identify the relevant messages, determine the distribution channels, GR tools… So, we are a manoeuvrable yacht compared to an unwieldy ship.

Other specialists are directly involved. Also, there are media tools that can help us promote the necessary messages. There are journalists in the staff, SMM… So, we have a complete closed cycle. I do not know any other company that could completely close the process as we do and replace the crisis committee.

: Did you ever experience a copyright infringement? How do you fight this phenomenon and is it possible to deal with it in general?

Siutkin: We have registered all our developments, competencies, articles, trademarks.We defend the right to authorship and write a claim, if someone uses them without our permission. Special warnings regarding content usage are placed on the website. Intellectual property is also our public performance and training content.

Despite this, unfortunately, we constantly face violation of our copyrights. As soon as we update on the site about new services, know-how, interviews, professional comments, they are immediately copied by other companies that do not have enough experience and skills to write about them. Very often the newly created company, which no one has heard, completely duplicates your range of services. In today’s digital world, where everything can be copied with a click of a mouse, it’s very difficult to understand who is the real one. Therefore, we always recommend customers to ask about a successful case, asking “what do you see,” “how did you do it,” “how are you going to do it.” Then you can see and hear a lot, especially what was skillfully hidden behind the texts.

: What is the most urgent and risky issue in Ukraine, what do the companies face?

Siutkin: At the moment, this is, of course, a matter for the tax and law enforcement authorities. Unfortunately, the depth of the problems that can be created by these bodies is impressive. The company does not even need to break something to have questions.The basis for creating a problem are inaccuracies and small mistakes. Powerful international companies have problems with additional taxes and fees, VAT refund. The amounts of money are very serious.

In fact, all investors who enter the country look at those who are already in our market and what problems they face. Nobody is ready to defend against criminal proceedings for a year and a half. If you ask CEOs of large companies about what they are facing in Ukraine, you can often hear: “We have five criminal cases lasting more than two years”… And how many inspections? And how many cases in the tax courts? The main risks of doing business become clear and the fact that such actions often do not always take place within the legal framework. The system does not work on the business here.

: What an investor who plans to enter Ukraine needs to do first, what to look for and where to start?

Siutkin: Accept theother rules of the game. The company will definitely have a lot of risks, if doing everything the way it is used to without checking. Initially, foreign companies have a very high level of trust by default. In Ukraine, the level of trust must be reduced to zero checking everything. They should carry out a risk audit, check every object and each buyer. They should do completely non-standard things, not the way they used to do business.

In any other country, CEO should not keep everything under control, invest his time in non-specific functions. In Ukraine, even embassies and ambassadors perform an unusual function – they are compelled to protect the business, to act as an instrument for protection against conflicts. To be successful in Ukraine, a foreign investor will have to understand how the state thinks, and then and only then he will be able to work proactively. It is necessary to understand and accept that in Ukraine everything they knew about doing business does not work.

: Can you comment on the Promotion Staff LLC loud case. Many CEOs faced with the fact that they do not even understand what their violation is, is there any reason for them to worry?

Siutkin: The specificity of Ukraine is that we have a systemic and fundamental substitution of concepts at all levels. For example, we do not have the presumption of innocence fixed in the Constitution of Ukraine. The business constantly has to prove its innocence. Practising for more than 20 years, we wonder almost every day how skillfully the state substitutes concepts not for the benefit of business, so companies need to do a great job to prove that the offence did not exist.

In the case of these forty companies, a huge plus can be that there are a lot of them. If they united, then they would definitely have a positive result for them, both in the more shortened terms of solving such a conflict and in the depths of the issues. However, it is currently difficult to predict how this case will unfold, because there are too many companies and it is difficult to predict their future actions. At the same time, it’s possible to calculate the risks, even create scenarios of the process. That’s what we will do at our training. One thing I can say for sure is that if the case develops under the scenario of law enforcement officers, the risks for companies are quite large, so I would not hope that the matter will “resolve” by itself. In this case, active or even proactive actions will be a good advice for such companies.

: Do you think that the charge of money laundering can have any basis?

Siutkin: You need to study all the circumstances and especially the documentation to give some assessment. Without this any estimate is groundless. Honestly, I do not think that there was a fact of money laundering by foreign companies. A large foreign business “plays by rules”, but often suffers only because it enters into a relationship with a Ukrainian counterpart. This is today’s practice.

: Would the consolidation of these companies be a good option? 

Siutkin: Yes. But again, in order to unite, you need to have a clear strategy, a clear vision. After all, there are quite serious arguments against them – an examination that confirmed the amount of damage. This is quite rare when at this stage of the criminal case there is already an expert-confirmed sum of damages. The law enforcement agencies work quite effectively on the legal side. That’s whyit is inefficiently to sit and wait for negative consequences.

: Do you suggest to go beyond the usual behaviour?

Siutkin: Sure. However, you need to understand where you are going, why and what is the ultimate goal. You need to have a clear map, like a miscalculation of the GPS course. You must understand and calculate what the opponents “came up with” and keep working ahead all the time. And only then it will be possible to get  out of the conflict successfully – in any other way. If you do not know what the next step of your opponents will be, you will not win.

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[1] On 17 October 2017, were instituted criminal proceedings involving the withdrawal of funds through outstaffing agreements against more than forty country’s leading enterprises. In particular, there are Huawei Ukraine, Samsung Electronics Ukraine Company, Kyivstar and Nova Poshta. The point is that the funds of these companies were transferred to Promotion Outsourcing LLC and Promotion Staff LLC allegedly for the use of their qualified specialists on outsourcing terms, in fact, the service was not provided.

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