Interview Lessons for business

To be successful the business has to spend time learning business environment 

Mykola Siutkin, CEO and founder of S&P Investment Risk Management Agency, about why such a potential country as Ukraine does not have a flow of foreign investment and what needs to be done to change the situation.

CEO S&P Agency, a Ukrainian company specializing in integrated business solutions, shares experiences, assuring that there are no miracles. There is no such effective tool that can solve a problem in a company with one touch. In protecting the interests of the business, only the application of a set of tools — GR, PR, crisis communications, legal and managerial tools can be effective. Exactly S&P Agency can provide such multi-level protection to investors in Ukraine, and teach how to avoid mistakes and minimize risks.

All this Mykola told in an interview with , based on his own experience and successfully implemented case of his company. It was an engaging conversation that was as frank as possible.

: In 2017, Ukraine has risen to 4 positions in the international Doing business rating and now takes 76th place out of 190 countries. In your opinion, does this mean a change in the balance of Ukrainian and foreign investment and the potential for FDI inflows into the Ukrainian economy in 2018?

M. Siutkin: In my opinion, changing of Ukraine’s position as a country in any ratings, even very influential, will only mean the fact that Ukraine can fall into the eyes of a potential investor, as long as it is a possible investment object. The final decision is taken by investors not on the basis of ratings, forums, promises of the Government of the country, it is accepted only after a detailed analysis of the business environment and potential risks. Very often the signal to make a decision to enter the new investor market is the success story of other big players. And, by contrast, no place in the rating will force the investor to come to a country where business is suffering from raiding, illegal actions of law enforcement or other controlling bodies.

If the above-mentioned risks are minimal, then large foreign players will stand in line, regardless of the country’s rating, subject to favorable financial performance. Therefore, in order to obtain a flow of foreign investment, it is necessary to form the image of the country and show concrete examples of successful investments. This is a minimum and, as a maximum, to create comfortable and understandable conditions for doing business for a foreign investor, starting with the protection of property rights, taxation, and simplifying bureaucratic procedures.

: What risks do foreign investors face with when they start working in Ukraine and how can they avoid these risks?

M. Siutkin: Ukraine is a priori a high-risk country. But at the same time, one can not but take into account the fact that the size of the profits that can be obtained in our country far exceeds the standard interest that foreign companies can receive in other European countries. I consciously focus on European countries, because Ukraine is unique in its location, first and foremost, for European investors, but not only. In determining the investment attractiveness of our country one can not ignore the huge area of Ukraine (the largest in Europe): the population of today according to various data is 39-43 million people, the population is educated, and the cost of labor is minimal compared to the countries of Europe. There are plenty of advantages in Ukraine, but they are really offset by those risks, which really suffer not only foreign but also Ukrainian business.
• To the main risks we include loss of investments and/or assets in the territory of Ukraine.
• The second on the list, but equally important, is conflicts with Ukrainian partners, which, as a result, can also lead to loss of assets and/or business.
• The third significant risk to date is the conflict with the state, the authorities, especially with the participation of law enforcement agencies.

The risk issues are quite tight and deep, we have even developed a special training for the CEO of foreign companies, in which we show the types of risks, their levels, mistakes. And, most importantly, we teach foreign investors how to avoid them and minimize already existing risks.

In any case, regardless of the difficulties that are currently present in our country, one can not but take into account the fact that large and medium foreign business has been successfully operating in Ukraine for quite some time. And in absolutely different fields. But it should be noted that the business that has spent time studying the new business environment, conducted a risk analysis, as well as minimized it, will be successful. It is clear that business can not carry out such a volume of work alone. Therefore, for business success, a team game with the involvement of experts at all stages of the investment project implementation is required, as well as close cooperation with local and international business associations.

: Investor protection is now a very important topic for our country. What, in your opinion, investor protection tools are really effective?

M. Siutkin: Unfortunately, there is no magic pill, or any one tool that effectively and effectively removes the problem in the company in one touch. In the process of building and implementing business protection, we apply a variety of tools, such as GR, PR, crisis communication, crisis management, coaching, mentoring, management and legal tools, which are tailored according to the complexity of the task. Building a full-fledged defense is a multilevel process that is individually developed for each individual case. And believe me, very often those tools that worked in one business can become completely ineffective in another. It reminds me of the IronMan competition, which is not there and can not be two identical starts. There has to change tactics, strategy, and creativity ever in the race, depending on the source data for a particular day and even the start time. In any case, we are for a systemic fundamental approach that allows businesses to feel safe in such a difficult business environment in Ukraine.

I would also like to add that the current legislation of Ukraine gives the business enough tools to protect its rights, the question is only about the ability to properly use such instruments. And now, in the latter, the problem often lies. I fundamentally disagree with the opinion that the current legislation of Ukraine is weak in the issue of protecting a foreign investor. Legislation is rather progressive, but its implementation is very weak. But you can work with it.

: Fighting corruption, including in the real estate sector, is still one of the most important tasks for the state. What advice would you recommend to an investor starting a business in Ukraine?

M. Siutkin: The only advice will be — to act only in the legal field, not to accept incorrect “rules of the game”, as if you were not trying to impose them or submit them “under the sauce”, which is the only way to do business in Ukraine. It is not true, believe me, there are many successful examples of doing business in Ukraine, absolutely honest, transparent and legal. Once started “to play according to the rules of others” it is very difficult to change them. But even in this case, the output is always, the main thing is to take for once and for all the decision to act only within the framework of the law. And you know, from a financial point of view, such a strategy turns out to be much more profitable than a false position imposed from the outside.

: Business is not only asset and investment protection, business is first of all people. What can you say about partnership and how will you advise investors to build partnerships?

M. Siutkin: Any business is looking for a partnership, especially when entering new markets. And this is normal. Partnership with local business facilitates the entry of a foreign investor into new markets, helps to establish new relationships, successfully implement projects, etc. Partnership in some projects is simply necessary, but, at the same time, it is necessary to include rationalism and pragmatism both in the process of choosing a partner and in the process of establishing a partnership.

My advice will be the following: a successful partnership in Ukraine (but probably not only) will be only if the correct system of checks and balances is created, which simply will not allow a violation of rights by one partner or it will simply not be profitable.

An intelligent approach to designing partnerships is the key to minimizing corporate and / or raider conflicts. According to our analyst, the very mistakes in the registration of partnerships in 95 % led to the loss of assets. Therefore — minimization of possible investment risks takes place at the “zero” stage, that is, before the entry into the investment project. A false entry into an investment project is a guarantee of its successful implementation.

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