Ukraine conflict highlights upsides of ethics and prudence

The heartbreaking events in Ukraine have caused significant global political and macroeconomic consequences. The human toll is devastating, and I hope peace, justice and stability return to the region as soon as possible.

Russia’s actions against a democratic and sovereign nation are appalling. They are also a sobering reminder that choosing where and with whom you do business is a critical component of long-term success.

It’s been inspiring to see the international community rally around Ukraine and its incredibly brave leadership by striking Russia with crippling economic sanctions. This powerful alternative to military action helps remove funding for the Russian war machine and pressures the autocratic Russian government. It’s also been extremely costly to many Western companies investing in Russia or relying on Russia for goods and services.

No event in the 34-year history of Riverside better illustrates why we’ve never directly invested in Russia, and why we’re wary of many other geographies without fundamental freedoms and a long history of stability. If this sounds old-fashioned, here’s why.

  • We insist on the rule of law, even though we rarely litigate anything. Playing by the rules on a level playing field works best. We believe the protection of intellectual property is critical, and we rely on trustworthy judicial and legal protections.
  • We love free and fair elections — and hope America doesn’t stray too far from them. We believe passionately in democratic capitalism because it creates so many dynamic opportunities.
  • We need well-developed capital markets to access growth funding and get paid for the work and risks we take.
  • Valuing human rights speaks to the soul of any nation — it is both the right thing to do and closely tied to freer, more entrepreneurial and creative nations.

Over many years in business, Riverside Co-CEO Béla Szigethy and I have been well-served by these principles. We’ve missed some big winners, but we’re relieved and happy to not be feeling much pain from Russian sanctions. And we’ve slept comfortably while enjoying a lot of success for decades.

There’s a broader lesson here that goes well beyond Russia and investing. Any business owner needs to carefully consider risks when sourcing products or raw materials, seeking funding or capturing new customers. The where matters. Even within the sphere of where we do business, we weigh regional factors. That’s because certain states, regions and countries have marked differences in the considerations outlined above.

I am certain that many companies — even those that have just written off billions of dollars connected to Russia — are eager for sanctions to end so they can get back to making money there. I’m not here to tell them what to do. For us, Russia has a long way to go before it meets our key criteria of a safe bet. I sincerely hope it happens in my lifetime — a prosperous and free Russia would be great for that country and for the world. Russians have a rich history of contributing to the world in science, the arts, medicine and commerce. Many of those highly skilled workers have already left and more will follow if Russia continues to act as a pariah state. They, too, know that the “where” matters.

In the meantime, while you’re staying away from Russia, be sure you’re not over relying on other regions fraught with political risk, corruption, instability or other foundational problems. It makes for risky business. ●

Stewart Kohl is Co-CEO of The Riverside Company

Stewart Kohl

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