EY Ukraine jointly with The American Chamber of Commerce in Ukraine conducted the survey "Doing Business after 15 Months of Full-Scale War in Ukraine”.
102 CEOs and top managers from companies operating in Ukraine took part in the Survey, conducted from May 30 – June 12, 2023. 75% of the respondents are CEOs, 25% – top managers.
The survey examines the impact of the war on doing business in Ukraine, current information on the damage caused by the war, and companies' plans for compensation. Some of the key indicators are:
- Assessment of losses. 49% of respondents indicated that their plants/factories/facilities/storehouses/offices have been damaged: 27% of them have minor damage, 22% – have major damage which requires significant repair. 49% of companies had no damage after 15 months of the war. 19% of companies had some of their assets under occupation.
- Compensation. At the same time, only 15% of the companies consider requesting compensation for direct (physical) damage or lost profits, while 53% do not plan to request compensation, and 32% have not decided yet. The main reasons for such low rates are the number of losses (two third of companies among those that suffered damages have losses below $10 million), the complexity of the process, uncertainty in reimbursement results, and the cost of the process. Currently, the companies are left to cover losses and damage due to war at the cost of their own resources. To support Ukraine's economic recovery, it should be critically important to streamline the process of gaining compensation from the aggressor and seek support from donors for business recovery.
- Obstacles in the compensation of damages. The business representatives identified the following main difficulties of the compensation process: unclear legal strategy on enforcement (48%), too long procedure on litigation and enforcement (40%), high process-related costs (27%), lack of expertise for litigation in non-Ukrainian jurisdictions (21%), and drawbacks of valuation methodology in Ukraine (19%).
- What next? Due to the difficulties, 36% of organizations are uncertain about the next steps within the next 12 months related to compensation for damages from the russian federation. The most common strategy is to wait for the creation of the mechanism for the confiscation of russian assets (24%) or not to plan on requesting such compensation at all (27%).
- Safety. The business representatives were asked a difficult question on the safety and security of employees. 56% of respondents said that all of their companies' employees are safe. Sadly, there were painful numbers also, with 32% of companies' having instances of employees killed and 27% having instances of employees injured.
The following key findings emerged regarding organizations' plans for Ukraine's rebuilding: 74% plan to create jobs for Ukrainians in existing projects; 63% intend to invest in new projects, plants, or facilities; 47% are ready to offer expertise or technical assistance to Ukraine's government.
"Despite the fact that almost a half of respondents stated that their business had incurred damages due to the Russian invasion, only 15% of the member companies consider requesting compensation for direct (physical) damages or lost profits. The main reasons for such low rates are due to complexity of the litigation process and, uncertainty in reimbursement results, high litigation costs compared to the number of losses (two third of companies among those that suffered damages have losses below $10 million). Currently, the companies are left to cover losses and damage due to war at the cost of their own resources. To support Ukraine's economic recovery, it should be critically important to streamline the process of gaining compensation from the aggressor and seek support from donors for businesses recovery", – commented Mykhailo Prykhodko, Partner, Valuation, Modeling & Economics leader, EY Ukraine.
"After 15 months of Russia's full-scale war in Ukraine, 84% of AmCham members are fully operational. The majority of businesses in Ukraine don’t plan to make claims for war damages until proper compensation mechanisms are in place. It is important to have these clear mechanisms developed and eventually implemented”, – said Andy Hunder, President of the American Chamber of Commerce in Ukraine.
Full results of the survey are available here.