Unpacking the ‘litany of risk and ethical issues’ from the Russian invasion of Ukraine
For Australian company boards and management, there are myriad governance concerns arising from the ongoing conflict in eastern Europe, and law departments have an important role to play.
In conversation with Lawyers Weekly, Governance Institute of Australia chief executive Megan Motto (pictured) said there is a “litany of risk and ethical issues” to be concerned about in the wake of Russia’s invasion of Ukraine in recent weeks.
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These include, she outlined, avoiding sanction breaches, reputational risk management and supporting workers affected by the conflict.
“Boards and managers may also consider whether the Ukraine crisis and the response from companies globally sets a precedent. Some boards may decide to go beyond the sanctions requirements and leave Russia because they oppose the war on ethical grounds. So, ethics may become a key driver,” she advised.
“Will they make the same decision in other areas of conflict or where there are other human rights or ethical violations?”
The board and senior management in Australian businesses and organisations will, at present, be turning to their legal counsel and company secretaries, Ms Motto continued, for regular updates on this fast-evolving situation.
It is therefore critical, she posited, that in-house lawyers remain on top of the geopolitical developments whilst also attempting to anticipate what may be around the corner.
“For legal teams, you will be advising on the sanctions in place and the implications for the business. And, if your organisation is contemplating withdrawal from a jurisdiction, there will likely be a lot to consider from a legal and contractual perspective,” she suggested.
In order to help the business or organisation avoid any sanctions breaches and manage risk and reputation, there are a handful of key steps that must be taken by the law department, Ms Motto listed.
These include: identifying whether any of your contractual counterparties, trading partners, financial institutions or other members of your supply chain appear on the consolidated list, as well as any existing contracts or activities relating to Russia, Donetsk or Luhansk.
Moreover, the law department must conduct a review assessing exactly how your products and services are being used in Russia, and also review the cancellation and force majeure provisions of your existing contracts.
Elsewhere – and to better manage the business or organisation’s risk and reputation throughout the conflict, Ms Motto added, in-house lawyers must ask the following questions: “What possible risks could there be to the company as this conflict continues? Could there be further Australian sanctions? Could there be sanctions outside Australia, which affect operations or investments in Russia? How do shareholders, customers and stakeholders feel about the issue?”
There is also an inherent opportunity, Ms Motto concluded, for law departments to meaningfully steer the business or organisation through such turbulence.
“During times of geopolitical crisis and challenge, good governance will help Australian companies remain strong, manage the community’s ethical expectations and look after their staff, wherever they are based,” she noted.
“They are also less likely to breach sanctions.”