2014 Ukraine crisis – Implications for corporate crisis management

In the late year 2013 events started to unfold in Ukraine’s capital city Kiev that would change the political and economic environment of the EU and Russia. The tension had been building for years between the two parties with Ukraine in the middle and during 2014 the tension blew up and events started to escalate into a crisis, which we now know as the 2014 Ukraine crisis. The crisis would include political, economic, and even military actions by all the parties involved with Ukraine slipping close to civil war. Both political and economic hardships followed for others as well with both the EU and Russia placing heavy political and economic sanctions on each other. Most notably in terms of this paper, the Russian federation placed total import embargo sanctions on food imports from the EU and some other countries. This meant that a Finnish dairy company, Valio, had to engage in corporate crisis management as almost a fifth of its total revenue was cut in a heartbeat. Valio had been prepared for some kind of complications with their Russian market as events started to unfold in Ukraine in the beginning of 2014 but never did they suspect that a complete shutdown of the Russian market would follow. The company is still recovering after more than a year after the sanctions were posed and have not been able to supplement the lost revenue streams. This research is a qualitative research aiming to find answers to the main questions: 1) What is the 2014 Ukraine crisis and what kind of special implications does it have and 2) How did the crisis affect Valio and how did Valio fare in its crisis management efforts. The data has been collected both from secondary document sources and primary sources. The main findings of this research are that the political and economic environment of the EU and Russia has gone through a profound change during the years 2013-2015. The companies and governments should re-evaluate what kind of environment they are now facing and what kinds of risks the new situation poses. This also calls for a deep academic analysis from the academic community. In corporate crisis management of Valio the main findings are that the former literature has looked into crisis management as one-time occurrence but the new crises and global events would call for a more on-going crisis analysis and active crisis management. Thus, corporate crisis management should be viewed as a cycle. Valio specifically handled the situation surprisingly well, considering that their revenue was indeed cut by a fifth. The main aspects of crisis management, which Valio did not handle as well, concern the learning curve of crisis management. They could be doing more in order to prepare for future crises better by learning from this experience. The situation is then still on-going in the autumn 2015 both in Ukraine and within Valio.

[Kirja-arvostelu]

Kirjallisuusarvostelu

“Who is steering the ship and which constellation guides the way? Exploring transparency in the European Central Bank during the time of crisis”

This paper explores transparency in the decision-making of the European Central Bank (ECB). According to ECB´s definition, transparency means that the central bank provides the general public with all relevant information on its strategy, assessments and policy decisions as well as its procedures in an open, clear and timely manner. In this paper, however, the interpretation of transparency is somewhat broader: Information is freely available and directly accessible to those who will be affected by the decisions. Moreover, the individuals shall be able to master this material. ECB´s negative attitude towards publication of documents has demonstrated central bank´s reluctance to strive towards more extensive transparency. By virtue of the definition adopted by the ECB the bank itself is responsible for determining what is considered as relevant information. On the grounds of EU treaties, this paper assesses ECB`s accountability concentrating especially on transparency by employing principal-agent theory and constitutional approach. Traditionally, the definite mandate and the tenet of central bank independence have been used to justify the limited accountability. The de facto competence of the ECB has, however, considerably expanded as the central bank has decisively resorted to non-standard measures in order to combat the economic turbulences facing Europe. It is alleged that non-standard monetary policy constitutes a grey zone occasionally resembling economic policy or fiscal policy. Notwithstanding, the European Court of Justice has repeatedly approved these measures. This dynamic interpretation of the treaties seems to allow temporarily exceptions from the central bank´s primary objective during extraordinary times. Regardless, the paper suggests that the accountability nexus defined in the treaties is not sufficient in order to guarantee the accountability of the ECB after the adoption of the new, more active role. Enhanced transparency would help the ECB to maintain its credibility. Investing in the quality of monetary dialogue between the Parliament and the ECB appears to constitute the most adequate and practicable method to accomplish this intention. As a result of upgraded transparency the legitimacy of the central bank would not solely rest on its policy outputs.

The contagion effect of public debt on monetary policy: the Brazilian experience

This paper attempts to explain why the Brazilian inter-bank interest rate is so high compared with rates practiced by other emerging economies. The interplay between the markets for bank reserves and government securities feeds into the inter-bank rate the risk premium of the Brazilian public debt.

External debt in developing economies: assessment and policy issues

More than one decade after the external debt restructuring (the Brady Plan), a great amount of literature has been published concerning the balance sheet factors in developing countries. The staff of international multilateral institutions joined with reputable academics in this great controversy. The external debt problem of the developing countries is back and once more reflections on its cause and on policy recommendations are analytically distinct. Our main task is to reflect on the recent external debt dynamics and assess how this debt has evolved. Our findings indicate that the susceptibility of some developing countries to default is associated with global imbalance, that is, the way they borrow.

Civilian-military cooperation in crisis management operations

Finnish Defence Studies is published under the auspices of the National Defence College, and the contributions reflect the fields of research and teaching of the College. Finnish Defence Studies will occasionally feature documentation on Finnish Security Policy. Views expressed are those of the authors and do not necessarily imply endorsement by the National Defence College.

The 2008 financial crisis and neoclassical economics

The 2008 global financial crisis was the consequence of the process of financialization, or the creation of massive fictitious financial wealth, that began in the 1980s, and of the hegemony of a reactionary ideology, namely, neoliberalism, based on self-regulated and efficient markets. Although capitalism is intrinsically unstable, the lessons from the stock-market crash of 1929 and the Great Depression of the 1930s were transformed into theories and institutions or regulations that led to the "30 glorious years of capitalism" (1948-1977) and that could have avoided a financial crisis as profound as the present one. It did not because a coalition of rentiers and "financists" achieved hegemony and, while deregulating the existing financial operations, refused to regulate the financial innovations that made these markets even more risky. Neoclassical economics played the role of a meta-ideology as it legitimized, mathematically and "scientifically", neoliberal ideology and deregulation. From this crisis a new capitalism will emerge, though its character is difficult to predict. It will not be financialized but the tendencies present in the 30 glorious years toward global and knowledge-based capitalism, where professionals will have more say than rentier capitalists, as well as the tendency to improve democracy by making it more social and participative, will b e resumed.

The new international financial crisis: causes, consequences and perspectives

The paper investigates the recent financial crisis within a historical and comparative perspective having in mind that it is ultimately a confidence crisis, initially associated to a chain of high risk loans and financial innovations that spread thorough the international system culminating with impressive wealth losses. The financial market will eventually recover from the crisis but the outcome should be followed by a different and more disciplined set of international institutions. There will be a change on how we perceive the widespread liberal argument that the market is always efficient, or at least, more efficient than any State intervention, overcoming the false perception that the State is in opposition to the market. A deep financial crisis brings out a period of wealth losses and an adjustment process characterized by price corrections (commodities and equity price deflation) and real effects (recession and lower employment), and a period of turbulences and end of illusions is in place.

Metas de inflação, taxa de câmbio real e crise externa num modelo kaleckiano

Inflation target, real exchange rate and external crisis in a Kaleckian model. Which role should the real exchange rate play in an inflation target regime? In this paper this point is discussed from the point of view of the conditions required for avoiding an external crisis. With this objective, a dynamic Kaleckian model is presented focusing on the stability of the external debt to capital ratio. The main conclusion is that policy makers should monitor closely the evolution of the real exchange rate in order to make compatible the inflation target regime with external stability.