War and Recession: The Causality And Casualties Of Managing Both In Your Communications

Companies around the world are going through extremely challenging times staying afloat amidst war in Ukraine, economic turmoil, interest rate rises, high-single digit inflation, and the impact that all of these have on employees. Next, we will prepare for the coming recession.

The Conference Board forecasts that economic weakness will intensify and spread more broadly throughout the US economy in the second half of 2022 and expects a recession to begin before the end of the year. This means that the challenges the global economy is facing right now will worsen, and some companies that are on the edge of default might not be able to come out of the recession.

Although the war is contained within the territory of Ukraine for now, and has not spilled over beyond the country’s borders, as we are witnessing, geopolitical events like this affect the entire world economy with disruptions to key commodities and supply chains.

In the latest development, reservist troops are being called into action, and this is provoking strong responses in the countries engaged in the conflict but also all around the world.  The UN Assembly in New York in September cautiously addressed this but reached no resolutions.

The war has made it challenging to export from Ukraine. Russia has surrounded and is attacking Ukraine from nearly four-fifths of the country’s border. Assaults are coming from Russia, Belarus, and the Black Sea, leaving only Ukraine’s western border open for trade. Grain exports from Ukraine have halted. Long negotiations with Russia allowed for a ceasefire so Ukraine could ship its grain for export just once. Also, a lot of warehouses were bombed, destroying any commodity inside. All of this has had a dramatic effect on the global grain trade as Ukraine and Russia are the second-largest grain exporters. Each supply 8 percent of the world export (USA is number one with 16 percent). Energy prices are going up as countries cut back on energy imports from Russia, as Russia cuts off natural gas supplies.

In addition to free-market laws where supply and demand are running the economy, companies and consumers are making their difficult choices guided by their conscience. Companies around the world had to be scrupulous when choosing a route on how to respond and take a stand on the geopolitical events and communicate it to all of their stakeholders. It is tempting to believe this has abated as time has passed, but it will rise again.  The pressure is mounting as we move inexorably towards a recession and the basics of food and energy in the winter will cause stress for great parts of the US population. In this context, what a company decides to convey to the world will affect company’s brand reptation and may be a trigger and a turning point for its brand and, possibly, its future existence.  How do companies balance their comments – and, more importantly, their actions – between voicing concern for human beings in other lands versus ensuring they are caring and empathetic for those facing growing hardship from the economy at home?  These two concerns are linked, with rising energy and food prices being felt in the US strongly affected by Russia’s actions. However, there are also other costs indirectly rising for consumers such as housing and shelter.

This is not so much an issue of War vs. Recession but one of War and Recession.  Balancing the story you tell about supporting the freedom of the world at large and caring about the challenges of the people at home will be crucial.  How this is done will feed into how your company is regarded.

The burden of fostering brand reputation is on the shoulders of communications professionals. Any storytelling about the company’s action or inaction will directly affect its brand reputation and its profit margins. During high inflation and in preparation for a recession there is not much room for error in decision making and storytelling.

For example, the decision to leave the Russian market might have cost a company a significant loss of revenue that may now compound the challenges of a recession. A decision to stay and continue selling and manufacturing products and services in Russia can lead to dissatisfaction amongst your stakeholders around the world and impact your brand reputation, leading to loss in profits.

Whatever decision is made by a company it is in the hands of communications team to tell the story and present decisions in the best light, addressing as many stakeholders as possible to secure ongoing growth – even through the recession and the geopolitical upheaval. It is an extremely challenging task as your stakeholders consist of your customers, prospects, colleagues, employees, suppliers, influencers, and other groups that have any direct or indirect involvement with your brand. And communications professionals are responsible to craft a story that would resonate with a majority of stakeholders.

Before crafting the story to each new action and reaction in Ukraine, Russia and the economy, communications teams need to be clear on what groups of stakeholders are of the highest priority for each given there will always be variety of different opinions on that issue and you cannot make everyone happy. This is where stakeholder prioritization comes into play.

By supporting Ukraine in the war, a company’s messaging needs to reflect its actions. Some examples include, did a company leave the Russian market, did they donate to initiatives to help Ukraine in the humanitarian crisis, are they organizing any events, or any fundraisers to support Ukraine. Companies need to assess their economic ability and weigh their effort with how they can take a stand on this crisis factoring in the upcoming recession.

Data from The C-Suite Mid-Year Outlook survey that The Conference Board conducted show C-suite executives have supported employee volunteering, gave corporate funds for relief through international or Ukrainian organizations, and matched employee contributions for immediate relief.

Q. What are the elements of your organization’s corporate citizenship/human capital response to the war in Ukraine?

Note: 750 CEO’s and C-suite executives globally. Source: C-Suite Outlook 2022 Special Midyear Survey

There is a demand from consumers for transparency as more and more people care about a company’s ethics: where and how they source materials, labor, and how a company take a stand to a social, political, environmental issues.

Conversely, many stakeholders may not care as deeply about these factors and will be focusing on lower prices and the quality of a product or service as inflation rises, budgets get tighter, and the economy begins to recede.

The challenge for communications teams is to sense stakeholder expectations to build their story to get the highest return on their brand reputation and thrive through the stormy waters of the recession.