After the collapse of the Soviet Union roughly three decades ago, accountants and other professionals from the West flocked there to capitalize on new opportunities. International trade in Russia has skyrocketed following the Union’s downfall, being a large contributor to financial service firms heading over there in the first place. Corporations from the West have been able to stay out of foreign conflict to continue conducting business with Russia. This all changed following the recent Russian invasion of Ukraine; now many firms that do business in Russia are dealing with an ethical dilemma on whether or not their Russian business affairs can continue.
Russia’s Role With US Accounting
One percent of the Big Four accounting firm’s employees are currently located in Russia, which makes up about 13,000 employees. Although only a small percentage of revenue for these firms come from Russian business, they are still considered to be strategically important because it allows the firms to offer services worldwide. This opportunity is becoming less viable because firms that continue to operate in Russia are facing criticism coming from all directions.
Firms Facing Backlash
Although Firms are condemning the aggressive acts of Russia, many of them are not ready to discuss an exit, calling it “premature”. Grant-Thornton is one of the only large Western Firms with ties in Russia that has decided to go beyond condemnation and cut ties with its 500-person Russian Auditing Firm, saying its reasoning was due to the recent Ukraine Conflict. Additionally, Boston Consulting Group and Bain & Company both have offices in Moscow, employing about 1,000 people in Russia combined. Both companies have said they would stop doing work for Russian entities but have yet to stop any of their operations in Moscow. Whether the firms decide to continue work in Russia or not, they still must comply with the international sanctions that are being imposed on Russia.
Russian Sanctions
Federal and Local Governments were quick to impose sanctions on Russia & their business allies. The United States has been working to target Russia’s financial system by blocking assets of large Russian banks and imposing exporting controls on the technology needed by Russia. The Department of Justice has also announced a task force whose main job is to seize the illegally obtained assets of Russian oligarchs and elites. State & Local governments have since followed suit with the federal government.
New York Governor Katie Hochul signed an executive order that forbids New York State from doing business in Russia, additionally, she canceled New York’s investments in Russia. Although she did not get into details of the sanctions imposed by New York, she said in a statement that New York will not directly or indirectly aid Russia by permitting their investment activity.
Wrap-Up
Russia’s invasion of Ukraine has left Western Accounting and Consulting firms with a big ethical dilemma. As the state and local sanctions will continue to be put on Russia, firms will have to decide if staying in Russia and conducting business is ethical and profitable.
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