The transformative swings of the economy, society and management practices in 2022 could not but influence the relationship framework between business and public authorities. All the changes manifested themselves in an uneven manner in a variety of segments, as well as differed in Russian and foreign companies.

Trend 1. The position of Western companies is shifting

It is feasible to start with the back-story outlines. Prior to 2014 the Government, mainly, listened to the needs of overseas companies. In the time following 2014 – the import substitution strategy has become the state high-priority vector, so resultantly it has affected the position of foreign corporate entities.

The State has found itself be interested in issues of the Russian business, while ignoring the foreign companies’ critical remarks of some initiatives. The burning examples – preinstallation of the Russian software for smartphones, as well as the introduction of the rule «The unnecessary second» in terms of the medical equipment. The foreign business aspired to preserve the ‘status quo’, but at the same time, it was already impossible for these entities to attain some substantial preferences. However, the sustainable and constructive dialogue with public authorities was still underway. In 2022, the situation has finally shifted for a number of companies.

Back in spring last year lots of foreign brands expressed the very desire to leave the Russian market. The upper management representatives of some of these entities confined themselves to just «loud» declarations, but there were those, who launched the process of leaving the market.

Decisions of headquarters of transnational corporations disrupted the trust level between the Russian Government and foreign business structures. As was eyed by the Russian bureaucrats, declarations, concerning the aspiration to leave the Russian market (even in the case when these intentions were not executed) discredited the international brands. From the standpoint of public authorities, such a course of action jeopardized the Russian officials within these companies, their clients, as well as the development process of some industries, including those, which were of paramount significance for the country.

As a result, in 2022 the foundation for maintaining the constructive dialogue between the State and a part of companies from «unfriendly» countries was eliminated. Hope it is the phenomenon of temporary nature.

In these circumstances, the Government made it much more difficult for foreign companies to leave the Russian market. In particular, among measures, which were adopted, – the special deal harmonization procedure with regard to international companies, restrictions associated with the sale of strategic entities’ shares, as well as strict policy in terms of the currency legislation. In addition to that, the import substitution trend’s strengthening took place.

At the background of the restrictive activity in the country, companies «freeze» their GR-function, so it takes its toll on the development of the profession, on the whole. The functionality of relevant specialists is substantially narrowed down, as well as the budget volume decreased. The relocation of employees with regard to other countries is observed (for example, Central Asia).

We remember that the GR-profession itself in our country has been formed under the influence of international business. While leaving the Russian Federation, the large-size companies simultaneously withdraw the established GR-traditions. It refers to the high-level compliance culture, the skill of interacting with stakeholders, understanding of the specific outlines of working with consultants, etc. All these features are common to Western companies, because their headquarters are located within the US and Europe, where all the GR and lobbying traditions, as well as the sectoral legislative regulation exist.

Trend 2. The new most-favored countries

The position of international companies from «friendly» countries (for instance, China, India, and Turkey) is slightly different. Some of them are inclined to relocate their manufacturing facilities to the Russian Federation. It is feasible to find a number of burning examples in such domains, as automotive industry, production of special equipment, medical devices’ segment, etc.

The Russian public authorities are enthusiastic about establishing the constructive dialogue with the management circle of these corporate entities. For example, GR-professionals from Chinese companies, who are ready to invest in the Russian economic sector, are actively invited to take part in meetings with the participation of federal ministers, deputy ministers and heads of large federal districts. It is obvious that a greater emphasis is currently put on these companies. The investment agenda is of paramount importance for Russia this is why the Government is open for collaboration with corporate structures from «friendly» countries at the highest level possible.

At the same time, it does not mean that international companies from these countries do not face obstacles within the Russian market. The import substitution trend exerts the risk for them as well. For example, the application of the rule «The unnecessary second» – when the public entities are unable to purchase the international medical equipment if, at least, one domestic manufacturer participates in the tender process – affected the Chinese business as well.

What is more, some companies from «friendly» countries withdraw their business capabilities in the Russian Federation due to the looming risk of secondary sanctions. It takes its toll on the relationship with the Government. Although the number of such companies is much less, compared to the amount of Western ones.

Trend 3. The new and unexpected functions of GR

External conditions in 2022 facilitated the emergence of new vectors of the crisis GR – in both Russian and international companies.

One of them, for example, was associated with the partial mobilization, which was announced in September last year. All the corporate resources were utilized to fight off the «local excessive enthusiasm». It was necessary to advise the regional public authorities on jeopardies of stopping the manufacturing processes, as well as it was of paramount importance to demonstrate their significance for the Russian economic sector. Simultaneously, GR-professionals participated – as experts – in the procedure of forming the list of sectors, where officials should not be drafted for the partial mobilization from.

Moreover, many companies encountered the necessity of withdrawing persons, who were somehow related to «unfriendly» countries, from the corporate management framework. In some cases their share decreased, sometimes the Russian representatives began to exert the full-fledged control over the business. It is a difficult process and, very often, the assistance of GR-specialists is much required. They support it through the interaction with regulators – first of all, with the governmental commission on control over the implementation of foreign investments. The range of their objectives comprises the obtainment of necessary explanatory outlines from public authorities, which are subsequently passed on to stakeholders. Overall, as stated by the Centre for Strategic Research, the largest 89 international companies made a decision to pass the business ownership on to new individuals.

Along with the crisis policy, the strategic work, regarding the long-term regulatory risks in companies staying in Russia, was underway. The business entities, who are strongly related to the most regulated domains, such as tobacco, pharmaceutical industries, medical devices, cannot but take it into account.

It refers to the restrictive measures with regard to the state procurement, elaboration of new technical regulations, some production prohibitions, etc. These spheres are being currently considered during the work with regulators within Russia, as well as at the supranational level, in particular, at the level of the European Economic Commission (EEC). The activity is exacerbated at the backdrop of a plethora of tactical risks and the challenging economic state of affairs.

Trend 4. Elevation of the role of GR

One of the major this-year trends, which is observed in our practice, – the GR-function is being born in the companies, where it has not existed before.

The overriding explanation for this phenomenon is that the public support degree with regard to a variety of sectors increases at the backdrop of the current crisis. The public authorities offer new protective options for the Russian business, including subsidies, concessional loans, preferences under the procurement framework and others. By June the first-priority action plan, aimed at supporting the Russian economy, already contained over 300 measures. According to the Prime-Minister Mikhail Mishustin, the general volume of the budget stimulus ought to exceed 8 trillion rubles in 2022.

At the same time, as was practically showed, not all companies were capable of utilizing such support measures, incl. due to the difficult report system or the necessity of the legislative substructure.

Very often, it is GR-specialists, who participate in discussing the future support measures. And last year these GR-professionals were of special importance. The brightest example – IT-segment. The Russian public authorities paid greater attention to the support of the sector, and the GR-function helped Russian companies use all the opportunities, provided by the Government.

Apart from that, the competition between Russian structures within vacated niches has become tougher and stricter. In these circumstances, GR-professionals help create the competitive advantages and overcome administrative barriers. They collaborate with regulators, while telling them about business challenges, as well as they elaborate the cooperation mechanisms with public companies.

Trend 5. The bureaucratic acceleration

In 2022, the Russian economy faced the large-scale challenges, which required the acceleration of the decision-making process both at the federal and regional levels. In these circumstances, the interactive format of interaction between public authorities and business entities has been established, when all the public decisions have been made in a real-time manner. It is possible to provide some last-year worked examples.

Firstly, some agencies aspired to establish the direct cooperative channels with business entities from the most regulated domains. Sometimes, the collection of proposals was implemented directly through the messengers’ chats. As a result, through the assistance of the massive business engagement and the expertise use, some important decisions were made in an accelerated manner. For instance, the prompt economic support measures were adopted within a week, following the 24th of February: cancellation of business inspections, perks for the IT-sector, credit holidays, etc. During the «business as usual» period it would took 6 months to adopt such measures.

Secondly, the collection of business proposals was carried out in a prompt manner without weekend-breaks within different platforms, in particular, through such large organizations, as the Russian Union of Industrialists and Entrepreneurs or the All-Russia Public Organization «Business Russia», as well as through sectoral associations, development institutes, working groups under federal executive authorities.

Thirdly, the Government aspired to explain its policy. For instance, in March the portal «Obyasnayem.rf» was launched, where answers to the most relevant questions, including business queries, were published. In Moscow, the call centre for entrepreneurs for the purpose of assisting them amid the crisis events was established.

In conclusion, we would like to note that the GR-practice in Russian companies is still the function in its infancy. Lots of companies do not have such professionals yet. However, nowadays it is obvious that in the near future the Russian business is going to encounter new challenges, and the range of GR-tasks is to be extended. As a result, the market advantage is to be possessed by those corporate entities, who will be able to attract the professional personnel and establish an excellent rapport with public authorities.

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