Insurance

Mykola Siutkin, CEO and founder of S&P Investment Risk Management Agency on why the flow of foreign investments has not yet flooded the country with such a rich potential and on the peculiarities of doing business in Ukraine.

S&P Investment Risk Management Agency specializes in creating complex solutions for the business protection sphere. Mykola Siutkin shares his experience with Boryspil magazine and insists that only integrated approach can be effective in protecting business interests.

Doing Business ranked Ukraine 76th in 2017. What is your forecast for the FDI growth in 2018?

M. Siutkin: A positive change in ratings means that Ukraine can easily become visible. Investors approve decisions after analyzing the business environment and risks. Ratings can’t force an investor to come to a country where business is suffering from raiding and state authorities’ illegal actions. It is essential that the state image be shaped and that examples of successful investments be shown while creating clear business conditions for foreign investors.

What risks do foreign investors take in Ukraine? Can they avoid those risks?

M. Siutkin: Loss of investments and/or assets is a risk. The second essential point includes conflicts with Ukrainian partners, which can lead to loss of assets and/or business. The third critical group of risks includes conflicts with the state authorities.

Risk issues are deep enough, we even have a training for CEOs on avoiding or minimizing risks.

Which tools for protecting investors are effective?

M. Siutkin: We use GR, PR, Crisis Communications, Crisis Management, Coaching, Mentoring, Management and Legal Instruments while protecting business. They are matched according to the task complexity. It is a multi-level process developed for each case individually. The legislation provides enough tools for protection, the point is the ability to use them properly.

What would you recommend an investor who starts a business in Ukraine?

M. Siutkin: I would recommend acting legally, regardless of imposing ways of cheating by anyone. There are many successful entrepreneurship examples in our country – honest, transparent and legal. Such a strategy is more rational from the financial point of view.

What would you recommend investors regarding building partnerships?

M. Siutkin: A partnership is successful only in case of creating a proper system of checks and balances, which will restrict agreements violations by one of partners. Having a reasonable approach to building partnerships is the key to minimizing corporate and/or raider conflicts. According to our analytics, mistakes of partnerships formalizing are main causes of losing assets in 95% of cases.

On 10 July, the 15th Kyiv Post CEO Breakfast was held at the InterContinental Kyiv. The event was organised by S&P Investment Risk Management Agency and DHL Express Ukraine.

The topic of the meeting was Ukraine’s Road to Prosperity. The participants discussed the need to create a fiscal investigation service, the effectiveness of the anti-corruption court, gas prices, subsidies, creating an effective anti-smuggling mechanism and other pressing issues.

Business representatives have noted noticeable improvements in the banking sector. After many years of crisis and financial losses, today we can talk about increased liquidity and, in the long run, the empowerment of creditors.

In addition, they raised the issues of raising the property tax, restrictions on transfer pricing abuse, the legal status of the tax police, and the thorny issue of eradicating corruption at customs and in other areas of the public and private sectors.

Talking about our country’s path to prosperity, the participants of the 15th CEO Breakfast, under the auspices of the Kyiv Post, came to the conclusion that Ukraine is a worthy country for investment, which has every chance of success. Unfortunately, positive changes are happening too slowly in our country. Ukraine has enormous potential that can be realised if the business climate is favourable and the necessary reforms are implemented. At the moment, unfortunately, direct investment in Ukraine remains negligible.

Interview of Nataliia Osadcha, co-founder of the S&P Investment Risk Management Agency, PhD, MBA, on the role of conflicts in the life of big business

It’s no secret that Ukraine is a country of risky investments. Prosperous corruption, lack of sufficient protection of private property rights and many other prerequisites create fertile ground for the development of business conflicts. Today’s trend in the country is the involvement in such conflicts a large number of participants, including state and law enforcement agencies, but there are those unicums, who could resolve the conflict and withdraw the company from it.

LDaily turned to Nataliia Osadcha, the co-founder of a company, the S&P Investment Risk Management Agency, which is specializing in minimizing conflicts and rescuing business from conflicts of any complexity. In her interview, Nataliia talked about what business conflicts are, what consequences they have for the business, about the strategy to get the business out of conflict, what tools to use and what bonuses the business gets when it successfully stops the conflicts.

LD: Natalia, tell us what is «conflict» in your understanding. And what kinds of conflicts exist today?

N. Osadcha: Conflict, business conflict, is a term that we have started applying in our practice long time ago. So, we realized that many serious problems in business do not happen under the specificity of corporate conflicts, and also can not be identified as raiding. We also found that such a phenomenon as corporate raids and corporate conflicts have undergone such significant changes, have merged so much with other forms and interests that they can not already be attributed to some known classical forms and/or classifications. For us we started to usethe term “conflict” which is much wider than the above definitions and, of course, it includes all the types of conflicts that exist today.

According to our definition:

conflict means any situation that leads to different types of losses for business.

Today in Ukraine there isa huge number of conflicts` types, including external, internal, involving government agencies, with the participation of partners, competitors, employees, former employees and so on. It is possible to enumerate them for a long time, we even derived our classification of conflicts` types, which we present in our trainings for the CEO.

Nowadays there are no conflicts in the pure form – internal or external conflicts, and it does not even matter who initiated them, but what is important is that 95% of all conflicts are carried out with the participation of the state and / or law enforcement agencies, and with such participation the conflict goes to another level.

The main problem is the wrong identification of the conflict. For example, in 90% of companies` cases their consultants do not identify the situation as a “conflict”, they assign it the status of “problem”, which refers to the standard business operations. In this regard, the following mistakes occur: the strategy, instruments are incorrectly defined as well as the ultimate goal of the conflict, its possible timing, risks associated with such a conflict areincorrectly identified and also possible losses that the company may incur, their types and size.

LD: What should do a company that turned out to be in serious conflict?

N.Osadcha: Any conflict for the company is always difficult. It is difficult because sometimes this is the first experience of this kind for the company. And, as I said, to understand and correctly identify the conflict at an early stage is a guarantee that the company will avoid “deep diving” and as a result minimize the terms of the conflict, risks and all kinds of possible losses for business.

We have specially developed a number of trainings for CEOs and / or business owners, especially with the goal of teaching to identify correctly the conflict, showing and detailing the business, which may indicate that the company is already in conflict.

I will give an example from another area of life, which at first glance is in no way connected with business processes, but it very eloquently shows, how important the correct diagnosis is. For example, a patient comes to a consultation with a doctor who, after examination, diagnoses a patient with SARS, and prescribes treatment according to the diagnosis. Of course, such treatment will not bring relief, moreover, worsen the patient’s condition. But if the doctor had carried out a complete examination of the body, he would have seen that a patient’s coughing was a consequence of pneumonia. That is, what he sees and hears is a consequence of something very serious and protracted. With business can happen the same and that’s why the business often loses because it incorrectly identifies the situation, as a result a company builds a strategy improperly , uses the wrong tools, and, accordingly, adheres to the firstly chosen wrong motion vector.

LD. What tools should the business use to overcome the conflict as a winner?

N.Osadcha: Our company has been engaged in breaking the business out of conflicts for more than 10 years, S &P’s partners have been doing this all their lives for more than 20 years. We have had a long way to this, by attempts and errors and realized that withdrawing a company from any conflict using only one or two tools is impossible.

Some companies make the main bet on legal instruments, others put PR at the forefront, while others think that only GR will help them to get out of a difficult situation. We disagree that the choice of tools, their frequency (at what stage to use), main messages must be closely intertwined and built into a single strategy.

In the process of conflict development, both the strategy and the initially selected set of tools will change. Applying only one tool or deliberately building a strategy around it only reminds me of a picture when a military general wants to win a war only with help of one type of weapon, for example, a spear, although the enemy’s arsenal consists of infantry, tanks, aviation and even the fleet.

There must necessarily be a comprehensive strategy, including – PR, GR, a combination of time and messages. Of course, without a legal instrument it is impossible to get the company out of the conflict, especially if the level of complexity is high. But only a certain set of tools works in a certain percentage and with certain messages aimed at a certain result.

Unequivocally I can say that only due to such anapproach S&P Investment Risk Management Agency succeeds in successfully removing business from serious and protracted conflicts. Our successful cases are an indicator of the effectiveness of the developed strategy and selected tools.

LD: Can you give examples of different types of conflicts from your practice?

N.Osadcha: We do not have the right to disclose the cases with the names of the persons involved in the conflict, but I can cite isolated examples of different types of conflicts. So, there can be an internal conflict between partners. For example, one of the partners received (formal or non-official) control over the executive body and in fact exercised sole control over the company; he also subordinated financial flows to himself. Regarding to the second partner, the options in this case may be different, from the legal deprivation of the last ownership of the business, to bringing charges and removing it from business management.

Internal conflict, like any other, does not exist in its pure form any longer, but is always closely intertwined with the government. Sometimes the problems of one of the partners begin with the state bodies, and only in the process of conflict development it becomes clear who is behind it and who initiated the conflict.

There are external conflicts when a competitor in the market carries out illegal actions against another player of the market, sometimes only for the sole purpose of gaining market share and customers of his opponent. Such conflicts often “start” with an application for a crime filed by a competitor, and of course, such conflicts are also carried out with the participation of both government and law enforcement agencies.

LD: So we can say that the Conflict is very much similar to military actions. How do you think, if it is possible to talk about the similarity of such phenomena?

N.Osadcha: The similarity is very high, moreover, the term “war” is often used in the context of corporate conflicts. Very often they are called “corporate wars”. Any conflict is a “military action” in miniature. There is also an interested person, there is an ultimate goal of the conflict, there is a strategy of opponents and as in the war, everything changes very quickly depending on the actions of the opponent. Why else can you compare conflicts with the war, since the ultimate goal is very often either a business as a whole, or a valuable asset, or a significant market share, or financial flows. And this, in fact, is the vital artery of business. Therefore, the strategy of getting out of such a crisis for business should be very measured, systematic with the use of the right tools and exclusively within the legal field of Ukraine.

Also I want to draw attention to the fact that the right way out of the conflict will bring enough serious bonuses for the latter. We even gave this phenomenon the name “how make a plus from a minus for business”. At our training we indicate what “advantages” the business can get from the conflict. As an example, we can talk about forming a reputation component, both among the business community and in relation to the government. Also, the company gets immunity for possible conflicts in the future.

In fact, the conflict can give a lot of “pluses”, you just need to work on it.

LD: Why did S&P Investment Risk Management Agency choose for itself a specialization in breaking the business out of conflict as the main one?

N.Osadcha: We deliberately devoted ourselves to protecting business. We began our activity in 1998 when large investors just started to enter Ukraine. And, in fact, we spent a huge amount of time and gained invaluable hands-on experience. We got a unique chance to do what we like, do what we believe. I also believe in highly specialized professionals, regardless of the scope of their activities.

The problem of Ukraine is that many people try to offer everything, for example, if you go to a restaurant, very often you will find the menu line from sushi to borsch. But it is impossible to be good in everything: either you have spent your life on something exact, and then you are a professional in this issue, or you are everywhere and in a little bit, but in fact nowhere.

Working as a strategic business consultant, especially in such areas as conflicts, places the latter fully responsible for assets, investments, and sometimes for business in general, including the personal freedom of its owners.The responsibility is very high, as are the rates in such conflicts. Therefore, it will be an effective consultant who has strong practical background. I am sure that today S & P company corresponds to what it declares, and I’m glad that I’m a part of such a unique team of its kind.

Exclusively for LDaily

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Raiding is one of the most serious problems for business owners in the field of real estate. Despite the experience of other people, discussions and official statements, cases of raider seizures happen to be. Nataliia Osadcha, co-founder of the S&P Investment Risk Management Agency, PhD, MBA, told Property Times about the external and internal threats of raidingfor real estate and land lots, about mistakes, made by owners and possible ways to minimize risks and prevent seizure.

— In your opinion where is the possibility of raider capture hidden – inside or outside of the company?

— In fact, almost always raiding appears inside the company, as it often happens with the participation of either partners or top managers.A possibility of raider attacks basically arisesbecause of the objects owners` mistakes , moreover the mistakes are possible both in companies where there are several partners and where there is only the owner – in this case we are talking about an attack from competitors or state bodies.

— What internal mistakes make raider seizures possible?

— The main mistake is in the fact that in the very beginning of cooperation future partners do not anticipate the risks and do not ask themselves “what happens next?”. They srike hands thinking that the situation is asfine as it seems today and it will last ever. In theory, everything is ok,the business runs in a proper manner, the documentation is studied, lawyers are hired. However, these actions and evaluation, unfortunately, still do not reveal all the risks and do not protect the business from raider seizure.

To predict and estimate these risks and blanc spots we need to think like a raider, have his vision. Business owners and their advisors do not have such experience. Therefore, they can not understand how their arrangements will be violated by the raider.

In other words, the possibility of raiding is designed by the owners themselves, by means of the incorrect defining ofthe parties`responsibilities. When it comes to conflict, only legal documents will be valid. If there are no written agreements, you will prove nothing.

Some owners make mistakes drawing up and creating a business structures and charters. Also errors occure in giving too wide latitudeto top management , who often start cooperating with raiders.

Businessmen spend a lot of money on security systems, the object`s video control butat the same time they pay too little attention to settlingan agreement and protecting their investment , nevertheless sometimes these are quite large sums of money. People have an oral agreement and suppose it is enough.

— It can be explained as they have no experience, but , of course the owners must be aware about many examples …

— In fact, the owner of business, like any other person, does not want to understand and accept the fact that it is his/her fault. I can agree, it’s really hard to accept. And then, again, everyone starts from the start fact that the tenure, authorities, duties, terms, and conditions must be negotiated, and all parties must keep the agreement in future.

It also happens that we are ready completelyinform the owner about the risks , but he/she does not listen to us. The usual reasons for ignoring the consultant’s advice are “we thought you were wrong.”

The refusal to hire advisors, who can design the right system of protection forbusiness, owners explaines as theyhad beensure theywould not havefaced any problem.

Weneed to be reasisticand recognize the fact we are not working in a sterile environment.

— You mean the principles and conditions of working in Ukraine?

— Any investor must understand: if he/she wants to get a high profit – the risks will be also high. Getting here, in Ukraine, high profit (and there is a fairly high profit comparing to the European market), it is necessary to accept the fact that the risks are real and crusial. In any case, there are no ideal conditions for everyone anywhere, and when the object starts bringing profit worth million, you must be sure you meet those who want to get this object.There are a lot of ways to undertakeaggressive actions against property being both an insider or an official .

Ukraine is a casino country to some extent , but only if you do not estimate your risks in advance. Yes, it’s true, that without a qualified legal defense chances for business to be a success are fifty-fifty. Of course, I think this is not a reasonable approach when large and even very large investments areput at risk.

In general, in the classical scheme, the raider’s task is to go to the object ,controlthe profit and use this profit. Raidersas well remember about war expenses, which areconsiderable . The party, that has seized control over the facility, perfectly understands that sooner or later the owners will come to return the object. The task of the raider is to prolongate this process of return as long as possible, preferably for ever and a day, and ideally to make such a process just impossible. The longer the raider will use the object, the more money he will earn. Perhaps the raiders even admit that someday they will have to return the object, but while they are occupying it, they will receive income and strengthen the defense. For example, it is legal to “move” the object further away from the partner out of business or former owner.

And even if the owner is lucky enough to return the object, weunderstand that it isa situation of receiving much less profits than his due for all the years of property had been invaded.

— What legal and practicalmechanisms can be used to minimize this risk?

— It is necessary to think about risks at the stage of entering into a partnership, that is at the initial stage. If you do not have enough experience and knowledgeyou need to hireexperts. It is the analogy with the ski slope: if you do not know the route, it is logical and rational to take a local instructor for protecting yourlife and health, it is preferable when the instructorhas had many years of experience on these routes. The same is in business, especially ifyou ut at risk there are seriousinvestments.

If you estimate posiible problems in the beginning and, as a consequence, you understand a certain threat coming from the partner, you will not enter into cooperation with such a partner at all or you will find another one. In such a case your benefit is in the fact younot onlysave yourmoney, you will save time. If you want the partnership to be advancedand reliable, define the rules of the game: make betrayal unprofitable for the partner or, even better, make it impossible.

Let me give another analogy. You give the partner a key to the warehouse with jam (for example, this keymeans the partner has more shares than you, but it gives him/her a controlling share). Do you really think that sooner or later he/she will not think: why do I need him if the path to the jam is already in my hands? Commercial real estate is a lot of money and, accordingly, to get them is a great temptation. Just do not create such temptations, do not let people do bad things .

— One of your practices is preparing forecasts for the onset of the asset’s loss date and what will happen. Doed it mean that the date of raider capture can be estimated?

— Every situation can be estimated in the form of a diagram. Our companyhas been working in this field for more than 10 years , we know one case may last to for 3 and 7 years, as for instanceit isin the situation with the Sky Mall Shopping Mall, so we we are round-the-clock involved into active resistance to raiders` attacks , now we know fastwhat combinations the raiders will use against the owner and how to manage the current state of actions. It’s not magic, it’s experience and years of practical work.

Experience gives you a vision, and to resist a raider, you must think like him. Therefore, again, we always say that a pledge of successful investment in Ukraine is in registering and fixingall the conditions at the initial stage. At the very first stage of protecting businesswe closeall possible ways to act for raiders.

And this may be applied not only to real estate but also to land lots, that are either located on the state territory or owned by the state. Risks with land are no less butsometimes even higher. Business can invest to the land, then build a large object, and the land lot can simply be taken away. For example, on recognizing the land lease or sale as invalid.

— Here we return to the issue of external factors, where risks can come not from a partner, but from the state.

— Over the years of market formation nothing has changed systematically by the side of authorities. Even if you do not have a partner and in the project you are the sole owner, then the competitors can try to take the assets, and very often in the collaboration with the state bodies. The system does not change , regardless of the country’s development vector. The attempts will belikely at least for 10-15 years, it is experience.

Sometimes the seller of an asset has positiverelations with the state long enough, but it can stop every moment. And in the case of ordinary due diligence, lawyers just do not look so deeply, so they do not predictthe risks.However, then it occurs that the previous owner signed an agreement with the state “in a wrong way”, and , as a result, the entire chain of transactions is recognized as invalid. At this moment you are without a valuable asset and youspend a lot of money forattempts to return ypur proprety. It means expenses forthe legal protection and support , PR, mass media, here we add the lost profit. Although, again, everything could be fixed at the initial stage.

Unfortunately, as a rule, business in Ukraine starts looking for a solution only when the company was attacked. It must be something special in a human nature.

— How do raiders operate from somewhere around?

— Usually a request appears , it is a small, seemingly unrelated to all business activity, document. For example, a note in the media, a request for verification, etc. Owners tend not to pay special attention to such signals, considering them as something separate from the whole business or an isolated case. But in fact, as soon as the first such an insignificant request comes in, we already understand to what it can lead. Behind every such an invasive point there is its own ultimate goal.

Sometimes we immediately put on guard at the site, we start round-the-clock monitoring of registries, media. When you did not pay attention beforehand for prevention of raiding , you have a situation of being involved tothe war, it meandshuge expensesand the risk that you may lose the object.

Raiding by state bodies can be executed through criminal cases, checks, identification of violations of norms of construction works and much more. They will still have access to important documents (through the so-called seizure of documents).

If you get such a signal from the very beginning, you can avoid problems and even criminal cases. It’s like an illness that can be treated at an early stage , then it’s fast enough and costs minimum, or you can have an illness for a long time and have hard consequences , in case of property seizure these areexpensive actions.

But if the company still finds itself in aconflict, it just needs to be managed correctly. Then the company receives the image of an implacable fighter as a bonus. Everyone knowsthat it is better not to attack that company. What does it give? It gives a loweringof problems in the future. Raiders simply will not want to contact with such business, as exactlythe companywill fight to the win. It is easier to find another, a weaker one.

— They say that it is best to use all media, report an attack …

—We have quite a lot of tools for work and we should not think that protection from raiders is reduced only to PR campaign and usual legal support. Legal instruments in raiding are like a spear. It is impossible to win a battle with a spear. There must be a vary variable arsenal. And in order to understand how to use different tools, that it is not fighting to win a battle, but to win a war, that’s what life should be spent for.

We involve PR, GR, corporate trainings, reputational practices, coaching. At the same time, different instruments and their combinations are used at different stages of the conflict.

As for PR, then you need to use this tool very carefully. PR can be used when you have all the right evidence on your hands and your opponent does not. Because PR is a very subtle tool, and its incorrect use or use at the wrong stage can be turned against you. We can not also rely on the legal part of the issue, reporting on win in courts: as practice shows, this can not give any steady results.

— We will be read by today’s partners, perhaps, they will reflect on their agreements and their consequences. What should they do?

— Of course, as I said, it’s best to register everything in the begitting. But if they really have a partnership, what difference does it make if they sit down at the negotiating table – in the future or now? If one of the partners refuses, this indicates that the conflict issue is only a matter of time. Perhaps, after such negotiations, the partners will even have to disperse, but taking into account the interests of both sides. Either one of them is in danger of losing everything. But you can always sit down and agree honestly. Just need to pick the right time and right arguments. Show both partners the disadvantage of war. And very often such negotiations help to avoid both sides unnecessary costs and conflicts. And it is important to remember that in a serious conflict it is very difficult to really estimate what sum of money will be spent on the conflict itself and who will be the winner of this confrontation. Therefore, the peaceful resolution of a possible conflict for partners is an initial step .

«S&P Investment Risk Management Agency» owns the exclusive copyright of the information in this article. The author has the sole right to control the use of this material. It means the prohibition of using this information without our consent. The term “information” means texts, comments, photos, images, and other materials. Any use of the information or any part of this article without the written permission of the author is prohibited. The term “use” means copying, adaptation, re-writing, modifications, etc. In the case the irregularities are detected, the author has the right to copyright protection in accordance with the procedure established in Article 50-53 of the Law of Ukraine «On Copyright and Related Rights».

The biggest recent news was information about searches and pressure on large business by Office of Prosecutor General of Ukraine. Indeed, on March 16, Nova Pochta reported in the network that the Prosecutor General`s Office conducted simultaneous searches in the offices and warehouses of the company in such cities as Kyiv, Dnipro, Odessa, Lviv and Poltava. According to the press secretary of the PGO Larysa Sagan, the searches were carried out within the framework of criminal proceedings initiated on the fact of abuse of authority by officials of Nova Poshta LLC and other related enterprises on the grounds of criminal offenses under Part 2 of Art. 363 of the Criminal Code of Ukraine (abuse of power or official position) and part 3 of Art. 212 of the Criminal Code of Ukraine (tax evasion in a particularly large amount).

It is difficult to evaluate any conflict when you are outside and do not have documents that may point to the violations of law enforcement agencies. However, being based on our positive experience, our scheme works quite successfully: law enforcement agencies` officers easily create problems for any company without any reasonable ground and sometimes actually destroy business by opening criminal proceedings and carrying out investigative actions.

To date, the current legislation provides for a system an opportunity according to which everyone has the right to apply for a crime to the law enforcement agencies. At the same time, the current law obliges law enforcement agencies to include information contained in such a statement in the Unified Registry of Pre-Trial Investigations (ERPTI). In practice, quite often, instead of crimes allegations, reports from the SSU, employees of the State Fiscal Service (SFS), and other specific documents serve as the basis for information on the crime. Such reports may contain any information or facts witnessed by the above-mentioned persons. For example, in our practice there was even a “research on the fact of tax evasion”, compiled by the staff of the SFS.

In our practice we faced with such a wide range of such “reports of crimes” that, probably, we can already write a book. In our practice there were criminal proceedings started on the basis of a report, the author of which allegedly witnessed how a bribe was given, a report on tax evasion or on poor-quality products.

Very often according to such reports authorities open criminal proceedings against an exact legal entity and its management board, and information about the crime, introduced into the URPTI, is consciously qualified under part 2 or part 3 of the relevant article of the Criminal Code of Ukraine. This qualification increases the severity of the crime and automatically grants law enforcement authorities the power to carry out unsolicited investigative actions against the officials of the targeted company.

The current legislation provides a lot of variations of tacit investigative actions, on which many businessmen have never even heard and do not know how they are implemented. Officers of law enforcement agencies apply a wide range of investigative actions, from audio, video monitoring and surveillance of the person to the search of housing. But these types of covert surveillance are not used so often. The most common ones are listening, recording of telephone conversations of a person or persons suspected of committing a crime. This kind of unspoken actions begins at an early stage of the case, and the right to conduct them is provided by the court. At the same time, such decisions of courts you will never find, because, according to the current legislation, they are not entered in the Register of Court Decisions. Therefore, the person, against whom such investigative actions are conducted, is hundred per cent likely to be unaware of them.

Also, the frequently used investigative action is the removal of information from the servers of mobile operators, the receipt of a calls list for a sufficiently large period of time and texts of SMS messages. Such investigative actions are conducted on the basis of a court order. They enter the Register with a significant delay and they do not contain personal information of involved persons. They may be found only if the company is aware of an open criminal proceeding or carries out continuous monitoring of information and, according to certain criteria, comes to the conclusion that such an action is carried out with respect to its officials. It is very difficult to find and recognize such information at the initial stage of the investigation. In 95% of cases the company finds out that criminal proceedings have been started against its relative or its officials, already when the search is conducted. The business also does not have the opportunity to find out about the fact of the search in advance, because decisions that are granted permission to conduct a search are not made public in the Unified Register of Court Decisions.

Based on our experience, in addition to the above-mentioned investigative actions applied to business, temporary access to things and documents, disclosure of banking secrets (access to banking information), interrogation and inspection are also popular. At the same time, conducting a search, law enforcement officers very often conduct other actions, which are not provided for by the Code of Criminal Procedure, i.e. the seizure of samples of goods for research etc. It is important to note that searches and inspections may be conducted many times, both for the company itself, and for its clients and related companies within the framework of the same criminal case.

Unfortunately, today we can state the fact that it is quite difficult for business in Ukraine to defend itself from illegal reports of a crime, and the withdrawal of the conflict into the public sphere is not a guarantee of its successful resolution in the shortest possible time. Business is forced to show ingenuity in order to prove its rightness and defend the right to conduct business in our country. To do this, it is necessary to apply the full range of available tools and PR is only one of them. The process of proving a negative affect can take months or even years. Acting within the legal framework is the only correct way to resolve conflicts of this level of complexity, since this is the basis for changes in the entire imperfect legal and state system. This principle should be adhered to by all market players, without exception. And only in this case the business climate will change to better.

And those people who are used to do business under the old rules will have no place in the new ecological environment. It will be unprofitable to create problems if there are no more willing to solve them outside the existing norms and rules. The system will be changed when all market players stand for each other, instead of playing the role of outside observers, indifferently watching their market companions or competitors’ destruction, forgetting that because tomorrow they may be in their place. However, today the principle of “voice in the wilderness”, unfortunately, continues to work.

We do hope, that the case with the conflict of the Nova Poshta company will be an exception of the rules.

«S&P Investment Risk Management Agency» owns the exclusive copyright of the information in this article. The author has the sole right to control the use of this material. It means the prohibition of using this information without our consent. The term “information” means texts, comments, photos, images, and other materials. Any use of the information or any part of this article without the written permission of the author is prohibited. The term “use” means copying, adaptation, re-writing, modifications, etc. In the case the irregularities are detected, the author has the right to copyright protection in accordance with the procedure established in Article 50-53 of the Law of Ukraine «On Copyright and Related Rights».

Mykola Siutkin, CEO and founder of S&P Investment Risk Management Agency, tells why Ukraine, a country with huge potential, does not have a flow of foreign investments and what must be done to change the situation.

S&P Investment Risk Management Agency, a Ukrainian company, that specializes in integrated business solutions, shares experience and insists that there are no miracles. There is no such an effective method which can solve a problem in a company immediately. In protecting interests of business, only a set of tools — GR, PR, crisis communications, legal and managerial ones -can be effective. S&P Investment Risk Management Agency can provide such multilevel protection to investors in Ukraine and teach themavoid mistakes and minimize risks.

All this M. Siutkin told in his interview for LDaily magazine, basing on own experience and successful cases of his company. It was a friendly and honest conversation.

LD: In 2017 Ukraine had risen to 4 positions in the international Doing business rating and now takes 76th place out of 190 countries. Does it in your vision mean changing the balance of Ukrainian and foreign investments and the potential for FDI inflow to Ukrainian economy in 2018?

M. Siutkin: In my opinion changing of Ukraine`s position in any rating, including the most affluent one, means the fact Ukraine comes in sight of a probable investor like a potential investment object. The final decision is taken by investors not on the basis of ratings, forums, promises of the country Government, absolutely not, investors take their decision only after detailed consideration of business environment and potential risks. Very often the signal for investors to make a decision and enter to a new market is the successful story of other big players. Neither rating nor place in it makes an investor to collaborate with a country where business has been struggling from raiding, illegal actions of law enforcement agencies or oversight authorities. If mentioned risks are minimal large foreign players will come regardless of the country’s rating, subject to favorable financial performance. Therefore, in order to obtain a flow of foreign investments it is necessary to form the image of the country and show concrete examples of successful investment results. This is the first stage and later it is necessary to create comfortable and understandable conditions in doing business for foreign investors, starting with the protection of property rights, taxation, and simplifying bureaucratic procedures.

LD: What risks do foreign investors face when they start working in Ukraine and how they can avoid these risks?

M. Siutkin: Ukraine in the default mode is a high-risk country. But at the same time one can not omit the fact that size of presumable profit in our country exceeds the standard interest which foreign companies can receive in other European countries. I specially focus on European countries, because Ukraine is unique in its location for European investors as well as for many others.

Fixing investment attractiveness of our country one can not ignore the huge area of Ukraine (the largest in Europe): the population of today according to various data is 39-43 million people, people are educated, and the cost of labor is minimal compared to the countries of Europe. There are plenty of advantages in Ukraine, but they are really cancelled out by those risks, which really press not only foreign but also Ukrainian business.

• To the main risks we include loss of investments and / or assets in the territory of Ukraine.

• The second on the list, but equally important is a risk of conflicts with Ukrainian partners, which, as a result, can lead to loss of assets and / or business

• The third significant point is a risk of conflicts with the state authorities, especially with participation of law enforcement agencies.

The risk issues are serious, especially for them we have established a special training for CEOs of foreign companies , during the training we show types of risks, their levels, common mistakes. And, what is the most important, we teach foreign investors how to avoid risks and minimize already existing problems. In any case, regardless the currently present difficulties it is easy to see the fact that large and medium foreign companies have been successfully operating in Ukraine for a long time and in different fields of activity. But it should be noted that business, spending time for studying new business environment, risk analysis as well as minimizing it, will be a success. It is clear, that business can not resist load without help. That is why during the training we carry through a team game with the involvement of experts at all stages of the investment project, where real implementation is required, also we provide close cooperation with local and international business associations.

LD: Investors protection is now a very important issue for our country. Which, in your opinion, investors protection methods are really effective?

M. Siutkin: Unfortunately, there is no magic pill, or any tool that effectively with efficiency removes the problem in the company by one touch. In the process of building and implementing business protection methods, we apply a variety of tools, such as GR, PR, crisis communication, crisis management, coaching, mentoring, management and legal approaches, which are used according to the complexity of the task. Building of a full-fledged defense is a multilevel process that is individually developed for an individual case. And very often tools, perfect in one case, can become completely ineffective in another. It reminds me of the Iron Man competition, which never has two identical starts. A sportsman needs to change tactics, strategy, and creativity just during the race, depending on the basic data on a particular day and even at the start time.

In any case, we are for a systemic fundamental approach that allows businesses to feel safe in such a difficult business environment in Ukraine. I would also like to add that the current legislation in Ukraine gives to business enough methods to protect its rights, the question is only in the ability to use such methods properly. I fundamentally disagree with an opinion that current legislation in Ukraine is weak in terms of protecting a foreign investor. Legislation is rather progressive, but its implementation is very weak. However, you can work with it.

LD: Fighting corruption, including such in a real estate sector, is still one of the most important tasks for the state. What advice would you recommend to an investor starting his business in Ukraine?

M. Siutkin: The only advice is to act only in the legal field, do not accept incorrect “rules of the game”. You must not try to submit them as the only way to do business in Ukraine. It is not true, believe me, there are many successful examples of doing business in Ukraine, absolutely honest, transparent and legal. Having started to play according to the rules of others you are not able to change them. But even in this case you must act only within the framework of the law. And from a financial point of view such a strategy turns out to be much more profitable than a false position imposed from the outside.

LD: Business is not only work with assets and protecting investments, business means attention to people. What could you say about partnership and how you advise to build investors` partnerships?

M. Siutkin: Any business is looking for a partnership, especially when entering new markets. And this is normal. Partnership with local business simplifies acting of a foreign investor in new markets, helps to establish new relationships, realize projects, etc. Partnership in some projects is simply necessary, but, at the same time, it is necessary to include rationalism and pragmatism both in the process of choosing a partner and in the process of establishing a partnership. My advice is as follows: a successful partnership in Ukraine (but probably not only) is real if the correct system of checks and balances is created and does not allow to act with violation of rights toward the partner, otherwise it is just not profitable. A reasonable approach to designing partnerships is a crucial thing to minimize corporate and / or raider conflicts. According to our analyst, mistakes in the registration of partnerships in 95 % lead to loss of assets. Therefore — minimization of possible investment risks must be done at the “zero” stage, before starting the investment project. A correct beginning of an investment project is guarantee of its successful implementation.

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