MYKOLA SIUTKIN: “TO BE SUCCESSFUL BUSINESS HAS TO SPEND TIME LEARNING NEW BUSINESS ENVIRONMENT”


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 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 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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