What Does War in Ukraine Mean for Businesses?
War has a number of effects on economic and business affairs. In most cases, war leads to inflation and a rise in prices. The reason for this is because of the government spending too much money on the war. When governments print too much money to fund war, it causes the inflation rate to go up, therefore increasing prices on consumer goods. War can also affect the economy by causing fluctuations in employment.
In some cases, unemployment decreases because factories increase output and there are more “jobs” available in the military. However, a war at home is disastrous for employment due to infrastructure damage, supply chain disruption, refugee crises, and the tragic violence involved.
War also causes a decrease in foreign investments as well as a decrease in trade between nations that are at war with each other or fighting over territory or commodities of value such as gold mines or oil fields. A decrease in foreign investment means that businesses no longer have access to funding from other countries which they can use to start new ventures or expand the ones that they already have running. A decrease in trade between nations means that businesses have fewer potential customers which leads them to have lower revenues and profits which can cause some companies to shut down altogether if they do not find alternative ways of generating income, such as offering online services instead of physical ones.
So what does this mean for your business? Here’s some advice from experts:
If you’re in the oil and gas industry, be prepared for higher energy prices, said Todd Buchholz, former White House economic adviser under President George H.W. Bush and author of Love Thy Neighbor: A Story of War.
But other than that, don’t panic — there’s no need for American businesses to start stockpiling goods or change business strategy overnight. In fact, Buchholz said he would wait for a while longer to see how world markets react to events in Ukraine before taking any action with his investments or business operations.
“I’m not worried about it at all,” he said. “This is a lot like the Cold War period where we have…skirmishes around the world.”
This war will unfortunately continue to affect lives and businesses in negative ways, but things are going well for the Ukrainian cause. They are receiving weapons and aid shipments from other countries including the EU and the United States, which gives them a chance to succeed. Anyone with business interests in Russia is advised to exit the market there as quickly as possible though, as that country enters a recession and experiences punishing sanctions across their economy.