Transfer of power in the post-Soviet states. Chances and political risks.

Most post-Soviet leaders are getting old – their average age is 60.5 years. It is no secret, therefore, that they are going to leave office in the not too distant future. Why, however, should the management of a multinational enterprise from the Western hemisphere consider age structure and terms of office in East European and Central Asian countries? The answer is simple: because there is an important political risk factor inherent in the transfer of power.

Such a power transfer might have immediate negative effects, for instance when a non- or poorly orchestrated change leads to chaos. This is not only associated with security risks. Rather, in such an environment, the networks a company has established over years often break away. Informal networks and good relationships are crucial success factors, though, particularly in the post-Soviet region. If they deteriorate, projects with public partners are at risk. In the worst case, the new leaders and their networks might regard MNEs maintaining strong relations to former leaders and their networks as opponents. In such constellations, the new elites will favour companies they themselves have good connections with.

The bad news for MNEs is that they are quite unprotected against such a transfer of power. Companies can insure themselves against certain risks such as expropriation, but there is no insurance covering transfer of power. The good news is that a transfer of power need not take MNEs by surprise. Establishing a broad local network and thorough monitoring provided by in-house or external experts are suitable mitigation strategies.

For more information on this topic, please follow the link to our article published in the journal OstContact (in German): https://owc.de/2019/10/14/machttransfer-im-postsowjetischen-raum-chancen-und-politische-risiken/