'Big 4' leave Russia as Moody's says invasion has replaced Covid as biggest supply chain threat

Mon 7 Mar 2022
Posted by: William Barns-Graham
Trade News


Big four accountancy firms KPMG, PWC, Deloitte and EY are cutting ties with their operations in Russia following the invasion of Ukraine.

The exits follow Accenture’s announcement on Friday that it had axed its 2,300-person Russian business.

McKinsey, Boston Consulting Group, Bain & Company, and Grant Thornton have also pulled out of the country, the FT reports.

‘Game is up’

“Everyone knows the game is up in terms of being able to retain a network firm in Russia,” an insider at one Big Four firm told the FT.

The Guardian reports that EY had 4,700 workers and partners in Russia and Belarus, while KPMG had 4,500, PwC 3,700 and Deloitte 3,000.

Risk assessment

The firms will no longer operate under the brands of the multinational accounting firms but may continue to work in Russia under different names.

Audits of Russian groups with foreign operations – including state-owned entities – could still be carried out by PwC network firms, provided they are not the target of sanctions and passed “heightened risk assessment”, a source told the FT.

PwC will not work for Russian clients if they are sanctioned by any jurisdiction, they added.

Covid replaced as supply challenge

A report by credit ratings agency Moody’s has said that the Ukraine crisis has replaced Covid-19 as the biggest challenge to global supply chains, reports CNN.

“The greatest risk facing global supply chains has shifted from the pandemic to the Russia-Ukraine military conflict and the geopolitical and economic uncertainties it has created,” Moody’s Analytics economist Tim Uy wrote.


Moody’s warned that companies reliant on energy resources would be particularly affected, as well as those using computer chips.

The shortage of chips, which began during Covid, will “worsen should the military conflict persist”, it claimed.

Russia supplies 40% of the world’s palladium used in the production of semiconductors, while Ukraine produces 70% of the world’s neon gas used in making computer chips.

US business risk

Another report by Dun & Bradstreet said that US companies are particularly exposed to supply chains connected with Russia and Ukraine, reports Forbes.

It claims that of 374,000 businesses worldwide who rely on Russian suppliers, 90% are based in the US.

Of the 241,000 businesses who rely on Ukrainian suppliers, 93% are based in the US.

Ratings downgrade

Sovereign ratings for both Russia and Ukraine have been downgraded due to the conflict, reports Reuters.

Moody’s downgraded Ukraine’s sovereign rating by two notches to Caa2 from B3 in recognition of the country’s financial situation.

“Even if the military conflict is brought to an end relatively soon and significant external support is provided to help reconstruction, it will likely take a significant amount of time to repair the extensive damage to the country’s productive capacity caused by the military conflict,” Moody’s said.

Moody’s and Fitch both downgraded Russia’s sovereign rating to ‘junk’ grade last week following severe sanctions by western countries, reports First Post.

Russia credit risk

The downgraded ratings signify that even through financial commitments are currently being met, the country is vulnerable to high credit risk.

According to the Association of Corporate Treasurers, a credit rating is a formal, independent opinion of a borrower’s ability to service its debt obligations.

Investors may only lend money to companies or countries that meet a certain ratings standard.

Those that do not may not be able to raise finance, or may only be able to do so with punitive payback conditions.