10 Ways the Ukraine-Russia War Affects Small Businesses in the US

From bracing for even higher inflation and disruption to supply chains, to cybersecurity under increased threat, the Russian-Ukraine conflict is taking its toll on businesses around the world, including in the United States.

Being familiar about how the war could impact businesses can help companies take the necessary precautions and be better prepared.

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10 Ways the Ukraine-Russia War Affects Small Businesses in the US

Take a look at 10 ways the war in Russia in affecting small businesses in the United States.

Supply Chain Disruption

The global supply chain, which has not fully recovered from the COVID-19 pandemic, has been hit further in the wake of the Russia-Ukraine war.

For businesses that source materials and goods that have dependencies on Russia or Ukraine, they can expect even longer lead times.

Businesses should therefore evaluate their supply chain risk and make inventory decisions accordingly.

Prices of Food Going Up

The cost of food and raw materials were already rising before the war broke out due to COVID-19 pandemic, with supply chain disruption and energy price increases. However, since Russia invaded Ukraine, prices of the likes of wheat have risen sharply.

The escalating cost of certain products is having a negative impact on businesses that rely on them.

Known as the “breadbasket of Europe”, Ukraine accounts for about 20% of beer’s usage of barley. The conflict in Ukraine is thereby threatening to push the price of the likes of beer up. Such rises would inevitably have an impact on small businesses that rely on beer, such as bars and restaurants.

Gas Price Increase

Of course, it’s not just the cost of food rising, as the war in Ukraine has shaken the oil market, which had led to higher gas prices in the US.

With gas prices nearing $4 nationwide, businesses which rely on gas for operations are feeling the pinch, with higher charges at the pumps having a direct impact on cash flow.

Inflated Borrowing Costs

The US Federal Reserve has already increased interest rates but increasing costs from the war is likely to raise rates further. This would result in the shoring up of borrowing costs for businesses and consumers.

Product Stockpiling

With many sectors facing shortages of essential products, the panic-buying antics of the pandemic could repeat itself. As a result, businesses and consumers may stockpile items. Farmers, for example, who have seen fertilizer prices skyrocket as much as 300% since early 2021, and which look set to increase further due to the Russia-Ukraine war, are threatening to bulk buy the likes of fertilizer.

Growing Cybersecurity Concerns

A week before Russia invaded Ukraine, the Cybersecurity and Infrastructure Security Agency (CISA) issued a rare ‘Shields Up’ warning to alert how businesses could be impacted by malicious cyber activity against the US.

Even if a business is not threatened by a cyberattack directly, the organizations it relies on to remain operational might be.

With the threat of malicious cyber-attacks from Russia remaining high, small business need to remain vigilant in taking protective measures to help safeguard their business from potential attacks.

Halt of Operations in Russia

Due to sanctions imposed on Russia impacting logistics, a number of businesses have halted operations in Russia.

Agriculture and Logistical Difficulties

In response to Russia’s attack, US agriculture companies operating in Ukraine have been forced to close offices and facilities in the war-torn country.

Logistical difficulties are one of the primary challenges for many US agricultural businesses trading with Russian and Ukraine. Importers and exporters are facing issues with settling payments in the case the trade partners work with sanctioned Russian banks.

Shortage of Software Engineers

In recent years Ukraine has become a popular country for the outsource of software development. As reports show, Ukrainian software developers have been hailed as the ideal software development destination, and subsequently, more businesses in North American had chosen Ukraine to expand their development capability.

However, Russia’s invasion of Ukraine has disrupted basic public services like telecommunications. Not only have such essential services been significantly disrupted but many software professionals have left Ukraine and moved to neighboring counties. As a result, small businesses in the US that had relied on using outsourced software engineers in Ukraine may have ran into issues and can expect the cost of this talent to rise and such vacancies be more difficult to fill.

Russian-Themed/Named Businesses Have Taken a Hit

Many small businesses in the US that go by a Russian name or theme, have faced major disruption since the war broke out in Ukraine.

Russian Samovar, a restaurant in Manhattan’s Theater District witnessed its business drop virtually overnight, with a string of cancellations. The owners are now under pressure to remove the ‘Russian’ from its name.

A similar situation faced The Russian House restaurant in Austin, Texas. The owner admitted that the name, right now, brings pain, so renamed the restaurant as The House.

With small businesses feeling the pinch from multiple directions, it is vital to plan for the potential impact of the war on business operations and develop a strategic business forecast to understand how the business will be impacted so that the risks can be proactively managed.

Image: Depositphotos

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