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Making it work in Russia - Challenges to growth in Russia - EY - Global

Making it work in Russia

Challenges to growth in Russia

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Companies struggle with a range of challenges, none of which show signs of a quick fix.

Emerging markets like Russia present unique challenges for businesses. Consumer product companies can expect high turnover rates, changing government regulations and corruption. With those manageable risks in mind, Russia is remains a good place to do business.

Managing HR issues

Human resources (HR) and talent management remain at the forefront of executive strategic thinking in Russia. We know that turnover remains high and it's challenging for businesses to recruit talented employees.

HR departments continue to lay off staff, control salary increases, reduce benefits and manage expectations downward.

One of the most challenging questions for country managers is how much to raise salaries. With inflation at 9%, many companies are looking to increase salaries by 12%-17%.

Another challenge for companies is how to successfully manage expatriates who can block the development of senior local staff and may not remain in the job long term.

Working with government intervention and corruption

It is becoming progressively harder to do business in Russia due to the unpredictable tax environment and bureaucracy.

Additionally, corruption can hinder growth. It can take the form of local competitors not paying taxes and counterfeit products on the marketplace.

Consumer product companies must keep these risks in mind when planning to do business in Russia.

Keeping a lid on costs

The cost of doing business in Russia has risen because of challenges like HR issues and changing tax regulations.

Recent rising costs have led to lower profits. In 2010, the cost of raw materials rose sharply driven by supply constraints, increased demand and investor speculation.

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