September 24, 2022

Big 4 Firms Condemn Russia’s Invasion of Ukraine, But Will They Sever Relationships With Any Russian Clients? (UPDATE)

[Updated with additional statement from Deloitte Global.]

When Deloitte’s global HQ posted a statement on its website on March 1 (see below in original post from Tuesday), the firm said it had “suspended business operations and client service in Ukraine as we focus on taking care of our people and their loved ones.” But on Wednesday, Deloitte Global updated its statement to say it “is currently reviewing our business and presence in Russia,” making it the first Big 4 firm to say publicly that it’s at least considering pulling out of Russia. But doing so is easier said than done, according to a Wall Street Journal article on March 1. Jean Eaglesham wrote:

One difficulty for the Big Four firms, according to people familiar with the matter, is that the Russian members of their networks are separate legal entities, answerable to local regulators.

The Big Four networks’s governing rules allow firms to be expelled only on specific grounds, such as gross misconduct. Booting a member firm because of the actions of its country’s government would be a complicated, drawn-out process, the people said.

The Big Four are also concerned about potential retaliation against staff in Russia if they ax clients there, the people familiar with the matter said.

Grant Thornton became the first top global accounting firm to boot its affiliate in Russia, FBK, out of its network of firms as a result of the invasion of Ukraine.

Here is the updated statement from Deloitte. We have bolded the new portion of the statement that was added by the firm yesterday:

Deloitte stands unequivocally with the people of Ukraine. Russia’s invasion of this sovereign nation is an indefensible act of aggression that echoes the darkest days in European history. Our overriding concern at this time is the well-being of our colleagues in Ukraine and their families. We are taking every possible action to ensure their safety and that their essential needs are being met under fast changing circumstances. We are concerned about all of our colleagues affected by this ongoing crisis.

For the time being, Deloitte has suspended business operations and client service in Ukraine as we focus on taking care of our people and their loved ones.

Deloitte is currently reviewing our business and presence in Russia. We are mindful of our professional obligations and the changing circumstances as we undertake this review. We will continue to comply with all applicable sanctions; Deloitte does not serve any entities of Russia’s Central Government.

Our primary focus will continue to be for the safety and well-being of our people as well as bringing to bear our global resources to address the humanitarian needs across Europe.

Our hope is that peace will prevail quickly.

[Original article posted on March 1.]

While all the Big 4 firms and some of their leaders throughout the world have pledged their support for Ukraine and denounced Russia’s invasion and assault of its neighbor, they’ve kept quiet on whether they’ll end any client relationships in Putinville.

Deloitte, PwC, EY, and KPMG have offices in both Russia and Ukraine. The Big 4 can release statements and make posts on social media about how they “stand with Ukraine,” but will they, as billion-dollar global brands, just walk away from certain clients in Russia? Like Delonte “Ghost” Rivers said in the movie Takers: “Aye, business is business. And money is money. I never said we were friends.”

The silence from three-fourths of the global CEOs of the Big 4 firms (Punit Renjen of Deloitte [Renjen has since tweeted about it], Bob Moritz of PwC, and Bill Thomas of KPMG) on Russia’s invasion of Ukraine speaks volumes. The only one who has publicly said anything about it is Carmine Di Sibio of EY:

But the leaders of some of the Big 4’s global competitors in the consulting world have actually come out and said they no longer will serve any government entity or do any new government work in Russia.

As Bloomberg noted today, sanctions imposed by the US, UK, and European Union in response to Russia’s invasion of Ukraine are forcing professional services firms globally to consider whether they should continue working with Russian clients who are state-owned. Several law firms said they are reviewing and, in some cases, planning to cut ties with major Russian clients as pressure mounts to comply with sanctions. [See this Above the Law article.]

So far that we’ve seen, Jon Holt, CEO of KPMG UK, is the only leader of a Big 4 firm who said publicly there will be client relationships that will be ending due to the situation in Ukraine, although he didn’t mention Russia by name. Holt wrote in a post on LinkedIn: “We are reviewing and adapting our client work and operations to align with sanctions and comply with all new laws. This will mean ending some of our client relationships in the UK and globally. The situation is fast-moving and is being kept under close review on a daily basis.”

In regards to the firm’s employees in Ukraine, Holt wrote: “First and foremost, we’re focused on the health and safety of our people and their families. KPMG is a global firm with offices in Kyiv and across the region. We’re in constant dialogue with our local colleagues to support them through this period, and our member firms are working to ensure they are able to provide all necessary support and assistance to them.”

In a statement on Twitter, KPMG’s global HQ didn’t say anything about potentially severing ties with clients in Russia: “KPMG around the world is also fully adhering to the sanctions introduced by various governments, which hopefully will contribute to bringing an end to this crisis.”

PwC’s official statement only addresses its support for the firm’s colleagues in Ukraine:

Deloitte has been very quiet regarding Russia’s invasion of Ukraine; the firm hasn’t released an official statement about what Russia is doing. [UPDATE] This afternoon Deloitte released a statement on the situation in Ukraine, saying the firm “has [temporarily] suspended business operations and client service in Ukraine as we focus on taking care of our people and their loved ones.” Deloitte’s full statement says:

Deloitte stands unequivocally with the people of Ukraine. Russia’s invasion of this sovereign nation is an indefensible act of aggression that echoes the darkest days in European history. Our overriding concern at this time is the wellbeing of our colleagues in Ukraine and their families. We are taking every possible action to ensure their safety and that their essential needs are being met under fast changing circumstances. We are equally concerned about our colleagues in Russia and adjoining countries affected by this crisis. We are bringing to bear our global resources to address the humanitarian needs unfolding across Europe.

For the time being, Deloitte has suspended business operations and client service in Ukraine as we focus on taking care of our people and their loved ones.

Deloitte firms will continue to comply with all applicable sanctions.

Our hope is that peace will prevail quickly.

Before Deloitte Global released its statement this afternoon, Richard Houston, CEO of Deloitte UK, took to LinkedIn to address his firm’s stance on the invasion. He wrote: “Deloitte North & South Europe is united with our Global Network in providing support to our colleagues and their families in the region, alongside helping wider humanitarian efforts. We unequivocally deplore Russia’s military invasion of the country and its absolute disregard for Ukraine’s sovereignty and independence.”

And it’s been interesting reading the comments below Houston’s post. In summary, many of his followers/connections on LinkedIn said social media posts of Ukraine support are nice and all, but Deloitte should no longer do business in Russia. Actions speak louder than words.

As of this morning, EY was the only Big 4 firm to actually post a statement regarding the crisis in Ukraine on its global website. But like the others, EY sidestepped the issue about the future of its Russia-related work: “As a global organization, we are working with relevant governments to comply with the recently enacted country policies and applicable sanctions.” EY’s full statement says:

We denounce the war in Ukraine and condemn the violation of international law. We are deeply concerned by the humanitarian catastrophe unfolding in Ukraine. The Russian military invasion in Ukraine is in direct opposition to the values that are core to our organization. It has, and will continue to cause, a great deal of suffering across Ukraine, Eastern Europe, Russia, and elsewhere. We urge all parties to work towards a peaceful resolution.

From the outset of this crisis, we have been primarily focused on the safety of EY people in Ukraine and colleagues outside of Ukraine who have family and friends in the midst of this ongoing military conflict. We have been determined to bring the full support an organization such as ours can bring – to help those who want to leave, as well as those who have had to, or have chosen to, stay. We have been deeply moved by the outpouring of support across our organization for those suffering as a result of this war. Our EY family is pulling together in ways both large and small to support those impacted. As a global organization, we are working with relevant governments to comply with the recently enacted country policies and applicable sanctions.

We’ll update this article if any new information appears regarding the Big 4’s future (and future client work) in Russia.

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2 Comments

  1. I am in EY audit practice in one of CIS cluster countries. CIS basically disintegrates now. Russia is more than 60% of CIS revenues. Ukraine (also part of CIS) is firm to separate from Russia. Our CMP said we separate from Russia or everyone will just leave the firm. This is true, as people in my country practice can’t stand to be associated with Russia in any way.
    I hear from partners that kicking-out Russian practice from EY network is almost done deal. Other network firms just right away turn down any cooperation with EY Russia, regardless if it relates to government or private clients. (btw EY has by far the largest concentration to state-owned clients in Russia as compared to other big4, and it’s vurtually certain big4 will be banned from serving them by Russian regime sooner or later, so it would have been a big hit anyway)
    That is to say, our people in Russia and Belarus below partner level have never been suppotive of either regime. CMP in Belarus publicly condemned rigged elections in Belarus in 2020. In Russia however, partners had very close connection to government, which is the reason EY is #1 in Russia and CIS as we had most of the large state companies. Carmine personnaly flighed to Moscow a few times to speak with Gref as part of Sberbank audit tender which we won in Feb. Global Chairman was always at Russian ecenomics forums even after 2014. You imagine how Ukrainians felt about that.
    My colleagues in Russia and Belarus are now depressed by what’s happening. I pity them but not too much…

    1. 1. “That is to say, our people in Russia and Belarus below partner level have never been supportive of either regime.” – based on a survey or your personal guess?
      2. Any word to Neo-Nazi militia (Azov Battalion) in Ukraine which has been killing tens of thousands local residents since 2014?
      3. Sounds like you didn’t know there are good amount of people from Ukraine tried to become independent from Ukraine and supported Russia’s military action.
      4. Do you know US government and NATO set up/funded biological weapons labs in Ukraine? Guess what virus they “studied” in those labs?

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