Five major crises with a huge impact on companies in the region were identified: Soaring energy prices, high inflation, Putin‘s war in Ukraine, COVID-19 related supply chain issues and labour shortages. While the COVID-19 crisis marks the starting point of the turbulences with lockdowns and supply chain disruptions, the Russian invasion of Ukraine triggered a number of shortages and price increases in energy and commodity sectors that needed quick, costly and often creative solutions. Currently, the high and persistent inflation as well as the volatile and high energy prices are regarded as the biggest challenges for management. Companies seem to have found ways to cope with war- and sanctions-induced effects on their businesses in Ukraine and Russia. Labor and talent shortages rank lower in comparison. However, interviewees from the construction and mechanical engineering industry mention that they strongly suffer from the tight labor market.

Agility, intensified communication and risk management are mentioned as effective crisis management strategies. Surprisingly, one third of the interviewed firms had no special crisis management tools in place. Supplier diversification, substitution of input materials, price increases and formation of strategic partnerships are used to address inflation and supply chain issues. Improvement of IT infrastructure, better coordination of production and implementation of crisis trainings contribute to efficiency improvements and resilience building.

Overall, the attractiveness of CEE is rated among foreign firms as „good“ (average score of 7/10). Growth is still the main motive for expanding to and operating in CEE followed by manufacturing and sourcing. CEE as a location for R&D centers is gaining in importance. Poland and the Czech Republic are the most attractive markets for foreign companies. The views on Hungary and Romania are diverging among the interviewees: the good business outlook is often tarnished by economic and political challenges. The „rebuilding Ukraine“ vision makes the war-torn country a promising future investment target. In the Balkans, neither further investments nor divestments are planned. Regarding Russia, the willingness to withdraw and divest is given although a decline of just 8% in Austrian exports to Russia in 2022 tells a different story.

A checklist for effective crisis management is concluding the report. Flexibility in adjusting to the new situation, intense and clear communication within the organization, the empowering of local teams and good old risk management are on top of the list. In contrast to the past, we see more „innovating out“ of the crisis approaches – when the new way of thinking is to always expect the unexpected then innovation is the best answer. Intra- and entrepreneurship are needed more than in „normal times“.

Download: Research report on „Doing business in uncertain times in Central and Eastern Europe”