Winston Churchill once described Russia as ‘a riddle wrapped in a mystery inside an enigma’ – and recent events in the country certainly show something of this unpredictable nature.
After the crisis of the late 1990s when the Russian economy collapsed, the economic climate had been improving and stabilizing, year on year. The Economist Intelligence Unit says direct foreign investment in the country in 2003 was higher than the $7.8 bn attracted in the previous twelve years combined, and predicted GDP would grow by 6 percent.
But when Russia’s richest businessman – Mikhail Khodorkovsky, CEO of oil firm Yukos – was arrested at gunpoint, the Russian economic environment suddenly didn’t look so rosy. Investor confidence fell, the Russian stock market suffered a severe (though temporary) drop, and whispers of Russian foul play started to circulate again.
The full impact of this event has yet to be seen but one outcome is the increased international profile of corporate governance practices at Russian companies. The focus now is on repairing the damage that has been done and ensuring Russia continues on its path of strong economic development.
According to Valery Goldin, vice president of international and investor relations at telecommunications company VimpelCom, corporate governance has been a key issue for Russian IROs since the economy started to pick up in 1999. This interest was heightened by the introduction of the Federal Commission for the Securities Market’s (FCSM’s) Corporate Governance Code, which was approved by the Russian government in November 2001.
‘The FCSM has become very active in trying to organize the capital markets, and has paid specific attention to IR,’ comments Goldin. He says there are two key areas IROs in Russia need to focus on. The first is the disclosure of information, including obligatory publications such as interim and annual reports. The second is making the company known, and facilitating interest in the stock.
Goldin explains how he has recently paid more attention to the internet as an IR tool. He also cites the ‘cooperation of senior management’ as an important factor in making his IR work run smoothly. ‘I have constant contact with the CEO and CFO,’ he comments. ‘They are aware of everything that goes on regarding IR, and post-Sarbanes-Oxley they pay even more attention.’ Goldin is also a member of the Association of Investor Relations Professionals (Ossi in Russian), the Russian IR society which was formed in 2001.
This IR veteran will no doubt be in attendance at the first annual IR Magazine Russia Conference and Awards in association with Ossi, being held in Moscow on January 29. The conference will be a full-day program exploring the key issues facing the Russian investor relations and financial communication communities. Topics to be discussed include the implications of domestic and international disclosure requirements; the benefits and pitfalls of an overseas listing; what to communicate and how to reach audiences; and how to achieve greater coverage in the press. The program will also include an international IR case study and a ‘tools and technologies’ master class. The conference will be followed by the awards event, where Russian companies will be rewarded for their IR expertise.
Alexander Goldin, media relations officer for communications firm Ansdell Associates and general director of Ossi, describes IR in Russia as ‘a young profession’ but says it is becoming increasingly valued. ‘The blue chip companies have already set up their IR departments, and there are many other companies which are in the process of setting one up,’ he comments.
This process of establishing IR as a vital part of the Russian investment world looks set to continue. ‘I cannot forecast to you the action of Russia,’ said Churchill. What can be forecast, though, is that 2004 will be another year full of Russian IR developments.
