In late May, Berkshire Advisory Group celebrated its 10th anniversary from the date, on which the company started up its operations on the Russian market. During these years, which were not easy for Russia’s economy and included at least two full-scale economic crises, the company managed to become one of the leaders in the field of business consulting. Vladimir Denisov, Partner with Berkshire Advisory Group, told NBJ about how Berkshire Advisory Group has managed to attain such results and built up its operations in principally new economic conditions that have arisen, firstly, due to the imposition of sanctions on Russia, and, secondly, due to the imports substitution process that has started in Russia.

NBJ: Vladimir, as we know, the issues relating to the imports substitution on the Russian market have become extremely important. In this context, one of the most popular topics is the cooperation between the public and private structures. Do you find this issue important?

V. DENISOV: This is a very important issue. I would like to expand it, as it’s clear to everybody that the way that the state and businesses interact would determine the future prospects of the national economy and, eventually, the life of every person. There’s no surprise that this issue is on the top of the agenda today due to the restrictions that were imposed on Russia and increasingly higher rates of imports substitution.
The imports substitution policy plays a key role in the existing conditions and it will enable Russia to defend it sovereignty in such key sectors, as defense, health care and social sectors, "food security", etc.
The government and businesses are actively working to prepare and roll out various projects, including the ones to be driven by PPP (private-public partnership). PPP will be used to roll our major infrastructure projects in construction of railways and automobile roads, ports, energy industry facilities, social sector facilities, etc.

Seeking to help medium-size businesses in their rolling out important projects, the Government set up the "Industry Development Fund" that has already made investment decisions for over 13 billion RUB.

NBJ: How well does the regulatory framework enable to tackle this issue?

V. DENISOV: It’s not possible to have perfect regulations, but some people still continue to ignore the fact that the sanctions resulted in the state setting completely new requirements to quality and results of the legislative process. Let’s make it clear – nobody expected that we would have to rewire the whole regulations system, based on the criteria for strategic security and imports substitution. We need to act fast and make significant changes to the customs, commercial and tax laws and regulations in the field of investment processes. Otherwise, we risk ending up with dependent and unprotected sectors, such as defense, social and foods industries.

NBJ: Some work is already being done in this regard, isn’t it?

V. DENISOV: Surely. For instance, on 30 June Law No. 488 "Concerning Industrial Policy" that was passed by the State Duma will be enacted. In order to facilitate its implementation, the Government is currently developing the order concerning special investment contracts. The state and private businesses will use those contracts to set forth their obligations, assumed within PPP projects. For instance, businesses will invest to set up production and manufacture an agreed products volume, while the state will purchase the products within a long period of time at the agreed prices, furnish tax benefits to the company, etc. Thus, this will enable to consolidate the efforts to address the tasks, seen as strategically important.

NBJ: As you were right to note, everybody has to work today in the new conditions. Today, companies need to rejigger their business strategies, contractors’ agreements, funding sources, etc. They are sure to benefit in the medium term, but any changes always come hard. Do companies engage you as a consultant for business models revamp, including due to roll out of PPP projects?

V. DENISOV: Yes, they do. Berkshire Advisory Group has something that companies value today most – rich experience in working together with various structures, such as banks, financial companies, investment funds, real sector companies, ministries and agencies.

That’s why we can, firstly, provide our customers with integrated services, and, secondly, help them roll out most ambitious plans, which may seem impossible at the first glance.

NBJ: What do you mean by integrated services?

V. DENISOV: We literally start working with a customer and "take" it through all process stages – starting from identifying a project idea, its detailed elaboration, developing a financial model and business plan, and up to the time, when the enterprise has managed to attain the planned key performance indicators. Naturally, a company that is planning to take a major share of market, might engage a dozen consulting companies in order to attain its objectives, while each of those will drive a particular issue. The alternative approach is to engage our companies as a one-stop services provider. This approach, firstly, enables to cut consulting costs, and, most importantly, mitigate the risks, when various consulting companies offer mutually exclusive "success formulas" and quite often they can’t see the big picture, objectives and specifics of the projects.

NBJ: You said that your company provides its customers with integrated services packages. Perhaps, those include the service that non-financial companies currently need the most – assistance in raising funds. There’s no secret that the issues relating to investments and lending today are very important for many market players.

V. DENISOV: This is true. I would say that the two issues that are currently the main concern of our customers are toxic debts and funding. The toxic assets require a multi-factor analysis, accounting for various components of the business, industry and markets, as a whole.

In relation to raising funds, the banks today need to take a more cautious approach and assume higher risk expectations, triggered by a deteriorating macroeconomic situation and possible defaults in the future. However, I am convinced that these are temporary complications. We expect more active lending and investment processes within the short term to engage foreign businesses.

NBJ: I think that the banks act quite rationally, when they roll out a more stringent credit policy – they are afraid of taking up new problem borrowers.

V. DENISOV: I believe that it’s about a different thing. We can see a lack of understanding in relation to the fact that our businesses have rebuilt their models to adopt to new conditions. The forward-thinking bankers have a clear idea that in order to maintain good relations with promising players – the ones, who are actively engaged in imports substitution processes and seek to build up their business models in a correct way – then we will be able to get good and loyal customers in a couple of years. It’s good not only because a bank would win a customer that will service its loans in a disciplined manner, but also because the customer would be grateful to the bank that supported it in a difficult time. In this way the bank would get a highly loyal customer, which is much more valuable than making a quick profit on the margin.

We need to remember that business is not only mathematics models and financial calculations, but also trust between the partners. And this is the most cornerstone principle, by which we are guided in all our work, and this is the culture that we strive to foster among our customers, including banks that we deal with, when rolling our projects for our customers.