The war in Ukraine has entered its third week and is unlikely to end anytime soon. What does this mean for the physical security industry? This note seeks to find that out.
The war in Ukraine has entered its third week and is unlikely to end anytime soon. What does this mean for the physical security industry? This note seeks to find that out.
The war in Ukraine began on Feb. 24. Since then, tons of companies have announced suspension of business dealings with Russia, in support of Ukraine. These include security companies. Consider the following:
Axis Communications: “We decided last week to halt all deliveries to the Russia Customs Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) until further notice. In addition to this, we do not accept any new orders or register any new projects in this region. We are closely monitoring the development and as soon as we have any additional information or changes to share, we will do so with those concerned.”
MOBOTIX: “MOBOTIX Management Board has decided to immediately stop all business transactions with Russia in support of the world-wide sanctions condemning Russia’s invasion of Ukraine. We stand united with the rest of the world in our efforts to hold Russian government accountable while we express our deepest respect and sympathy to the citizens of Ukraine.”
Of note, Messe Frankfurt, asmag.com’s parent corporation which organizes several security-related trade shows, also announced similar measures: “The Russian invasion of Ukraine poses an unprecedented threat to peaceful coexistence in Europe. Messe Frankfurt supports all sanction measures taken by the (German) Federal Government. Against this backdrop, the Messe Frankfurt Board of Management decided to suspend events of its subsidiary Messe Frankfurt RUS until further notice.”
Impact may be minimal
The war leaves us in physical security wondering how it might affect our industry. To start off, Russia is not an active exporter in the security arena. “Aside from the few security vendors who are headquartered in Russia, Russia really is not a major manufacturer for security products/components, so the impact on those aspects of the market will likely be minimal,” said Danielle VanZandt, Industry Analyst for Security at Frost & Sullivan.
According to VanZandt, while Russia and Ukraine are both countries that do have decently robust security purchases, they are not “central hubs” of activity for many security manufacturers. “As such, the conflict will likely impact any ongoing projects by halting them entirely, but may not have a significant financial impact on security manufacturers,” she said.
She added: “Chinese security vendors do have a more prominent presence in Russia and may continue their business there for the time being, but continued pressure for economic sanctions and isolation could change their sales strategies.”
Increased spending in surrounding countries
What we can expect is some increases in security spending in neighboring countries. “I do expect some limited increases in spending on physical security solutions, such as access control, border security, and perimeter defenses in many of the neighboring countries surrounding the conflict – that is, Poland, Romania, Estonia, Latvia, Lithuania, etc., but much of the increased spending will also be moving towards defense purchases rather than just physical security,” VanZandt said.
This may also apply to the broader
security industry in Europe. “In the short-term, Europe will likely see a slight uptick in larger perimeter security systems, as well as some enhanced cybersecurity systems to fortify themselves in case the crisis expands beyond Ukraine. Countries along the Ukrainian border, such as Poland, Romania, Latvia, Estonia, Lithuania, Finland, and Moldova, will increase their border security spending as a means to protect their border crossings, but also seek out additional identity verification and authentication solutions in response to the influx of refugees from Ukraine and areas neighboring the crisis. This level of spending will stay at this elevated rate until the crisis is resolved, so it remains to be seen when that could subside,” VanZandt said.
Some supply chain issues
Supply chain may also be impacted, primarily due to longer air-shipping time. “There could be some small supply chain effects to hit the industry, particularly when it comes to products that must be transported via air travel, due to the changes being made to many flight paths to avoid Russian, Belarusian, and Ukrainian airspace. The airspace restrictions in the region and the re-routing of many flight paths, which may cause longer shipping times, might be the most consequential impact on the broader supply chain,” VanZandt said. “Inflation and exchange rate problems, while thought to potentially have been worse once sanctions were introduced, seem to already be subsiding and only really affect the Russian and Belarusian economies at the moment.”