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The Caisse de depot et placement du Quebec building in Montreal, on Feb. 7, 2020.Christinne Muschi/The Globe and Mail

Big business is learning a costly lesson about risk management.

Foreign companies and institutional investors are scrambling to sever ties with Russia as the United States, the European Union, Canada and other allies escalate economic sanctions against Moscow for its invasion of Ukraine.

As gruesome images of dead and wounded civilians, including children, horrify people around the globe, major corporations are suddenly eager to renounce Russia despite having no qualms about making money in that market just last week.

Some companies, such as British energy giants BP and Shell, are divesting Russian assets, while others, including U.S. automaker Ford, have suspended operations in that country. Tech titan Apple, meanwhile, has halted product sales there.

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The world’s biggest institutional investors are also boycotting Russia. Norway’s sovereign wealth fund, for instance, is dumping shares in Russian companies and its holdings of Russian government bonds.

Such moves to blackball Russia are indeed extraordinary, but some of the recent corporate spin about standing in solidarity with Ukraine is a bit rich. Do business leaders really think people buy their cock-and-bull story? It’s obvious these businesses are doing damage control to obscure their risk-and-compliance failures.

Let’s get real. Foreign businesses, pension funds and other asset managers, including those based here in Canada, have actually spent years being willfully blind to the threat that Russian President Vladimir Putin has posed to Ukraine and the rest of the democratic world.

Russia didn’t suddenly transform itself into a pariah state in recent days. Mr. Putin has long proved to the world that he is a despot. After he orchestrated the 2014 annexation of Crimea, his country was kicked out of the G8. But that rebuke didn’t stop Mr. Putin from interfering in the 2016 U.S. election, waging cyberwarfare against democratic countries, or poisoning and jailing his political opponents.

Sanctions or not, Russia has been a risky place to do business for a very long time. So, why didn’t foreign businesses take action before now? Do their executives and directors lack general knowledge about world affairs, or perhaps they have no access to Google on their smartphones?

A more likely explanation is that business leaders overruled the advice of their risk and compliance staff to maximize profits. That’s why investors, employees and the general public must now raise hell.

The truth is, foreign businesses of all kinds spent years lending legitimacy to Mr. Putin and his rogue regime through their investments and commercial contracts in Russia.

It’s clear that Russia has been planning its invasion of Ukraine for years, and its incursion there is just the beginning of Mr. Putin’s latest power grab. Other European countries are now at risk.

North American countries, meanwhile, may not experience bloodshed on their soil, but their citizens will also pay a steep price for Russia’s aggression.

Make no mistake, foreign business leaders also have blood on their hands. Their craven quest for profits in Russia helped embolden Mr. Putin. Corporations and institutional investors, including those headquartered in Canada, must be held accountable for their lapses in judgment. Too many of them have offered empty talk on corporate social responsibility over the years.

Canadian businesses with operations in Russia, including Magna International Inc. and Alimentation Couche-Tard Inc., are now facing heightened reputational and operating risks.

It’s a mystery why Canadian business leaders didn’t come to their senses back in 2020, when our energy industry became collateral damage in a crude-oil price war between Russia and Saudi Arabia.

But it seems that also wasn’t enough of a reality check for some of Canada’s institutional investors. Caisse de dépôt et placement du Québec, for instance, only recently sold hundreds of millions of dollars of shares in seven Russian companies on which Canada first placed sanctions in 2015.

Sure, those sanctions applied to new business dealings only and not existing holdings. Nonetheless, it should have been apparent to the Caisse that hanging on to those investments was a bad idea.

Common sense also seems to have escaped more than a dozen Canadian fund managers that hold shares of Russian companies that have been on Canada’s trading-sanctions list since 2015 in their mutual funds and exchange-traded funds.

Although more than 100 Canadian business leaders recently wrote an open letter to the federal government promising to isolate Russia “by unwinding commercial relationships and divesting Russian holdings,” the fact remains that some of them waited too long to do the right thing.

Cancelling contracts can be costly, and finding buyers for Russian assets will prove difficult. But let’s not feel too sorry for these companies. They had it coming.

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