In their latest article, Horizon CF’s senior executives Leonid Gryaznov and Maxim Oyrakh explore critical factors shaping Russia’s capital markets in what they term a “new reality.” They discuss the limitations of returning to previous market conditions, highlighting the need for new approaches in corporate governance.

Corporate governance serves as a mechanism for owners to oversee hired management. Established primarily in the 1990s to protect the interests of foreign investors, Russia’s corporate governance framework now requires adjustments to prioritize the interests of private, Russian investors, who collectively contribute investments in domestic companies on a scale comparable to or exceeding that of institutional investors by several times.

Meanwhile, large-scale investments by tens of millions of individuals in Russian company securities have become possible due to the advancement of the financial market’s digital infrastructure and the availability of new, affordable investment products. New issuers are entering the capital market—companies that have emerged and developed actively over the past 30 years. These are small- and mid-cap companies offering their securities to investors through public offerings. Investing in such securities generally carries higher risk than investing in established leaders of the Russian stock market, making effective corporate governance crucial for these new issuers.

The authors emphasize that while private investors can assume industry and venture capital risks, they should not be subjected to the risk of poor corporate governance. Neglecting corporate governance principles would ultimately mean disregarding the interests of millions of Russian citizens.

The growing prominence of private investors also contributes to greater market volatility. Gryaznov and Oyrakh call for measures to encourage private investor participation in collective investment instruments. Additionally, they stress the need to rethink current corporate governance practices to address emerging risks and realities facing Russian corporations—risks that regulators should identify and integrate into future guidelines.

Read the full version of the analytical article for more insights.