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A message from our CIO, Scott Phillips:
"G'day Fools. If you're like us, you're dismayed by the events taking place in Ukraine. It is an unnecessary humanitarian tragedy. Times like these remind us that money is important, but other things are far more valuable. And yet the financial markets remain open, shares are trading, and our readers and members are looking to us for guidance. So we'll do our best to continue to serve you, while also hoping for a swift and peaceful end to war in Ukraine."
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BHP Group Ltd's (ASX: BHP) leadership and the management of other companies are thinking about the potential impacts of the Russian invasion of Ukraine.
The Australian Financial Review reported that BHP's Chair Ken MacKenzie believes more companies and investors will decide to follow the decision of the oil businesses BP and Shell to exit Russia.
Mr MacKenzie thinks that boards and management teams will be looking at the best-case and worst-case scenarios to consider the potential outcomes on the business, as well as cyber risks.
The AFR quoted Mr Mackenzie who said:
As business people, our role is to understand those situations, to understand the potential range of outcomes that can come from a geopolitical situation. We call that scenario analysis and then develop contingency plans around that to protect the business. That's our job, but none of us have a crystal ball.
I always say, hope for the best and plan for the worst. So, it's everything from one scenario which would be a quick, peaceful resolution, which we're all looking for, to the unthinkable.
And we've just got to understand the implications to our business and get out in front, which is what everybody did during the pandemic, very successfully.
Is Europe important for BHP?
BHP makes less than 2% of its earnings – around $1 billion of sales – from Europe.
The more important market for the business is China which is a big customer for BHP's iron ore and it also buys a lot of its other commodities as well.
Mr MacKenzie noted that there is a bit of tension between Australia and China, but said there is mutual dependency – "We need China and China needs us." He also said that its business-to-business relationships with its Chinese suppliers and customers "have never been stronger".
BHP share price snapshot
The BHP share price rose 3.8% today. That means that it has now risen by 14% this year, despite now going ex-dividend.
One of the latest analyst ratings comes from Macquarie, which rates it as a buy with a price target of $53. That implies a potential upside of around 10% over the next 12 months. The broker reckons the company can keep capitalising on the high resource prices.
