Export risk management
Exporting does indeed present its own specific risks despite its huge growth potential for companies. Besides the risk of company failure, international business can be impacted by political matters, climate change, economical issues or exchange rate fluctuations. In this environment of high-risks level, economic players are often struggling with uncertainty in their decision-making process, mostly regarding customer and supplier management.
In order to support companies in their export strategy with their international partners in a perfectly serene environment, Ellisphere adapted its Business Intelligence solutions to the international scene.
Politics: how can it impact export?
Current political events such as Brexit, Catalan independence or the stance taken by the current United States President, Donald Trump, directly impact the business climate. Indeed, around 1.700 Catalan headquarters have been transferred to other Spanish regions during the current political crisis taking place in Catalonia.
“The United-Kingdom, Spain and the United States are stable economic grounds, these countries will not represent major risks overnight. Still, we need to remain vigilante since their unclear evolution might have repercussions on the international scene; and uncertainty is not a state that business is fond of.” Says Stephen Lord, Head of International Projects at Ellisphere.
The main questions are: How do French companies get access to the export market? Will it become more complex? More expensive? How will customs tariffs evolve? … We could also question ourselves about the BRICS*, until recently considered as the best perspective for global economic growth and promising commercial outlets for exporters, these countries are now experiencing a dip in growth and an increase of bankruptcies.
Opportunities and risks in international business
If conquering foreign markets can be considered complex, exporting remains a growth driver for many companies. Thanks to the diversification of their outlets and markets, exporters often see better results, have better financial stability, are more innovative and are less dependent on their domestic market.
However, there are specific risks in international business that take several forms.
Exchange rates: regarding this variable, it can bring extra costs for exporters. The regulation about currency transfer is also something to anticipate. For instance, it is prohibited to leave Africa with African currencies. Political matters, government stability may jeopardize commercial transactions. Furthermore, the risk of fraud is becoming more and more an issue due to globalization and the rise of the internet.
Within this complex environment, the main objective for companies is to determine the sustainability and solvability of their foreign partners, as well as anticipating payment delays and default that can have a significant impact or be lethal to their treasury. “Just because a company is solvent does not mean that it will pay on time. If European legislation requires companies to pay under 30 or 45 days for specific lines of business, it is still necessary to verify that every company respects that legislation.” Explains Stephen Lord.
An exporter must be informed about the law and habits in the country with which he wants to do business. This “home-work” must be done for every company in every country.
Access to information is easier in some countries
The very first issue to know our foreign business partner is that the access to information is quite unequal depending on the country.
First, it is necessary to verify the legal existence of the foreign company. To do so, we need to investigate company records which give legal ID. However, every country has its way, including European countries.
In the USA or Germany, companies do not have specific ID like in France (SIREN number). In other words, you can have an identical ID for another company located in another city, making it even more complex.
The same can be said of financial information and balance sheet, every country’s legislation will either facilitate or complicate those accesses. In Switzerland, only stock exchange companies have the obligation to publish their balance sheet. To access others is simply impossible.
In France, a recent law allows micro and small sized companies to choose the option to keep this information confidential so that their balance sheet and profit and loss accounts are not free to be used. “Ellisphere though has access to these confidential documents, including necessary information for our scoring. This allows us to inform our customers of a potential failure of their business partners.” Add Stephen Lord.
Business Intelligence tailor-made decision
Ellisphere has developed services which respond to exporters’ challenges. The score indicating the probability of failure is part of our offer.
For International information, Ellisphere’s experts have access to company information platforms. At the same time and with the help of their partnerships in the country concerned, they collect all available data. Indeed, Ellisphere is the founder member of the BIGnet network, composed of the European leaders in the field.
“The idea is the same, no matter the country. Experts bring together information about the ID and the legal form of the company, its headcount, its activity, if it is quoted on the stock market, its financial data and its payment behaviour.” Indicates Stephen Lord, current President of BIGnet.
All of this information is compiled in a database making possible the evaluation of a score that is delivered on every company studied.
With regard to the all-important question of supply of financial and economic information, Ellisphere offers online and real time company reports. Investigations are also possible and are particularly efficient for exporters. Indeed, although the delivery time is longer, the reports point out the singularity of every country and give a more complete and personalized information to the customer. This service analyses and addresses the problematics of the customer. First of all, Ellisphere mandates its foreign partners to look into the companies of the concerned countries. Their mission is to collect information and send them to Ellispehere’s experts who will translate and file a detailed report.
A more serene look upon export
Valuable first steps are essential to deal with export serenely.
First of all, it is necessary to carefully choose the countries in which we seek to set up businesses by mapping their specificities and potential risks (economic, political, cultural). It is then fundamental to define Business Intelligence processes. For instance, targeting, risk management and monitoring. This preventive action is important; Ellisphere offers Business Intelligence solutions adapted to every need.
To conclude, the key of success for export is to be well guided and to make decision regarding sustainable and durable business partners, and so regardless of the sector or the country.
*BRICS: Brazil, Russia, India, China, South Africa