A year and half on from the EU referendum, and one year away from the date set for the UK’s departure from the EU, there are already plenty of suggestions with whom Britain should sign future trade agreements. From fast-growing economies such as those of Malaysia and Bangladesh, to established trading partners such as Japan and South Korea, or even the notion of joining the distant Trans-Pacific Partnership (TPP) – whatever the destination of British goods, it’s clear that there will likely be a lack of knowledge of these foreign markets and economies.
With Asia now responsible for a third of global GDP, seven out of ten of the world’s fastest growing economies located in Africa and South America, with its booming middle class population, there are positive/optimistic times ahead for exporting companies after Brexit, assuming you get paid that is! This is the single biggest hazard in international business, and can be down to a variety of reasons, from customer bankruptcy, unwillingness to pay, corruption and fraud or even political regime or governmental change or the absence of our common technology.
Managing credit risk overseas is very different from the domestic market: it’s likely your organisation’s knowledge of the market will be limited compared to more established marketplaces, and the requirements for information supplied by businesses, such as their financial performance or director information may not be consistent with your organisation’s expectations. You may consider to reach out to a local source of intelligence for more information that may not be a regulatory or government requirement in the buyer’s country, such as a history of directors’ previous appointments.
The financial status of companies are in a constant state of flux, so how do you stay one step ahead, and aware of any developments that could cause disruption to your supply chain? The difference between recognising the risks and underestimating them is the ability to react swiftly to the problem before it’s too late. It’s important to have a monitoring system in place to capture important events, both negative and positive – after all, you can seize new opportunities through identifying positive financial changes amongst certain customers.
Payment behaviour is an important indicator, in order to assess the likelihood of a business becoming a payment problem, you need to obtain and gain insight into the payment behaviour of a company. To analyse the short term or recent behaviour isn’t enough. You need to look at it in the context of previous performance, by considering at the annual, two-year and even five-year financials including turnover, profit and loss.
Doing business with overseas companies can lead to an influx of growth opportunities, but it can often be a challenge, particularly when assessing risks. The key to reducing the risk of bad debt when working across borders is to be as informed as possible.
Graydon’s International Business Credit Reports enable you to make informed decisions about the companies you wish to do business with abroad. Compiled using 2,000 different characteristics, instant and accurate international company information from over 190 countries, from a dedicated team of analysts speaking multiple languages, our global partner network enables you to trade abroad with confidence.
Click here to find out more about international credit reports available from Graydon.