Credit Management magazine December 2017

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INTERNATIONAL TRADE Monthly round-up of the latest stories in global trade by Andrea Kirkby. SHIFTING SANDS EGYPT is, you might say, a 'challenged' economy; tourist numbers have fallen from 14.7 million in 2010 to 4.8 million last year, and high inflation remains a problem, as does security. But this year the country seems to be beginning to get back on track. The IMF reports that it's doing well, and the fact that the floating Egyptian pound has halved against the dollar has helped the country by relaxing the pressure on foreign exchange reserves. Credendo has upgraded the country's political risk, and the stock exchange has become a regional hotspot with several large IPOs planned. Oil and gas is benefiting from a significant amount of foreign direct investment, and remains a key opportunity for exporters. But there's also a huge amount of money headed for renewables – the European Bank for Reconstruction and Development (EBRD) is spearheading a £1 billion investment in the sector. Infrastructure, education and retail are also big markets – retail is recovering fast with annual growth forecast at ten percent. Even better for UK exporters of consumer goods, supermarkets and chains are making an impact on what had been a very fragmented market of tiny traditional shops. But watch out. Getting paid can be an issue – and the Egyptian pound isn't the world's strongest currency! POLITICAL risk is a nasty thing. Political risk used to be something that affected emerging markets – Africa, South-East Asia, the Balkans, the Stans, Latin America. Europe, the US and Canada had managed to reduce political risk to within very narrow confines – a few points more or less on the stock market indices, not much more. (Even economic risks seem to have moved, with the US and UK underperforming the rest of the world economies according to Coface.) WHILE everyone's waiting to see who will be the next head of the Fed, one thing seems sure; the era of cheap money is coming to end. With both US and UK inflation surprisingly on the upside recently, banks are likely to hike rates – but the Fed is also starting to reduce the size of its balance sheet. That all adds up to a great deal of fiscal tightening – at odds with Donald Trump, who wants to run the THE WORLD TURNED UPSIDE DOWN Things have changed. According to Oxford Analytica, businesses now see the US as the top source of political risk. Certainty has evaporated; tough talking about trade with China, the possibility of pulling out of North American Free Trade Agreement (NAFTA), possible sanctions on Russia, and the war of words with North Korea, could all exacerbate a tense situation – besides a protectionist rhetoric that could threaten world trade. At the same time, Trump's willingness to govern THE END OF CHEAP MONEY economy as 'hot' as possible. Higher rates will put pressure on the 'just about managing' businesses that are currently managing to service their debt, but not pay it off or improve their balance sheets. But interest rate hikes will also lead to currency volatility; the dollar is likely to strengthen, and that could worsen the US balance of payments and lead to further protectionism on through executive orders is creating a nightmare situation for some sectors, as businesses face seeing regulations change almost overnight. Couple that assessment with a schedule of rising interest rates and something says to me that we're going to see some major currency volatility. But also, that Europe and emerging markets are going to be, possibly, rather easier places to do business than the US over the next few years. Trump's part, or even to full scale 'currency wars' with China. So, watch cross rates carefully; and don't get caught out with mismatched currency exposures. And of course, if sterling starts strengthening after its long bout of weakness, there'll be some major impacts on exporters. Hedging might not be such a bad idea. The Recognised Standard / www.cicm.com / December 2017 / PAGE 28
SMES AND CREDIT INSURANCE ACCORDING to credit management company Nimbla, even though 89 percent of SMEs admit to having suffered bad debt problems, only 24 percent use trade credit insurance. (Imagine a world in which 89 percent of us have been burgled or had a house fire, and only 24 percent had home insurance). When you look at some of the trade credit policies available, though, it's understandable – they're designed for much larger companies with much larger credit management departments. So, it's good to see Atradius launching a product aimed at the SME market (up to £5 million turnover). Modula Freedom has a fixed pricing matrix, making it easier to use. Do you think if Nimbla carries out another survey next year, the numbers might have changed? CURRENCY UK FOR THE LATEST EXCHANGE RATES VISIT CURRENCYUK.CO.UK OR CALL 020 7738 0777 Currency UK is authorised and regulated by the Financial Conduct Authority (FCA). HIGH LOW TREND GBP/EUR 1.1425 1.1088 Up GBP/USD 1.3397 1.3189 Up GBP/CHF 1.3305 1.2996 Up GBP/AUD 1.7351 1.6986 Up GBP/CAD 1.7135 1.6658 Down GBP/JPY 151.658 149.224 Up BITCOIN 2.0 ON THE HORIZON BLOCKCHAIN – the technology that enables cryptocurrency Bitcoin – has entered the world of trade finance. AIG has partnered with TradeIX to offer trade finance through a Blockchain-based open ledger that offers real advantages – improved transparency, quicker transaction times, and real-time visibility of customer terms and credit risk. Blockchain could also revolutionise cross-border payments. IBM is currently piloting crossborder cryptocurrency payments across Asia, working with Thai, Indonesian, Australian and Japanese banks. It hopes to simplify transfers and move transaction times from several days to just a few minutes. It's still a relatively new technology. But there's no doubt we'll be hearing more about it – and early adopters could benefit from lower finance charges and better management tools, so watch this space! IVORY COAST COMES GOOD AN only recently ended civil war, corruption, an inefficient and slow court system, and high debt servicing requirements; Cote d'Ivoire doesn't sound a great place to do business. The good news, though, is that it's beginning to come good. Political stability is allowing the Government to get to grips with some of the country's problems, and despite soft prices for its major exports cocoa and coffee, it's seeing some of the fastest growth in sub-Saharan Africa. GDP is expected to rise at seven percent a year in the next couple of years, with huge government investments in infrastructure priming the pump. CRISIS? WHAT CRISIS? You could be forgiven for thinking that Spain is in crisis. The Catalonian independence referendum has thrown the continued existence of the state into doubt, even if the declaration of independence has been 'suspended'. There's rioting in the streets, and rumours that Spain will use emergency powers to take over control from the Catalan authorities. But the financial markets are telling us they’re not worried. True, after the referendum result was announced, bond yields moved up a bit – but not much. And they've now fallen back to pre-referendum levels; the market's saying that there really isn't any more risk than before. The credit ratings agencies haven't downgraded Spanish debt, either. So, for the time being, it seems, you should worry more about getting pickpocketed on Las Ramblas in Barcelona than about your Spanish receivables. Britain already exports cars, dairy products, and textiles to Ivory Coast, but there are huge opportunities in other sectors. Oil and gas and mining are developing sectors, while the move to secure greater value added from agricultural products before exporting is seeing investment going into agribusiness and food processing. Fly in the ointment? You may find more Ivorians speak French than English, but that's not a major problem. But their currency, the CFA Franc, is tied to the euro – so Brexit worries could make it volatile. EXPORTING IS IN FASHION! IT'S nice to know that British fashion is doing well in the export game – including exporting to Paris, the native city of haute couture. 2016 saw exports hit a 21-year high, up eight percent on the previous year to £10.7 billion. Burberry and Mulberry are well-known, but smaller houses and young designers are doing their bit – for instance Baia Bags, which started in a spare bedroom and is now exploring international markets. At the same time, traditional family businesses like cashmere house Johnstons of Elgin has had a makeover to appeal to today's markets – Johnstons has worked with Vivienne Westwood and Kylie's designer Christopher Kane, and now has offices in Tokyo, Dusseldorf, Paris and London. Now the Department of International Trade has set up a programme with the British Fashion Council to target international buyers and match them up with British designers. Let's hope our exporters set another record this year. NO MORE JUNK! PORTUGAL has finally won back the investment grade credit rating it lost in 2012 after accepting an EU/IMF bailout. Its bonds aren't junk any more – and to celebrate, they staged a massive rally, with the yield dipping to 2.5 percent. (At the height of the credit crunch, yields on Portuguese bonds were over 16 percent.) Portugal still has an horrendous pile of Government debt, but the economy is growing at two percent, unemployment has been cut, and the budget deficit is being tackled. The UK is the fourth largest investor in the country, and the sixth largest exporter to Portugal, so there's a strong relationship to build on, particularly in technology – areas such as fintech, environmental controls, and life sciences. If the country has really turned the corner, this could be a good time to start exporting – or to start giving Portuguese customers a bit more leeway on credit. Mind you, it's only S&P that's improved its rating. Moody's and Fitch remain, so far, unconvinced – or are they preparing their own upgrades? The Recognised Standard / www.cicm.com / December 2017 / PAGE 29
Page 1 and 2: CREDIT MANAGEMENT CM DECEMBER 2017
Page 3 and 4: 13 PEER PRESSURE ROBERT PETTIGREW 2
Page 5 and 6: CMNEWS A round-up of news stories f
Page 7 and 8: Rising costs threaten survival of U
Page 9 and 10: The state of the credit management
Page 11 and 12: Joanna Elson OBE, Chief Executive o
Page 13 and 14: OPINION AUTHOR - Sean Feast PEER PR
Page 15 and 16: OPINION AUTHOR - Sean Feast failure
Page 17 and 18: Kier achieves gold after creating N
Page 19 and 20: for example, have become a pressure
Page 21 and 22: FROM THE CHAIR Time to reflect The
Page 23 and 24: HQ PROFILE - GOVERNANCE AND TECHNIC
Page 25 and 26: Supported by Headline partner EUROP
Page 27: TRADE TALK What now for UK traders?
Page 31 and 32: The next evolution in credit manage
Page 33 and 34: The Recognised Standard / www.cicm.
Page 35 and 36: HAYS - SALARY GUIDE CREDIT SALARIES
Page 37 and 38: OPINION AUTHOR - BODHI GANGULI ANAL
Page 39 and 40: South West PAYMENT TRENDS Sector Sc
Page 41 and 42: THE RECOGNISED STANDARD CICM Britis
Page 43 and 44: OPINION AUTHOR - CHRIS SANDERS Chri
Page 45 and 46: THE CREDIT CONTROL RECRUITMENT SPEC
Page 47 and 48: EDUCATION - SAINT-GOBAIN BUILDING D
Page 49 and 50: THE CICM MAGAZINE FOR CONSUMER AND
Page 51 and 52: OPINION BLACK OR WHITE The economy
Page 53 and 54: LEGAL MATTERS AUTHOR - Peter Walker
Page 55 and 56: Proud supporters of CICMQ With over
Page 57 and 58: New CICM members The Institute welc
Page 59 and 60: BRANCH NEWS THE North East Branch r
Page 61 and 62: STANDLONE CREDIT CONTROLLER LEAD YO
Page 63 and 64: Cr£ditWho? CICM Directory of Servi
Page 65 and 66: Cr£ditWho? CICM Directory of Servi
Page 67 and 68: MONTHLY PRIZE CROSSWORD CREDIT CONU

Credit Management magazine December 2017

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