Vision - July/August 2008 - (Page 23)

from its roster of about 300 U.S. institutions that can process such transactions. It can split the risk for such loans with one of these banks or with the vendor’s own bank. Ex-Im has been involved with loans ranging from $5,000 to tens of millions of dollars. Grandmaison cited a recent deal with a 22-person, woman-owned, Californian tech company. The firm needed a $42 million line of credit to carry out a contract in Latin America. “One of the products we offer is called ‘Working Capital’,” he explained. “It [can be] difficult to take a foreign contract and ask a commercial bank to loan against it. The lending bank comes to us; we share the risk to enable the company to proceed with the project.” In some cases, Ex-Im carries the largest share of the loan—even as much as 90 percent on some projects. The Bank also can set up lines of credit for such resellers. “A U.S. exporter can sell overseas and assume no risk if he understands that there are government products that are available,” Grandmaison says. A U.S. exporter can sell overseas and assume no risk if he understands that there are government products that are available. — J. Joseph Grandmaison, member, Board of Directors, Export-Import Bank of the United States Continuing Evaluations Sabbah identifies other factors that can be used to mitigate risks and build sustainable operations. His export management company, which represents U.S. CE makers and those from other industries, finds ways to benefit from current conditions, such as the weak dollar that makes U.S. products more affordable around the world. But he likes to take a long-term approach, cautioning partners about the risks of setting up a sales relationship that would be abandoned when the exchange rate turns around. He also recommends ways that partner companies develop alliances to support global expansion. Sabbah cites a North Carolina firm that works with a bank- ing agency under a state-run program to provide export credit insurance. Sabbah emphasizes that this kind of relationship takes advantage of the substantial government resources that are available to help U.S. firms expand business and limit risks. “Do your homework,” he cautions, citing experiences in which a vendor becomes excited about a potential foreign customer encountered during a trade show, such as the International CES. “It’s easy to exhibit a product and have people express interest in it,” Sabbah says. “But you have to find out about the markets they’re coming from to make sure it fits.” Part of that evaluation process involves a complete review of risks in that region. “Non-tariff barriers are an example of regulatory risk,” he adds. Sabbah recalls a situation during the 1990s when the European Union was trying to control the importation of CE products by forcing all devices to pass through one single port. “It created a barrier to entry for the goods by slowing the importation,” he says. While such dramatic examples of regulatory risk are extreme, it underscores the barriers that accompany the move to go global. The Economist Intelligence Unit identified the depth of concern that companies face when they expand overseas. It found that only 17 percent of companies were “very confident” that they were compliant with regulations in their overseas markets, compared to 40 per- cent that were “very confident” about compliance in their home markets. Part of that concern stemmed from queasiness about the cost of regulation, which most respondents believed to be climbing. “Complexity equals cost,” the Economist group summarized, adding that exporters are “keenly aware that a breach of regulatory rules could bring severe consequences that stretch far beyond any direct penalty.” Where Danger Looms While the range of risks remains large, it can generally be split into categories such as currency fluctuation, political risk and the various forms of commercial and investment risk. A separate and often-asked question focuses on risky environments: Which countries pose the greatest concerns to a U.S. company? Paul Sabbah says that different countries—and various parts of the world— present all types of challenges at different times. Like other experts involved on a daily basis, he is hesitant to single out specific countries as problem markets. Even the Eurasia Group, which recently posted its “Top Nine Political Risks for 2008,” offered predictable countries and topics such as Iraq, Iran, terrorism and energy, as major factors, but presented few details on specific risky business environments for products such as consumer electronics. Companies pursuing global opportunities have a vast supply of services, many of them available, as Sabbah, Grandmaison, Fawaz and others explain, from U.S. government and international agencies. For example, the U.S. Commerce Department steers businesses, through its Commercial Service site (www.export.gov/finance/exp_ risk_mitigation.asp), to resources that offer insurance for both export transactions and for the political risk associated with overseas investments. However, if you do your homework, global expansion can become a business boon to CE companies. • July/August 2008 on profitability. fluctuations in exchange rates that may have an impact — Nabil Fawaz, global head of Agribusiness, Manufacturing and Services at the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) Currency risk refers to www.ce.org 23 http://www.export.gov/finance/exp_risk_mitigation.asp http://www.export.gov/finance/exp_risk_mitigation.asp http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - July/August 2008

Vision - July/August 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Embracing Disrupting Technology Vaulting Ahead with Your Brand International Risk Stop Boomerang Products CEA Newsline Tech Speak Tech Policy Going Global Eye on Business Market Insider Just the Stats

Vision - July/August 2008

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