For many years, the guiding principle behind many international supply chains was to source and manufacture as efficiently as possible. The focus was on the lowest costs, minimal stock levels and a limited number of suppliers. Geopolitical tensions have added further considerations to this. After all, what happens if that supplier is no longer able to deliver tomorrow? If a trade route is cut off? If export licences change or import duties completely alter the business case?
From efficient to resilient
Companies are increasingly looking to alternative suppliers, other production sites and new markets. Research by the European Commission and the EIB shows that 64% of European companies now consider themselves prepared for geopolitical risks. Nearly 90% expect exports to remain stable or grow further. Doing business internationally remains attractive, but it requires a different approach to risk management.
Allowing credit risk and financing to evolve
It is not just the supply chain that is affected by these developments. They also have a direct impact on your customers‘ financial position. Higher energy prices can put pressure on margins. An import duty can make a product less competitive. An export ban can cause turnover to disappear overnight. The question of ’whether this customer can pay‘ is now complemented by the question ’which geopolitical factors could influence this customer’s ability to pay’. As a result, country-specific knowledge, sector information and up-to-date credit information are becoming increasingly important. Banks are also aware of this. The ECB notes that banks are tightening their lending to businesses as a result of trade tensions. Companies that are heavily dependent on international trade are being monitored more closely. Risk is therefore no longer assessed solely by entrepreneurs themselves, but also by their financiers and insurers.
Local knowledge, credit information and insurance, financing and debt collection are becoming an increasingly important part of your international strategy. Want to find out more? Please feel free to get in touch!