International Credit and the “3 C’s” of Credit

• Country, currency and culture risks are inextricably linked, so assessing risk must consider all three factors in unison.
• Increasing global competition, continued nationalistic governmental policies, and other factors necessitate a holistic approach to risk assessment.

In international credit management, country, currency and culture risks are inextricably linked to assessing the customer risk. They can be evaluated only in unison and the assessment of one will depend on that of all others.

If there are two words that characterize the business climate in the global village, they are "intense competition."

It is worth repeating that globalization is not just a cliché, an empty phrase. It is happening all around us as businesses increasingly look at the world as if it had no national boundaries. Governments, on the other hand, still tend to make policy in what they perceive (often very narrowly) to be their country's national interests. With globalization, competition sharpens worldwide, but nationalistic laws frequently make for a highly uneven playing field.

Under these circumstances, the only companies that can succeed in the longer run are those offering their customers first-class products and services, as well as the best possible conditions of sale. Exporter countries often enjoy substantially lower costs of funds than many of their important sales territories. To pass on some of the benefit to customers in the form of credit is not charity, but simply good business. Indeed, on present trends it will become increasingly difficult even in lesser markets to sell on terms such as cash in advance or cash against documents.

While it is often more apparent as to understanding how currency and country issues may impact risk, the global credit manager may question the value and significance of examining the cultures that exist in countries where export business is projected. The pro-active company (and credit manager) recognize that personal and company relationships still are critical, both in the development of new markets and to insuring that payment obligations are processed in a timely manner.

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