Creditworthiness and paying habits along sovereign lines was, as expected, a recurring topic of interest throughout FCIB's Annual International Credit and Risk Management Summit in Hamburg in May. While sources noted the importance of weighing conditions within each region of a country and relationships with existing customers in such places, FCIB delegates still craved information at the national level, and not just about often-discussed problem nations like Greece, Spain and Russia. Based on panelist, speaker and delegate observations, here is a rundown of some of the latest risk and big-picture economic trends to keep in mind for some less-discussed nations:

Argentina and Bolivia: Concern is growing among those who do business in these nations as the threat of confiscation, such as in Venezuela in the recent past, continues to rise. As such, the short-term credit market is rife with risk, and options like credit insurance are in short supply. The key phrase here is "wait and see."

Bangladesh: Emerging as a manufacturing outsourcing destination because of lower wage demands than other production powerhouses such as China and India.

Egypt: Major changes to the banking system are taking place post-revolution. Hence, even timely payments are often subject to delays of a week or more. One panelist noted that Egypt resembles the Turkey, now a sub-BRIC emerging economy of note, of 25 years ago. Granted, the process of change and reaching potential is more likely to come over decades, not months or years.

Hungary: Those doing business here generally do so on open account following a short period of COD-type arrangements, and characterized Hungary as one of the better-paying European nations at present. However, it often takes three to five days for clearing and gaining access to the payment.

Italy: This PIIGS nation fell off media radar somewhat, but is doing a good job of quickly executing reforms. However, its debt burden remains tremendous, and the nation could struggle more if well-publicized problems in Greece or Spain escalate further.

Netherlands: Held up as the example of how a nation can progress from perennial debtor (up to the late 1990s, early 2000s) to creditor over the course of a decade. Few are in better a position financially, save Germany, in the European Union at present.

Nigeria: Continues to be a high-risk market although, because of the oil trade, can be lucrative as well. Financial problems at Pipelines and Products Market Company (PPMC) remain a concern with possible spillover effect. Fuel shortages have been blamed on PPMC woes, and it is estimated the private market has exposure well exceeding $1 billion.

Slovenia and Croatia: Cash-flow problems for companies there have been an issue for years, but that seems to be abating somewhat.

Tunisia: Showing no improvement, payments are continually late or delayed. A wait of a month for banks to make the money available is not out of the question even when payment is made on time.

United Arab Emirates: The UAE actually benefitted from the Arab Spring revolts. Like parts of Turkey, Dubai now has become a bit of a trading center between more Islamic-tied business, including those operating under Sharia Law, and the west.

- Brian Shappell, CBA, NACM staff writer

Despite divergent topics discussed during the opening trio of sessions at the FCIB Global Conference in the greater West Palm Beach area, one theme seemed to beam out of the morning sessions: Change (and being able to adapt the large amount of it going on in business and credit at present).

Sanjiv Sanghvi, of Wells Fargo Bank, noted that a few changes in leadership in Europe (Italy, Greece) doesn’t necessarily equate to a bump in stability automatically.

“It’s tough to believe that putting technocrats in power will mean they will things will be run in a fundamentally different way,” he said, before noting the U.S. economy continues to look strong – much stronger than portrayed by the mainstream media – especially in comparison.

Sanghvi did note that the coming Basel III changes will require businesses, notably those in credit, to stand up and take note. All told, the Basel III changes and what seem to be some almost hidden requirements could force financial institutions to literally double their capital holdings. As such, he believes banks forced to change their ratios will simple handle the equation on one side or another: raise the costs to borrow or reduce assets in the game.

“That’s a huge different in capital requirements,” he said. “There’s going to be less credit available, not just in trade finance, but finance in general.”

Meanwhile, Marsh USA’s Angela Duca’s speech about global political risk suggested companies either need to be quick on their feel and flexible when granting terms into emerging, somewhat stable economies or they need some type of insurance backing.

“How do you forecast political risk [terrorism, regime changes, etc.]? You can’t,” Duca said. “It’s hard to predict the spark that will cause a major change in a country. And, in the real world, political risk exists all the time.”

Michael Sauter, of Guardean GmbH, used his presentation to promote the idea of willingness to be flexible as well, noting that holding firm to principles and strategies that worked four to five years ago simply may be the most “dangerous” strategy a credit department can employ.

“Adapting to change is the most important thing to our profession,” Sauter said.
Note: Check back throughout the week here and at our Twitter account (NACM_National) for live coverage from FCIB’s Annual Global Conference from greater West Palm Beach, FL.

Brian Shappell, NACM staff writer