Business management

Why now is a good time to consider international trade

Mirka Skrzypczak, the bank’s head of working capital and trade products, tells us what businesses can expect to get out of this year’s International Trade Festival.

The virtual event is an opportunity for businesses of all sizes to learn more about the issues they face and what actions they need to take, and to get a clearer picture of some of the initiatives the government is working on to propel international trade. With prestigious speakers taking part, the four-day event from 16 – 19 November will cover a range of critical issues, including how to prepare for international trade and export; supply chain visibility and the growing significance of environmental, social and governance (ESG) issues on both sides of the chain; managing working capital in a recession; and the importance of diversity and inclusion in the international trade environment.

Mirka Skrzypczak, the bank’s head of working capital and trade products, says: “We’ll be looking at the macro-economic and geopolitical factors, but also having pragmatic conversations and hearing case studies from businesses that are navigating all this.

“Businesses are getting ready for the end of the transition period, but they are also grappling with how the pandemic has impacted business, where their vulnerabilities are in their supply chains and how international trade can help them. We’ll explore how businesses can mitigate risks on both the supply and demand sides.

While the pandemic is global, Brexit is specific to the UK and the EU, and British businesses face an unprecedented combination of risks.

“Companies need to assess how much the part of the ecosystem in which they are operating has been affected,” says Skrzypczak. “We aim to help educate business. People don’t yet know what the final outcome of Brexit will be. Will there or won’t there be a trade deal? You can’t easily prepare for both because it’s a different set of rules and processes.”

If you’ve not traded outside the EU, then converting to World Trade Organization rules or a completely different trade deal with the EU will require significant changes to the way you do business. Getting the right information and advice to manage that is challenging but vital.

Prepare your business to go global

The International Trade Festival aims to inform businesses on expanding into new markets. While many may find this move daunting, particularly in the current climate, Skrzypczak says firms need to give it serious thought.

“The reality is that businesses will have to expand. Why? Because purchasing power has fallen as a result of the pandemic. There is less money to invest and less income, the economy is slowing, and there are fears of a double-dip recession. So, if you want to maintain your demand levels, your current customer base may not be sufficient to satisfy this.

“Hence you may need to expand internationally. But we know there many cases where businesses have tried and it didn’t work out. There are so many unknowns and different scenarios to consider.”

The event aims to make it easier for businesses to take this step, by providing a blueprint for expansion and raising awareness of the issues that organisations need to be on top of before they enter new markets.

Scrutinise your supply chain

Trading partners came under pressure when businesses first went into lockdown and goods and services were disrupted. But now the economic situation poses vulnerabilities within the chain that are not so visible. “Businesses need to spend time understanding what their supply chain is, who the suppliers of their suppliers are, who the customer of their customer is,” says Skrzypczak.

“They need to be aware of vulnerabilities. Are there any bottlenecks, any scenarios, that could put the continuity of supply chain at risk? If organisations detect vulnerabilities, they need to identify alternative sources or substitutes.”

Businesses need to spend time understanding what their supply chain is, who the suppliers of their suppliers are, who the customer of their customer is. They need to be aware of vulnerabilities

Mirka Skrzypczak
Head of working capital and trade products

It can feel uncomfortable questioning good relationships with suppliers and customers, but Skrzypczak warns against complacency. “Always think about substitutes or plan B. And, likewise, think about where you could have markets if your current market base collapses.”

There are opportunities for smaller businesses to collaborate. Syndicates are forming to create buying groups – working together to share sourcing costs and create a critical mass that provides specific suppliers with greater certainty. “You don’t want your supplier to fail – that’s why you’re forming your purchasing group to make sure there is enough demand to sustain them,” Skrzypczak explains. “I believe there’ll be a shift in how people work together, with much greater collaboration between businesses.”

Understand your working capital requirements

Critical to the health of trade, of course, is managing working capital. “There is always an imbalance of working capital in a post-recession scenario,” Skrzypczak says. The gap between accounts payable and accounts receivable is often disrupted, for example when businesses in the chain delay payment to suppliers to preserve cash flow.

“You may have a funding gap because you have suppliers pressuring you while your customers are not necessarily paying you on time, and you want to maintain those relationships,” Skrzypczak says. “So, solutions around how you can finance and bridge that working capital gap become more important in a recession.”

In the first instance, this requires businesses to negotiate with customers and suppliers. “When businesses pick up the phone to suppliers, they are frequently surprised at how much leverage they have,” says Skrzypczak.

For businesses that have trade receivables, there is scope for them to use forms of invoice financing or receivables financing to bridge any gaps. There are also other trading instruments to help finance the purchasing of goods from abroad before you can physically pay for them yourself. “Before using any of these, it’s important to understand at which point in your trade cycle your outlay is highest and find the solutions that address the cash crunch points,” Skrzypczak cautions.

The International Trade Festival is aimed at businesses of all sizes and sectors with sessions tailored to different types of audience. “The event is for all levels, including FDs and managing directors, but also operational directors, procurement functions, logistics managers, and all those managing working capital within the business,” says Skrzypczak. “It’ll be wide-ranging and thought-provoking. The world is in a state of flux, so that’s all the more reason to look globally at your company’s potential and its place in an international market.”

The International Trade Festival takes place from 16 – 19 November 2020. To find out more about the event and how to register, visit https://itw2020.virtualhub.events/.

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