By Rob Downey

My partners normally ban the use of military or sports metaphors in explaining trade credit insurance.  They know that troubled trade transactions, defective coverage, and disputed obligations are more complicated than the black-and-white examples typically presented by wars and athletic contests.  Still, I believe the  world of global trade could use a Major-General Robert Craufurd about now.

Background: During the Peninsular War (1808-1814), the Duke of Wellington, Sir Arthur Wellesley, battled forces which frequently out-numbered his own five-to-one.  Because his Army was in a near-constant state of tactical retreat - whenever it was not besieged - Sir Arthur developed a skill for covering his rear, in the military combat sense. 

At Wellington’s urging, Major-General Craufurd trained a Light Infantry Division intensely in the specific individual skills and unit drills needed to maintain order within and provide cover for a retreating army.  The distinguishing achievement of Craufurd’s Division was an ability to march at 132 steps per minute, forward, backward, or obliquely - while loading, firing or affixing bayonets to muzzle-loading rifles or muskets. The Division retreated using formations called for by military necessity: squares to protect against Lancers and Heavy Cavalry, double-ranked lines to bear maximum fire power on pursuing infantry columns and widely-spaced checkerboard columns to frustrate artillery whenever it was brought to bear.

“So how does this help assess trade credit risk?”, patient readers may ask.  Well, Major-General Craufurd anticipated his difficulties with some precision and prepared for each mortal peril with a particular but flexible response. This metaphor is useful to anyone still surviving in international trade today and likely facing several more years of serious business challenges and intense financial scrutiny. Credit, financial, and insurance commitments of support are currently harder to obtain, harder to hold, and harder to improve than at any time in the prior working life of most of us. Yet like Craufurd, we can anticipate the challenges and meet each new standard, demand, or threat with a ready response.  The seven habits suggested below may apply to privately-held companies more than to public ones, but the spirit behind these habits will be a useful one for the forseeable future of global business.

Craufurd’s ideas as guidelines for a workable global trade sensibility in the coming decade:

1.  Keep moving.  Get your financials audited on an annual basis; update them quarterly. Keep your non-disclosure agreements reviewed and ready.  You will be asked for documentation, information, and story validation often.

2.  Practice constantly.  Get financials on as many of your key buyers and suppliers as possible.  Try again. 

3.  Know the terrain.  Start a conversation with key partners.  Institutionalize, at a higher level of intensity than previously, the practice of gathering your own financial information.

4.  Anticipate your problems.  Be willing, under discreet conditions, to show key partners financials that you do not typically share.  Your trading partners are likely to make as sound and as favorable judgements of your merit as will rating agencies, lenders and insurers.

5.  Address the essence of a problem, demand or threat, not necessarily by opposing with a similar force.  Respond to buyer or supplier credit concerns with questions, if you do not share their position.  Experiment more than previously with methods and locations of delivery, packaging, manufacturing or warehousing in order to attain desired ends.

6.  Know the realistic limitations imposed by circumstance.  Get a credit limit on yourself.  Work through your bank to present to key suppliers an insured credit limit on your company.  The credit limit on yourself, protecting against non-payment by your company, can be arranged with the aid of your preferred lender.  In this way you may allay payment risk concerns from critical suppliers, obtain more favorable terms of supply and improve your cash flow.

7.  Do not try to win once and for all.   Imagine your partners' relative position in the supply chain afresh. Be willing to stretch a bit to help address the supply-chain concerns of your largest buyers and suppliers.

(Rob Downey is one of the founding partners of International Risk Consultants, Inc. (IRC) www.irc-group.com – a globally-integrated trade-finance and credit insurance specialty brokerage, which serves as the operating member of ICBA for Mexico, Brazil, India, China and the U.S.)