Global Economic Trade Issues Affect Diverse and Disparate Companies, Part Two of Three: INFECTION

By Ron Doyle

In the first part of this series of three blog posts about how global economic problems can spread quickly to affect seemingly unconnected companies, I discussed how bank problems in Mexico quickly resulted in defaults on amounts owed to exporters into that country.

In this second part in the series, I describe financial infections that we see developing on the horizon today. Infection is the process of contaminating a healthy entity with disease-causing organisms. The infection of mounting debts is a real risk in international economies – and there are others:

1. Sovereign debt is the most obvious and most infectious. Many of the Organisation for Economic Co-operation and Development (OECD) countries are carrying record levels of debt in relation to their Gross Domestic Product (GDP). These countries are not developing countries, but rather some of the major economies of the world and their debts are held on the balance sheets of leading financial institutions. In today’s global economy, the value of financial assets held by a bank is subjected to rigorous scrutiny.

2. Greece's recent bailout avoided an imminent crisis and also addressed the short term problems of some other European countries. The problem with this solution: it creates more debt. This type of solution “solves” a debt crisis in highly leverage countries by having better managed economies take on more debt. This type of debt is also held on the balance sheets of major financial institutions.

Click to read more ...

Global Economic Trade Issues Affect Diverse and Disparate Companies, Part one in a three Part Series: CONTAGION

By Ron Doyle

What does “contagion” mean in the context of trade credit insurance, the global economy and credit risk? Contagion is defined as a tendency to spread – as in the spreading of a harmful idea or practice.

The world financial news each day has many stories about different sectors of the economy: banking, mining, manufacturing, etc. When reading these items, it is often difficult to see how, or if, the problems in one geographic area or industrial sector will affect a seemingly unrelated company in another region.

Click to read more ...

The world remains mired in debt: Your New Year’s resolutions should include playing close attention to credit risks in your industry

By Ron Doyle

Hallelujah, the recession in Canada is over – the GDP grew by 0.1%! However the real question: Is the risk of bad debt losses increasing or decreasing on a global basis?

The number of banks in the USA that have failed in 2009 has reached 140. This is a symptom of weakness in the American banking system. Yet, what is happening with banks in other countries around the world, such as in Mexico, Russia, and the United Kingdom? How many of these banks have exposures to sovereign debt in countries like Dubai or Greece, and how are governments going to finance the expanding deficits?

It appears that because of the deficits, some countries, like the United Kingdom, and even the USA, may find their debt ratings reduced in future, which will increase the cost of borrowing and make it more difficult to find buyers for their ballooning debt.

There is an immense amount of debt held today by individuals, companies and governments, all which will have to be refinanced in coming years.

Click to read more ...

Nine credit insurance tips as relationships change in 2010 with underwriters, suppliers, buyers, lenders and peers

By Rob DowneyThe sculpture "Apollo and Daphne" by Bernini in the Galleria Borghese (from a file from the Wikimedia Commons)

Long ago, in the days before the crisis (B.C.)… Apollo, god of light, poetry, and eternal youth, the son of Zeus & Leto, was betrothed to Daphne – daughter of the River god, Peneus – and she was a lovely lithesome athlete. Fresh from defeating Python with his bare hands, brash Apollo made fun of chubby be-winged Cupid and his small bow. Impulsive Cupid shot a golden Arrow of Love into Apollo’s heart, but a lead Arrow of Revulsion into the heart of Apollo’s fiancee Daphne. 

Both utterly besotted and frustrated, Apollo chased the fleeing, frightened Daphne through the woods of Olympia for a year. Too tired to run anymore, she asked her father’s help to escape Apollo. Peneus cleverly turned his daughter into a laurel oak tree – source of royal staves and Olympic leaf crowns – so she could be forever near him on the banks of the rivers he ruled. 

Click to read more ...

Knowledge of trade credit insurance: the value of an ICBA broker

By Mark Attley

English is the second language for many of my 26 global partners in ICBA, but often the eloquence of a comment spoken by these partners communicates the message with much greater clarity than those of us who claim English as our first language. At a recent ICBA meeting, it was exclaimed, “We do not know what we do not know.” Normally, I would give appropriate credit for such a gem of wisdom, but for fear of embarrassing the prolocutor, I will refrain on this occasion.

Click to read more ...