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FEBRUARY 2016 BRIEFING
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SH INTERNATIONAL LLC


FEBRUARY 2016 BRIEFING


Adventures from the Overseas Payment Jungle
 
Dear Clients & Friends of SH International:
 
We work with many of our clients on overseas payment matters. We are going to give you the insider’s look at some of the issues that you may grapple with. Enjoy!
Managing Payments
Global Business Risks
 
When it comes to overseas product sales, until payment is received, there is a risk of not receiving it at all.  Seller beware.
 
This is true in all international business. One must be especially wary in emerging markets where there are often less safety mechanisms in place for non-payment. This can sometimes create a lack of concern for timeliness.
 
Actively strategize around these risks, and not just passively allow your company to be beaten up by them. Let’s discuss a few strategies ranging from the more sophisticated to the simple and pragmatic.
 
Trade credit insurance is offered by private companies and government agencies. By paying an insurance premium, you can be covered in case of a payment default. Some policies will also cover multiple transactions, making this a powerful tool for companies with significant foreign sales.
 
Factoring houses will purchase receivables at a discount. This way, your company will not have to wait for funds or assume the risk of non-payment. This can also obviate the need to manage credit and collections functions in-house. This option is not cheap, however.
 
Read on for a minimalist strategy that requires no bells or whistles to implement…
Building Trust Over Time
Street Smart Strategies
 
It can be difficult to get visibility on an emerging market buyer’s creditworthiness. We have seen companies go so far as to hire private investigators to try to get this information in special circumstances.
 
The most pragmatic way to proceed can be to incrementally build your own positive history with the company.
 
Start the relationship with smaller sales. Structure payments to minimize the risk, by taking as much as you need upfront to cover costs. Do not release new product until old ones are fully paid for. That way, your company is unlikely to make a loss on a transaction - only profits are at high risk.
 
As you build trust with the buyer, increase to larger sales over time. Building your own positive history with a buyer can be worth more than all of the credit reports in the world.
 
This seems like simple advice, but it can be hard to turn down a large sale because of terms. Taking shortcuts – delivering goods or services before any payment is made or other risk mitigating mechanism is put in place – can lead to tremendous frustration and loss.
 
Check out examples of what we have done to manage troubled situations when a foreign party is not coming through on their end of a deal. From actively managing relationships to cleaning up a mess without going to court, we have several strategies up our sleeves.
 
This is just the beginning – there are also lots of risks related to accepting letters of credit or payment in foreign currencies. 

Engaging an advisor familiar with various mechanisms and strategies to manage a full spectrum of risks can help your company survive and thrive in the global business jungle.
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ABOUT SH INTERNATIONAL LLC

We expand businesses through emerging markets deals, ventures and initiatives. We leverage a proprietary network of resources, specialists and partnerships to achieve powerful results. Based in multilingual and practical experience on five continents, we provide your company with truly global vision.
 
Copyright © 2016 SH International LLC, All rights reserved.


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