1. International Credit Management
Ashok Kampani
March 26th , 2015

2. Definition of International Credit Management
Manage receivable/debt in a country other than in which supplier is domiciled.

3. Receivables Asset Management
Security (risk)
Efficiency (DSO, collection)

4. Credit Function
Credit function normally gets noticed when things go drastically wrong (major write-off)
-Credit manager did not highlight /explain the risk properly
-Treasurer/CFO did not listen properly

5. Political/Country Risk
Credit
International
Commercial Risk
Political/Country Risk
Domestic

6. Sovereign /Political Risk
The risk of managing a debt in a country other than the one in which supplier resides. (e.g. Swiss company shipping to Turkey). The risk may entail that a foreign country may nationalize the business, imposes foreign exchange regulations, protectionist tariff, boycott, etc.

7. International credit Management evaluation process
Political country filter
Commercial filters
Country filters
Commercial filters
Grading of countries (rating agencies, underwriter), risk appetite, market dynamics, nature of the product, etc.
Financial statements analysis, credit agency ratings, risk appetite, market dynamics, etc, etc!!!

8. Risk mitigation and portfolio approach
Risk concentration
Geographical Commercial

9. Definition of security
The receivable debt is considered secured when it is guaranteed  by a third party ( acceptable bank or  insurance as per company policy ) irrevocably, unconditionally and in case of default is payable on first demand. In case of lien on an tangible asset ( collateral)  – the debt can be considered fully secured only if the company has full legal control of physical movement /transfer of the asset and asset’s market value covers the outstanding debt.
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10. Why do we need security?
Mitigation of risk concentration in financially/politically vulnerable geographical areas ( not customer’s willingness but ability to pay)
Commercial Risk Concentration protection (one key account failure can have serious consequences)
Non availability of financial disclosure
Weak/leveraged debtors financial statements
Transfer Risk from debtor’s balance sheet to an other entity

11. Receivable Coverage 1
Transactional 2
Country 3
Global

12. Security Nature Comments
Letter of Credit
Transactional/Revolving
Documentary risk
Bank Guarantee
Relationship sensitive
Bill of Exchange
Transactional
Time restricted
Pledge on a tangible asset
Cumbersome
Insurance
Transactional/Global
Flexible? Cost?
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13. Non financial elements
Credit /sales conflict
Selling to sales management
Culture awareness
Local Practice awareness
Reporting structure
Credit policies

14. Security decision flow process
Political Risk assessment
Commercial risk assessment
Transactional/Country/Global
Security instrument
Appropriate risk coverage at a sustainable cost

15. (Days Sales Outstanding)
What is DSO ?
(Days Sales Outstanding)
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16. Objective
A balanced portfolio with security in proportion to risk levels, at a sustainable cost

17. Microsoft Engineering Excellence
Questions?
Microsoft Confidential