Global Credit Solutions

Document Sample
Global Credit Solutions Powered By Docstoc
					                    International Credit and Risk Trends

                               By Albert Knowles
                        GCS Caribbean Regional Director

Sunday, July 01, 2012           Slide 1
                        Albert Knowles,
      •   LLB. Kings College London. Barrister Law Grays Inn London 1966

      •   Founder and Owner of a large commercial law practice in the

      •   Chairman of AV Knowles & Co Ltd a Collections & Credit Risk
          Management Company based in Trinidad and Tobago and one of the
          85 worldwide offices of Global Credit Solutions.

      •   Regional Director of Global Credit Solutions for the Caribbean.

Sunday, July 01, 2012                            Slide 2
Sunday, July 01, 2012   Slide 3
                                                                      Market Intelligence                              Agencies



                                     s                                North                                                  Partner                     Clients
                                                                     America               Europe                            s

                                                         America                                    Europe                                               Clients
                          Partner                                                                    East
                          s                                                                                                       Partner
                                                           Pacific                              Middle                                                   Clients


                              Partner                                         Africa
                              s                                            North Central                                   Partner
                                                                            and South                                      s

                                               s                                                             Partner
                                                                                                             s                     Clients

Sunday, July 01, 2012                                                                                               Slide 4
      • Various international groups which provide credit
        services, continuously monitor countries to
        extract latest risk trends for exporters- thereby
        facilitating optimum best credit decisions in
        international trade.
      • Other groups give data according to risk,
        economic factors etc
      • GCS takes all such available resource data to
        evaluate current risks & future trends.

Sunday, July 01, 2012            Slide 5
Sunday, July 01, 2012   Slide 6
      • Credit & risk management constitutes an integral element in
        international Client service.

      • Risk mitigation depends on availability & usage of resources to
        properly assess risk factors which directly impact on the basic credit
        decision & when approved,to fix an acceptable level of exposure.

      • To accept or grant trade credit without such due diligence is a
        recipe for disaster in the International arena.

      • Lets now examine CURRENT TRENDS in International Credit and

Sunday, July 01, 2012                           Slide 7
Sunday, July 01, 2012   Slide 8
      • Most analysts link the current credit crisis to the sub-prime mortgage
        business, in which USA banks give high-risk loans to people with
        poor credit histories.
      • These and other loans, bonds or assets are bundled into portfolios -
        or collateralized debt obligations (CDOs) - and sold on to investors

Sunday, July 01, 2012                          Slide 9
      • In retrospect, it seems a “no brainer”
      • Yet the fundamental flaw was a failure to assess Risk level &
        Exposure properly.
      • Credit was therefore approved incorrectly
      • The truth of the risk element was hidden ie that success of the
        investment depended not on the realisation of the collateral but on
        the borrower being able to repay- & marketed in a “prettified bundle
        of transactions”
      • This Product was sold to the unwary who did not properly asses the
        enormity of this risk.

      • The result? - A Global Crisis.

Sunday, July 01, 2012                         Slide 10
Sunday, July 01, 2012   Slide 11
      In regards to:
                        • Political
                        • Country
                        • Economic

Sunday, July 01, 2012   Slide 12
                        Political Risk

Sunday, July 01, 2012   Slide 13
                        Country Risk

Sunday, July 01, 2012   Slide 14
                                           Country Risk Report
                                              Republic of Yemen
                                  Al Jumhuriyah al Yamaniyah
      •       Terms of Reference and Contents
      •       I. General
      •       A. Geography
      •       B. Political
      •       C. Executive Power
      •       D. Legal
      •       F. Tourism

      •       II. Security.
      •       A. Current military and police presence impacting the security environment for resident foreign
              nationals in commercial sector.
      •       B. Official controls on foreign nationals, and attention of security services to foreign nationals.
      •       C. Presence and influence of any criminal organizations, in respect to legitimate commercial
              activities conducted by foreign nationals.
      •       D. Nature and levels of crime, particularly random violence and/or any targeting of foreigners.
      •       E. Security exposure in living and working places, and in various modes of domestic travel.

Sunday, July 01, 2012                                                            Slide 15
      •   III. Governmental Stability
      •   A. Major issues or factors challenging (or potentially challenging) stability, from the
          perspective of security of foreign residents, and perspective of ongoing commercial
      •   IV. Economic Conditions
      •   A. Environment for foreigners' entrepreneurial endeavours (not cottage industry, but
          small to medium sized business)
      •   B. Infrastructure and/or government programs to attract establishment of businesses.
          V. Specific Areas of Interest
      •   Eco Tourism and Adventure Holidays
      •   Interest in the town of al-Mukalla in general and the hotels in that town specifically the
          Holiday Inn, Mukalla and the Hadrama Hotel
      •   An area of interest between Saywun and Shibam with a centre of mass at 15° 56’
          04.27” N 048° 43’ 30.33” E.
            – Particular interest to be given to a travel and tourism company “Universal Travel”
               who have the tourism rights for this part of Yemen.
            – Al Hawtha Palace Hotel which is owned by Universal Travel
      •   Annex A – Tourist Statistics For Yemen
      •   Annex B – Reuters Newspiece on Yemen

Sunday, July 01, 2012                                               Slide 16
      Based on the Terms of Reference we consulted the following sources:

      •   HumInt Assets on the ground
      •   Personal General Knowledge of GCS Staff
      •   GCS Middle East Office
      •   Constitution of Yemen
      •   Department of Tourism Yemen
      •   Immigration Department Yemen
      •   Confidential reports available to GCS
      •   Confidential Country Check
      •   Reference Documents on Country
      •   FCO UK Reports
      •   Yemen Government Documents
      •   State Department Reports
      •   General Media
      •   Regional Media
      •   Country Media
      •   Mukalla Media
      •   Yemen Times

Sunday, July 01, 2012                            Slide 17
                            Economic risk
         Economic risks can be manifested in lower
         incomes or higher expenditures than expected.
         The causes can be many, for instance, the hike
         in the price for raw materials, the lapsing of
         deadlines for construction of a new operating
         facility, disruptions in a production process,
         emergence of a serious competitor on the
         market, the loss of key personnel, the change of
         a political regime, or natural disasters

Sunday, July 01, 2012            Slide 18
Sunday, July 01, 2012   Slide 19
      • It is essential that we advise our clients just how
        important it is to access fully the RISK involved in
        anything, but especially Investments and loans which are
        essentially CREDIT

      • Do not allow your clients to rely on someone else's
        assessment. They should always carry out their own
        assessment. Looking at the political , country and
        economic risk as well as the loan and trade risk.

      • RISK and CREDIT can be ruinous to individuals,
        businesses, countries, and as we now know the global

Sunday, July 01, 2012                  Slide 20
Sunday, July 01, 2012   Slide 21
      In relation to:
                        • Trade
                        • Manufacture
                        • Finance
                        • Services

Sunday, July 01, 2012   Slide 22
         Loans or Credit have been with us almost since time began and all
         businesses rely on credit, be it a small overdraft, a big business loan
         or a trade credit. Countries lend to countries, banks to banks and
         banks to businesses or consumers. One of the best indicators of the
         availability of credit and an economy is Credit Insurance.

         Credit insurance emerged as a product in late nineteenth-century
         Europe, but it didn’t reach widespread use until after World War I. It
         blossomed during the economic booms of postwar Europe, when
         peace and rapid rebuilding saw cross-border trade reach epic
         proportions. Today, worldwide trade credit insurance is an $8 billion
         a year business, with 87 percent of that captured by just three firms:
         Euler Hermes (36 percent), Atradius (31 percent), and Coface (20

Sunday, July 01, 2012                            Slide 23
               So lets now look at the International Credit and Risk Trends

Sunday, July 01, 2012                              Slide 24
      •   Source - IMF

Sunday, July 01, 2012   Slide 25
      Source BBC

Sunday, July 01, 2012   Slide 26
      Source BBC

Sunday, July 01, 2012   Slide 27
                   In July 2009 Coface issued the following Press Release

      •   Coface foresaw a world recession of -2.5% in 2009 (industrialized countries:
          -3.9% and emerging countries: +0.7%) and positive, but weak, growth of
          1.7% in 2010. The expected recovery that they predicted to be in 2010 was
          predicted to be weak for industrialized countries (0.5%), but better for
          emerging countries (4.1%).

      •   This revised forecast incorporates a greater growth falloff than forecast at
          the beginning of the year and it assumed that this drop stops in the coming

      •   Thus the difference in world growth between 2007 and 2009 reached 6.6
          points, an exceptionally large growth contraction. The CIS and emerging
          Europe are zones where the contraction in growth is the greatest.

Sunday, July 01, 2012                                   Slide 28
      Source Coface Press Release

Sunday, July 01, 2012        Slide 29
   On the 18th January 2010 Coface Issue the following press release

      • This credit crisis has lasted two years, like the previous crisis and as
        Coface predicted at the beginning of 2008 when it recorded the
        initial increase in companies’ payment defaults. But it has been the
        most violent credit crisis in the past 60 years: the world growth
        differential between the beginning and end of the crisis was 6.1
        points, with strong geographic disparities, as Eastern Europe and
        Russia were affected the most (10.2 and 16.2 points respectively).

      • Compared to previous crises, the magnitude of the shock is
        explained by the increasing globalization of economies: a
        confidence shock spread everywhere following Lehman Brothers’
        bankruptcy, with the seism reaching both finance and industry,
        Europe or Asia. Even yet in countries not characterized by debt
        bubbles the record contraction in world trade had a brutal impact on

Sunday, July 01, 2012                            Slide 30
      • Nevertheless, the decrease in payment defaults, until
        March 2010 indicated the credit crisis as such may have
        been over. This correlated with the end of the recession
        in most major industrialized countries at the end of the
        third quarter 2009.

      • Thus, after having implemented several waves of rating
        downgrades throughout the crisis, Coface was easing
        the rating outlooks for all industrialized countries.
        Exceptions include the United Kingdom, Italy and the
        “PIGS” (Portugal, Ireland, Greece and Spain), which
        remain rated A3, some still under a negative watch.

Sunday, July 01, 2012                Slide 31
      • The dynamism of emerging countries rebalances world growth. The
        decoupling of emerging countries / developed countries has finally
        occurred, but in a specific and new way. As stakeholders in the
        world economy, emerging countries couldn’t escape being affected:
        where companies were too heavily indebted, the growth contraction
        brought on credit crises (i.e.: significant increases in payment

      • However in most cases, the emerging countries managed this crisis
        independently. Thus they demonstrated their ability to learn the
        lessons from previous crises and to rely on solid fundamentals,
        which allowed them implement recovery policies.

      • Of growing concern as this presentation is being researched though
        is the risk now faced by Spanish banks and the flow on effect to EU
        member countries.

Sunday, July 01, 2012                        Slide 32
Sunday, July 01, 2012   Slide 33
Sunday, July 01, 2012   Slide 34
Sunday, July 01, 2012   Slide 35
Sunday, July 01, 2012   Slide 36
Sunday, July 01, 2012   Slide 37
       Make Sure Your Credit Risk Is ON
Sunday, July 01, 2012   Slide 38
      Finally in the misquoted words of Sir
         Winston Churchill I would like to
        give you three pieces of advice on
      • The First is Due Diligence

      • The Second is Due Diligence

      • And the Third is Due Diligence

Sunday, July 01, 2012   Slide 39
                          Thank You
                        Any Questions?

Sunday, July 01, 2012   Slide 40

Shared By: