The exciting part of international business and trade, some will suggest, is in the development and entry into new markets, in the enrichment that comes from experiencing different cultures and navigating the challenges of doing business in new environments. Certainly not in the area of finance!

The reality is however, that you can get everything absolutely right, but if you miss the target or lose the plot in terms of the financial aspects of the deal, it could have disastrous effects on your business overall. Have I got your attention?

The pursuit of international business and trade should be enriching and enjoyable, but it must be commercially viable—let me just say it—PROFITABLE!

I happen to think (perhaps you’ll feel a tear of sadness well up as you read this) that finance can be VERY interesting, and almost anything with an international flavour or angle is intrinsically fascinating, including finance that crosses borders. So much so that I make a decent living at it, and just for fun—because everybody needs a hobby—I wrote a short book on the topic. I can hear some of you saying “GET A LIFE!”

What IS trade finance?

Trade finance—the esoteric, poorly understood branch of finance that deals with the financing of international trade—is in fact relatively straightforward at its core. It has proven effective in facilitating trade across every market on the globe for hundreds of years if not longer. Did you feel that? The sudden rush of adrenaline and flash of goose-bumps as you contemplated the mind-blowing implications of this statement? Work with me on this!

Industry estimates suggest that 80 to 90 percent of global merchandise-trade-flows (now in the range of $18 trillion annually) are enabled through some form of trade finance. Put another way, only 10 to 20 percent of trade could take place today without some form of trade finance, including the risk mitigation aspect of trade finance. Still think trade finance is a snoozer topic? Really? Then STOP READING NOW!

For the rest of us, I wrote my book, “Financing Trade and International Supply Chains” as a means of introducing this vital business—a critical element of any company’s international business toolkit—in a way that (hopefully) distills some key concepts, and presents the topic in a very practical, commercially useful manner.

The four fundamentals of trade finance

Trade finance, including the financing of global supply chains, is fundamentally about four things:

• The facilitation of secure and timely payment across borders: “SHOW ME THE MONEY”
• The effective mitigation of a wide variety of risk in markets across the globe: “PLEASE DON’T LET ME LOSE MY SHIRT ON THIS DEAL”
• The provision of liquidity and financing: “BANKER, CAN YOU SPARE A DIME?”
• The facilitation of information flow about a shipment and/or about the related movement of money: “I COULD TELL YOU, BUT THEN…”

No matter how complex a deal or trading relationship, or how challenging the markets may be from a political risk perspective, a trade financing solution will involve some or all of the above. It can also simultaneously benefit an importer, an exporter and potentially a collection of commercial relationships that are part of a common global supply chain. Trade finance has proven effective and valuable in transactions involving stable and secure economies with established and trusted trading relationships. It’s also effective (even essential) in markets that may be war-torn or challenged by lack of basic infrastructure.

Trade finance can play an important role in enabling trade linked directly to international development and poverty reduction in the most difficult markets on the planet.

It can also play a critical role in enabling access—through trade—to agri-food, commodities and other goods or services that shape the standard of living of entire nations and regions. Perhaps at a more granular level, trade finance can help small businesses, even start-ups, explore opportunities to source in or sell to international markets much earlier in their life cycle than might otherwise be feasible.

Setting up a trade finance solution

While banks provide the majority of certain types of trade finance, other providers, such as Canada’s Northstar Trade Finance, provide critical support to SMEs. Other institutions like Export Development Canada (EDC) play a critical role in this domain as well, both on the side of financing and risk mitigation. Specialists in this field are very well-equipped to provide indispensable advice on trade and supply chain finance options.

As an exporter, the ability to package an attractive financing solution with your product or service can be an important competitive-advantage, especially in this post-crisis environment where liquidity remains constrained (i.e., there’s no cash around).  A large importer, likewise, can use supply chain finance structures to allow small suppliers (especially “strategic suppliers”) to gain access to financing on attractive terms.  Everybody wins!

If you’ve read this far, you’re hopefully convinced of the relatively straightforward nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes. In the fine tradition of presentations and blog entries, this should ‘leave you wanting to know more’ about the financing of international trade, and if so, I happen to know of a pretty good book on the topic…

Trade has become the target of much negative, inflated and even hysterical commentary in several parts of the world. This goes beyond the core constituency of anti-traders, many of whom are thoughtful commentators pointing out serious, dangerous and fundamentally wrong elements of the current global model of cross-border commerce. Others, well, they can stand as an example of free, if not particularly well informed, speech.

Let’s acknowledge that trade has some fundamental flaws. Sometimes it involves terrible life-threatening activities related to the trade in rare earth minerals, diamonds and precious metals. At times it can facilitate unconscionable injustice related to the distribution of wealth across global supply chains, from small producers at one end to global multinationals midstream, and wealthy consumer clients at the other end.

This is not a political statement, nor a comment on the darker side of market economics: it is simply the reality.

Anti-trade activities and anti-globalization advocates focus on these areas. They have clearly gotten to the core of an emerging issue among populations that feel (and are) disenfranchised. These members of the human family have not experienced anything close to proportional benefits from the growth of trade or the expansion of globalization. In fact, rather than “globalization” what we should more accurately call it is “internationalization”, since we are still far from globalized in most areas of endeavour.

If trade is indeed so terrible, why do we engage in it?

Let’s not get into the classical economics discussion about comparative and absolute advantage, or the related example of countries producing and trading in “guns and butter”. We’ll leave that for another time.

Can we agree that humanity has probably engaged in trade since the dawn of our collective existence, and that on an individual level, most of us have done some kind of trading at some stage?

I was never one to trade lunches at school, but there was something innately interesting about trading in hockey cards, stamps or other collectibles. I go back to the peak days of the Canada vs. Russia rivalry and of the Montreal Canadiens’ dynasty years, Cournoyer, Lafleur, the Mahovlich brothers and Larry “The Big Bird” Robinson and spent hours poring over stamp collections and negotiating with long-gone fervour to acquire a particularly interesting addition to either the card or the stamp collection.

Were these the seeds of an eventual career in trade? That might be a stretch, but going from my hockey card trading days to reading a memorable book called “Making Global Deals” by Jaswald Salacuse, it seems, was natural and in perfect alignment.

Anti-globalization sentiments hit home

I’ve been observing, with a combination of reactions I dare not describe, developments over the last few months in Europe, parts of Asia, the United States and elsewhere. This has led me to conclude that anti-globalization and anti-trade commentators have managed to do something exceedingly well that those of us on the other side of the debate have done miserably poorly, and that is to deliver their message with a focus on issues that grab you by the gut, or the heart, or some combination of the two.

These messages hit home so often because they are grounded in realities, some that are in absolute need of description, debate and deliberation. Realities such as the adverse impact of trade on the environment, natural resources, indigenous populations, child labour, animal cruelty, illicit trade in endangered species and a whole range of similar matters, even ‘trade’ in pharmaceuticals, provided to developing markets at costs that are impossible to defend on human terms.

Arguing in favour of trade based on statistics, objective measures of economic value-creation, increases in global wealth, or other similarly dispassionate foundations simply does not work.

These intellectually grounded, academically robust arguments do not bring to life the positive contributions of international commerce. For instance, the reality that trade contributes to international security and safety, that the engagement of developing economies in trade very literally feeds families, saves lives and raises the quality of life for tens of millions of people if not more, across the planet.

Trade is not just about commerce at all costs, it is not just about cost-cutting, or about finding new markets to sell into at attractive margins. Trade is also an engine of growth, a contributor to international development, and an important element of a growing effort to put financial and economic inclusiveness at the heart of international policy priorities.

Making connections with the very real benefits of trade

Many of the very issues raised by anti-trade activists and anti-globalization commentators are being improved, or at least mitigated, as a direct result of international engagement and trade.

Observe health and safety standards being applied in emerging markets, and anti-corruption measures positively impacting the full spectrum of economies from OECD economies to frontier markets because of trade deals and initiatives around corporate social responsibility and good global citizenship. We are also seeing an increase in responsibility from corporations for the actions and standards of their suppliers. All of the  point to improvements that cross borders, with benefits that reach around the globe.

These examples illustrate a few of the ways in which international commerce and engagement can be a channel for transmitting economic value, but also a channel for increasing safety and security, enhancing quality of life and advancing international development and reducing poverty.

Trade and international engagement are credited with pulling one billion people out of poverty.

Yes, the definition of poverty can be debated, and one can argue that more could have been done sooner – no question. However, it can be highly encouraging to observe very real signs of progress in the way nations, companies and people engage together.

Changing the way we do business globally

It is a source of energy and optimism to see that issues once seen to be at the fringes of priority are being brought sharply into focus, and are becoming the subject of serious dialogue, substantive policy and commercially compelling efforts to measure success through more than a set of financial statements.

The advent of the Internet, including the significant use of online trade platforms like eBay, Alibaba and the soon-to-be-developed e-World Trade Platform, have done a great deal to advance international engagement by small, even home-based businesses. These platforms have enabled the commercialization of local arts and crafts to an international market, and have enabled individuals, small businesses and communities to benefit from access to financial resources in order to pursue opportunities in international markets.

The global reach that can be experienced from one’s office or living room opens up unique culinary or cultural experiences, tremendous access to world-class education platforms – all enabling a new level of international engagement – and an interest in accessing and experiencing “things international” to a degree that was once impossible to imagine.

Trade, like most human activity, is imperfect. Happily, we have been making good progress in making trade and international engagement about much more than profitable commerce.

Social enterprise, good citizenship, the importance of inclusiveness are all becoming mainstream, and will contribute to addressing many of the issues we know need to be fixed in the global architecture for international trade, investment and engagement.

I (OK, we!) need to go back and think more about how to tell the story of trade and international engagement (and eventually, of finance) that will grab people by the gut or by the heart.

For now, I’ve got to go contribute to some planning for the 2017 edition of the World Trade Symposium to take place in London next June. This marks the second year of an event for which I am honoured to serve as a Board Member. We think a great deal about trade, finance, technology and inclusiveness, and ways we can put these things together to improve the lives of people around the world.  It is through such events and initiatives, and the important work for FITT and our community of members and CITP®|FIBP® designation holders, that the story of trade will ultimately be told in a balanced, thoughtful manner, to the continued benefit of many nations, businesses, families and individuals – even some of its most vocal opponents!

The horrific events in Paris were very much in the hearts of participants, and even in that sadness there was a palpable sense of determination, particularly among several French delegates with whom I interacted over the summit weekend.

One gentleman, whose wife is a medical professional at a hospital near one of the hardest hit areas, reminded us that it was France that brought the aspiration of “Liberté, Egalité, Fraternité” to the world.

The heartfelt comments of IMF Managing Director Christine Lagarde on a panel at the B20 session were equally moving in their reminder of the value of even an expression of support and concern for friends and colleagues across France.

The words to inspire us all

The parallel tone of the event, and the privilege of being “in the room” at the B20 was brought sharply into focus for me in Frankfurt, just before leaving for Turkey. It transpired that a woman behind a cash register whom I spoke with briefly had just been to Antalya.

Her parting words, “do your best for the rest of us,” echoed in my mind several times over the next few days, even though I did not have the opportunity to express to this citizen approaching her retirement that my involvement was very narrow, peripheral and limited.

Her words should, however, resonate with those leaders in Antalya in the business community, and certainly in the political leadership, as well as various complementary streams of activity.

The privilege of true leadership should come with a compelling sense of duty to ‘do the best for the rest of us’ and a determination to deliver substantively, even on the toughest issues.

Today’s strong leadership is looking at the bigger picture

As an unabashedly proud Canadian, it was excellent to see our new Prime Minister make his international debut at the B20 session in Antalya, very warmly received by top business leaders and the heads of various international organizations who shared the podium with Prime Minister Trudeau.

It was good to hear Financial Stability Board Chair and Governor of the Bank of England Mark Carney (another fellow Canadian) speak with focus and authority on the efforts underway to assure long term stability in the global financial and economic system.

And from the perspective of the work of our Task Force, it was inspiring to hear Governor Carney specifically mention trade finance in his remarks.

Trade finance is an esoteric domain, the critical importance of which is increasingly appreciated in business and political circles today.

Business leaders, including the CEOs of Coca Cola, Nestlé, SEB Bank, Sabanci and numerous others, were in attendance, as were the heads of the IMF, the WTO, the OECD and the International Chamber of Commerce. One striking undercurrent in the formal remarks, and in the exchanges which followed, is a sense among even the most hard-core business leaders that we need to start thinking more, and more seriously, about the bigger picture.

Numerous interventions reflected notions around the social responsibility of business, the role of commerce in international development, poverty reduction and peace and security. Chief among them was the imperative for executives to think long-term, and to think strategically about issues like sustainability and climate change.

This discussion is crucial, even as some sectors struggle with post-crisis regulatory issues, inconsistent legal standards across borders and issues like skills gaps and labour mobility.

Critical role of international trade in economics and sustainability a common thread

A cynical view might suggest that such musings are shaped by the context, and by the high visibility of the B20/G20 event. However, the sincere non-verbal cues – of certain speakers in particular – were undeniable, and the global nature of the gathering ensures a wide range of perspectives, reference points and ideological leanings.

All of it was underpinning a far-reaching exchange of ideas, even for the business-focused stream of the B20.

Several senior business leaders advocated directly and energetically for ratification of the WTO Trade Facilitation Agreement, and WTO Director General Azevedo, also a promoter of the importance of trade financing (as shown in his remarks at the Conference for Financing and Development in Addis Ababa last July) invited business leaders to engage more directly with the WTO going forward.

The crucial role of trade in the creation of economic value, reflected in part by the growth of global GDP, was specifically addressed by OECD Secretary General Angel Gurria.

Financial and economic inclusion, as well as the importance of small business, were also recurring themes, addressed directly or through advocacy for the Trade Facilitation Agreement by delegates like Guler Sabanci, Chair, Sabanci Holdings and Sunil Bharti Mittal, Chairman and CEO, Bharti Group, and Vice Chair, International Chamber of Commerce.

The critical role of small business in underpinning economic growth was widely acknowledged, not only at the Antalya Summit, but in the year-long work of the various B20 Task Forces, and the reports and recommendations produced by each task force.

Turning ideas into action

The dialogue and deliberations of the B20 Summit touched on numerous important points, and reflected a high degree of alignment on several major business-related themes, even those with wider and more complex implications, and a focus on the tag line “Business Diplomacy at its Best”.

The Turkish Presidency explicitly sought to maintain continuity with the efforts of the B20 Australia summit in 2014, and directed task forces to focus on the generation of implementable ideas and implementation.

Even with this focus and alignment, it is understood that one of the objectives of the business stream – gaining the attention and support of the most senior political leadership of the G20 – is a very difficult task, given the many highly sensitive priorities vying for attention.

The channel is very narrow, and demands a short, focused message, even with the support of organizations like the International Chamber of Commerce and many others actively and strongly supporting such efforts.

While reaching the G20 is an important objective of the B20 (and other parallel) processes, in the end, the research, analysis and recommendations of a series of task forces with world-class chairs and knowledge partners, stands on its own merits.

The year-long work of task force members serves as an excellent global basis for the development, sharing and dissemination of transformational business policy and practices.

Preparations are already underway for the next G20 and B20 events under the Presidency of China in 2016, with the official handover completed in Antalya.

It is incumbent upon all of us, however, to ensure that the work completed over the past year becomes part of an iterative, evolving process and contributes meaningfully to doing “the best for the rest of us”.

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

Culture is complicated. Developing relationships and business across borders may be challenging, but developing relationships and business across cultures is where the real art lies.

Years ago, the Ambassador to Canada of an EU Member State addressed a luncheon crowd at one of the major chambers of commerce, and politely but rather directly, told a group of senior executives that Canada talks a good game about being a “trading nation”, but that in fact, we are not really exporters.

His argument was that most of Canada’s business is done with the U.S: a nation with which we share a common language and a significant list of other similar characteristics and reference points, including, the implication was, similar elements of culture and mindset.

This is not a piece about debating the differences between being Canadian and being American. I leave that for another contributor, and anyway, there are several very humorous lists floating around out there already.

I take this ambassador’s point. You are missing out on a great deal, and in some ways, not really doing “international” business, if your travels do not include a crossing of cultures as well as borders. And yet, books have been written about cultural gaffes that have cost individuals promising opportunities, and cost major corporations millions or more, to say nothing of the years of lost goodwill.

There is very little ‘science’ to cultural awareness

Navigating cultural nuances can be a virtual minefield, and the complexity of the subject matter is reflected in the way it is handled, even in the most robust academic treatment of the topic. There are no hard and fast answers, and there is no hard science, because culture is a profoundly human expression of identity. In my view, it is a very personal experience that can be aggregated only up to a point.

It’s also the case that crossing cultures while crossing borders makes the whole process a lot more interesting, and let me just say it, much more FUN!

(You wouldn’t know it by my FITT photo or my professional profile, but I can be a fun guy, really!!)

The Canadian Foreign Service Institute published a short booklet fifteen years ago titled “A Profile of the Interculturally Effective Person”, then seen as a world-class guide on the topic, and probably still at the leading edge of practical thought on the subject.

The authors of this guide define an interculturally effective person as someone who is able to “live contentedly and work successfully in another culture.”  That definition might arguably apply to individuals who undertake medium-to-longer term assignments in foreign markets.

I would suggest that some variation of this applies equally to a ‘road warrior’ whose travel is shorter term, but may be quickly immersive, where ineffectiveness can have immediate and drastic consequences from which recovery is difficult (impossible?) due to the timeframes involved.

Adaptability is really the cost of entry

Being effective across cultures is important, whether you are relocating, or hopping to Manila for a two-day meeting after spending a week in Dubai, before heading to Geneva for meetings at the WTO. Whirlwind trips across oceans can sometimes involve equally ‘distant’ trips across cultures, and adaptability is nothing less than the price of entry.

If your instinct is to hit up the first hamburger joint after you get off the plane in a country you’ve never visited, I’m suggesting respectfully, please do better for yourself, and for the potentially enriching personal and professional experience you could otherwise have!

Put another way:

 If you’ve travelled a few thousand kilometres and the first thing you want to get your hands on is a French fry that tastes the same almost anywhere in the world…are you freakin’ serious??!!

OK, the French fry can be really good, but here’s one concept from economics that has proven useful: Opportunity Cost (slightly adjusted for this purpose): what else could you be doing in that moment, and what value is being lost as a result?

Of course, the poor French fry is just a proxy for any number of other aspects of an international experience, from reverting to familiar modes of negotiation, to seeking the “comfort” of familiar contractual terms or legal commercial/legal practice, even familiar modes of social interaction and relationship development. The list can be extensive.

Culture is like oxygen in some ways: we are surrounded by it, at the same time as it is in us: it is possible to make a conscious effort to be aware of one’s own culturally-based preferences, references, mindset and biases. But it is impossible to completely ‘step out’ of our own cultural reference points, and thus, equally impossible to completely adopt an unfamiliar culture, even if there is a sincere desire to do so, and even for a limited time or a particular purpose.

Hofstede and Hall are often quoted in reference to cultural considerations, and the Hofstede model of Cultural Dimensions offers six interesting ‘dimensions’ on which to understand and compare countries and their cultures.

Give the Zorkians a chance

OK, let’s get practical for a minute.

You arrive in an unfamiliar country and are immediately told (or maybe you were told this by a well-meaning colleague before you ever left home) that the local population, largely of Zorkian descent, are formal and distant, and very difficult to “connect” with.

You are invited some time later to conduct a two-day training session for a group of about fifty senior executives in Varnesia, where you are warmly greeted by the organizers, but gently warned not to take offense, because Varnesians NEVER interact or engage in public, and certainly will not do so when the session is facilitated in a second language by (GASP!) a foreigner.

Perhaps you have the unique pleasure (which can sometimes become a uniquely memorable type of headache, if only briefly until you get on top of things) of managing a team of professionals from multiple countries and cultural backgrounds.

The challenges and joys of engaging across cultures are numerous and endlessly interesting.

None are insurmountable, and despite the fact that this element of international activity can be a source of extreme tension, even near-paralyzing fear in some unfortunate cases, the reality on the ground is that it’s about basic respect, a bit of common sense, some homework, and a genuine desire to connect with people.

As it turns out, the group of Varnesians were reticent for about two hours, then it was possible to motivate their engagement by stepping behind a three-metre high projection screen, literally turning one’s back to the room to ensure that any brave speaker would not be seen, and asking a question from that ‘hidden’ position, providing a bit of initial comfort and a minor injection of humour into the process.

Be careful though, once they get comfortable and get started, Varnesians seem to actually enjoy engaging, and it will be impossible to have a ten minute break without someone wanting to come over for a chat!

Zorkians, on the other hand, are quite accustomed to asking how you are doing (and hearing the same question back), but not really prepared for you to actually pause for an answer from them. A couple of interactions of that nature might get you invited to a local steakhouse where a special “not for tourists” steak is served that can only be found in one particular neighbourhood. Strangely, several of those Zorkians, so difficult to connect with, may become excellent professional collaborators, and even – believe it or not – friends!

Focus on building genuine relationships

Managing teams that combine local and remote resources, and include members from multiple countries – or even different cultural groups in the same country – is a subject for another post, or a book.

Suffice it to say, one piece of advice offered years back to a colleague, may be worth repeating here: genuinely take care of the relationships and they will help you take care of the rest (mitigate and reduce challenges and amplify successes). This applies cross-culturally just as it applies in the comfort of your home markets.

Paralysis by analysis is a real risk in the context of intercultural effectiveness. Perhaps the best insight and advice I ever received on this subject, is to remain “yourself” at the core, irrespective of the context in which you are pursuing business.

That is to say:

Genuineness is important, and a contrived (or poorly executed) attempt to “go native”, no matter how well-intentioned, can seriously backfire.

Being yourself does not imply a negligent disregard for the context in which you are engaging: if the society is a conservative one, it is simply discourteous, possibly offensive, and potentially a personal danger to act in ways that would offend such sensibilities.

The subject of intercultural effectiveness can be studied and analyzed, and you can prepare diligently for international engagement, but it is much like tasting a new wine. The description on the bottle rarely does justice to the contents, and the best way to do well in terms of intercultural effectiveness is to engage, dive in, and actively seek opportunities to extend your own experience in this area.

One powerful gateway to effective cultural engagement is language: every language, it was once noted, brings with it a unique way of looking at life and at the world – much like every culture.

Like many other aspects of international business and trade, the ‘art’ of intercultural effectiveness, where personal approach and differentiation can be exercised to good effect, is perhaps the more interesting dimension than the ‘science’.

The navigation of intercultural effectiveness may be complex, but it is very much achievable, and it is personally and professionally enriching. The more you engage, the better you will get, and the more fun you will have.

Are there cultural “French fries” you need to cut down on to enjoy international experiences and become more interculturally effective?

OK, that’s probably not objectively true, and I do exaggerate a bit to make a point – not because I am a particularly nostalgic sort, but to position the key idea of this article.

The ‘old-fashioned’ notion of ethical conduct in international business, and doing what’s right (for its own sake, can you believe it??!) has somehow gotten terribly lost, and risks being lost even more strikingly when businesses of all sizes and businesspeople of all levels venture into international markets.

That statement may sound a bit North America-centric, but the ‘loss’ can happen from many points of view, and from many markets to many other markets.

The geography of international business ethics

The concept of ethical behaviour is not exclusive to one or even a few ‘worldviews’, though its exact nature can vary significantly.

Need an example or two? Canada, the U.S. and Europe (among others) place great value on protecting intellectual property, based on a combination of commercial considerations and a sense of ‘rightness’ about doing so. This can pose a challenge when dealing in markets where the failure to protect trade secrets or IP are seen as weaknesses to be exploited.

Would a Canadian, American or European company lose its ethical worldview, or compass, when establishing a local presence in such markets? Let’s just say there have been numerous examples of this has happening, to the indignation of the home-based press and the chagrin of shareholders awaiting the impact of having been caught.

On the “other side of the coin”, I had a memorable and striking conversation with a Saudi-based banker while at a meeting in Ankara a couple of years ago. This gentleman expressed genuine dismay at the fact that bankers and investment financiers are seen as ‘kings of the world’ in some markets.

He and his colleagues felt (is there a flavour of ethical thought and conduct here?) that farmers who feed human beings and others who create value and improve life deserved greater recognition for their efforts.

Bankers, he argued gently but persuasively, ought to be reminded that they are, in reality, facilitators of far more important activity than their own.  Could such an ethical compass face the risk of losing its reference point in a major financial market?

Following your ethical “True North”

At home, or in similar environments, familiar reference points and a trusted internal compass can combine to at least hint at the position of “True North”, offering perhaps just enough of a glimpse of ‘the right thing to do’, in most scenarios likely to be encountered.

Operating in international markets, it can be surprising to find that the trusted compass has been demagnetized by the combined influences of local practice, cultural and social differences in what are deemed ‘acceptable’ behaviours, and a conscious (or unconscious) choice to let those influences override that compass.

Even a subtle shift can allow the seed of a disastrous decision to be planted: the illusory comfort of pleading alignment with local practices, even as a competitive countermeasure, offers little protection when the ‘wrong’ is ultimately subjected to the bright light of scrutiny.

Know which way your compass points ahead of time

I was invited for a drink some years back by a gentleman who was introduced through a mutual contact in London.

The purpose of the meeting (over some of the best fruit juice I have ever tasted, incidentally) was to propose an engagement where I would be linked to this chap’s client as an independent and trusted third party, to offer an objective opinion about a decision that might involve my host’s firm as a service provider. Not an uncommon request, and under the right conditions, quite workable.

The discussion evolved well until about the last bit of juice in the tall frosty glass. At that moment, a sentence began about ‘certain ways things are done in this part of the world…’ – can you hear the alarm bells going off?

The proposal was that my recommendation to the ultimate client should be crafted to lead to the selection of the firm whose senior local representative had so courteously extended an invitation to meet. Well, so much for a promising and potentially interesting assignment!!

I put a polite but firm end to the discussion, on the basis that we do not do business in this way, and in any event, it would be illegal (with serious consequences) for a Canadian firm to be engaged in such practices.

The question of ethical conduct is not a theoretical one. Any business with decent levels of international activity, no matter how small, will inevitably run into gray areas at minimum and dangerously serious illegal propositions at worst.

One way to address this likelihood is to make decisions ahead of time about how your business (and your individual leaders or executives) will deal with the situation when it arises. If in doubt, seek the advice of your closest Embassy, High Commission or Post: you will get the right advice!

Taking a stand for another kind of ethical worldview

Is this really a discussion about ‘going old school’? Were past generations truly more ethical, or are we so well and so instantaneously informed today, that we are simply more aware of the massive transgressions (long list of examples and related adjectives deleted!) that have done decades or more worth of damage?

If it truly is a case of greater visibility, are we simply on a collective “trip” to one or the other end of the spectrum of ethical conduct, and can we as individuals and businesses make a difference in what the destination looks like?

I firmly believe the answer is “Yes”.

In some contexts, the ability to apply superior financial resources to win a contract, to gain access to influential parties, or to put a competitor out of commission is seen as nothing more than good business.

The nuances here are reflected in the fact that even institutions advocating anti-corruption measures had, for a time, to recognize the notion of a ‘facilitation payment’ as a relatively legitimate disbursement of funds, to be distinguished from a ‘bribe’.

Can an ethically-grounded position withstand the pressure of competition, and the subtle nudge to ‘adapt’ to local practices, especially after a material investment of time, resources and finances to enter a particular market?

Sometimes, the answer will simply be “No, it cannot”, and this is where a reminder can be helpful: this is a commercial decision with potential consequences that extend far beyond the commercial context to nothing less than life and death, especially in global supply chains so often anchored in developing markets.

Overheard once, a remark by a serial international entrepreneur: “Darn (OK, that’s not exactly the expression used – paraphrase, not quote!), I lost the deal to license this market by bribing the wrong official, AND not bribing him enough!”

Short-term financial gain at the expense of irreparable damage to a personal or company brand?

If the pure issue of ethical standards and conduct is not sufficiently compelling, perhaps a consideration of the economic consequences of following a demagnetized compass will motivate an alternate choice.

Standing at the crossroads and choosing our direction

It appears that we are, in several contexts from fair trade to anti-corruption measures, at a stage in our collective development, where an economic or financial inducement to do the right thing is still needed: it makes financial sense to support sustainable sourcing, we say.

It is economically important to support SMEs, to assist microenterprises in frontier markets to access global supply chains. It is necessary to assure our long-term access to resources, to engage in environmental assessments in the extractive industries or in the financing of long-term projects…

Is it really the case that ethical conduct is unfashionable, or has somehow lost ranking in our collective priorities, or were we ‘never as good as we thought we were’, and thus still in mid-voyage to a state of affairs where ethical conduct is indeed pursued for its own sake?

If we need the economic argument for now, let us by all means put more focus on it, but perhaps do so without losing sight of the larger objective and the loftier end-state.

There are already numerous initiatives, some international in scope, suggesting that success in commercial endeavours ought to be about more than numbers reported in a set of financial statements, and certainly should look beyond the next fiscal quarter.

As those transformational thoughts take hold, ethical conduct will shift from an unfashionable notion (even one rooted in economics) to a critical imperative, perhaps even pursued for its own sake.

Gotta go folks, time for another foray into markets that will stretch my worldview, sometimes test my compass, and perhaps offer a unique experience or two, like dining on black nut chicken in Singapore: the Buah Keluak nut is sufficiently toxic that its preparation includes (you are told upfront!) burying it in soil for forty days to extract the poisons…

How do you define what type of conduct is ethical when doing business in international markets?

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

Travel can be seen as a real challenge, a necessary but unfortunate evil plagued by delays, jetlag, poor service, and personal risk. Not to mention cramped spaces that are reminiscent of the transport of cattle or the packing of tuna into a flying tin can, more than they are of the luxury and adventure of days gone by.

Who in their right mind, one might justifiably ask, would choose a professional path that demands passing through X-Ray machines and invasive scanners, interactions with perpetually grumpy immigration officials and the voluntary consumption of airplane food, or worse yet, train station sandwiches?

The adjectives that come to mind (in several languages, and on a graduating scale of severity) are not fit to print, and yet, I am about to admit something even crazier – please keep the chaps in the white coats away…

My name is Alexander, and I am a travel-a-holic

It’s true. I actually enjoy the atmosphere, dynamism and sense of mission that one feels in a bustling airport, and I am convinced that prolonged absence from the perfume of jet fuel is a cause for concern.

The journey, for me, is a major part of the experience of international business, and of any form of travel: it is about much more than efficient and predictable displacement from “Point A” to “Point B”, and it provides countless opportunities for the exercise of civility, personal discipline and enrichment.

Even when things, as they inevitably will, go so ridiculously wrong that you can only laugh.

Travel, for me, is part art and part science, and in truth, I sometimes ignore the science and focus disproportionately on the art.

Make use of the resources available

As a Canadian businessperson exploring international markets, there are a couple of elements of the “science” that should be second nature: reach out to the Canadian Trade Commissioner Service to see if they can help.

Straight talk: spare me the ideological nonsense about ‘public sector’ employees that know nothing about the ‘real world’. Our best diplomats are a powerful asset in Canada’s international success – just as they can be critical to the success of a small start-up with a promising product or service that has progressed far enough to have a credible opportunity in international markets.

Canadian diplomats, both on the political and the commercial side of our Posts, are – despite years of shameful neglect – among the best in the world.

Relatedly, when you are considering travel in high-risk areas (or even unfamiliar ones), look to the Department of Foreign Affairs, Trade and Development (DFATD) for online market risk assessments. Where necessary, register with the Department so that they know you are planning to be in a volatile market, and can help maximize your chances of safe travel and safe return.

Look to industry associations, chambers of commerce (internationally, these bodies are much more central to the conduct of business) and World Trade Centres to gather market intelligence and for help with in-market logistics and introductions.

The time and financial savings can be very high, and the impact on the way you are perceived in your new market can be invaluably positive.

Check with reliable sources

Have you been asked to help a new contact in Ghana sort out how to extract tons of high-quality trees from the bottom of a cold lake that has preserved $1 billion or more worth of rare wood?

Check with a credible source in Canada: you may find, as I did, that the fellow in Accra talked a good game and had some interesting references, but as it turns out, he operates out of a repurposed school bus with a cell phone and a rented fax machine, and cannot be located or identified.

[Tweet “The science of travel demands personal responsibility: research and ensure risks are mitigated. “]

These unique entrepreneurial ‘hubs’ are an excellent and creative mechanism for local SMEs, but do not a billion-dollar extraction project make.

Have you had the good fortune to travel to Africa? (Times are difficult and risky in many areas now, but the old assessment – you will either get it, and love it immediately, or perhaps not at all – seems to hold true.)

When even the science of travel can’t help you

In my case, the science element was that all the necessary risk assessments had been done, and all the required letters of introduction sent out to senior ministry staff in Botswana, Kenya and Ethiopia, months in advance and with all the requisite stamps, colours and chops from the Deputy Vice Minister of This to her Excellency the Secretary General of That…

Despite the advance planning, multiple signoffs and the ‘approved’ agenda’ it was momentarily (this is a key word!) disheartening to call the Ministry in Nairobi, introduce myself after a long night at Johannesburg airport and a bumpy flight, only to be asked “Who are you again?”

As it turned out, the ministry staff had left the city and were in Mombassa at an off-site meeting.

Should one give way to ‘road rage’, indulge in a rant about bureaucratic inefficiency, or bemoan the significantly shorter time available to actually get the WORK done? NO!!

Can anyone say “Photo Safari”? Happily, the Kenya National Park is not very far, and the art of travel demanded that when the science of meeting-planning failed miserably, one simply went downstairs to the travel agency, booked a 1960’s VW van and a grizzled but extremely pleasant guide, and hit the road for what turned out to be a unique personal highlight.

The science of travel demands a certain level of personal responsibility: do some research and ensure that risks are either acceptable or appropriately mitigated.

On the other hand, just because there is a sign on the wall of a hotel compound that says “If you leave this compound and get killed, the hotel is not responsible”, does not (necessarily) mean that you stay in. Though it certainly suggests keeping well within the compound after nightfall!]

That said, personal travel styles vary significantly. Some prefer to have everything mapped out and organized, others do some planning and some ad-libbing, while others still abhor any real planning and would rather follow the wind. The latter approach is difficult in the context of business travel.

[Tweet “Your experience of travel comes down to the experience you create for yourself”]

The science of travel suggests that you check carefully which currencies are acceptable in a given jurisdiction – and that is a prudent practice! Travel to Turkey and attempt to pay the entry visa in Turkish Lira? Nope!

Travel to Ethiopia and assume that the authorities will be delighted to accept your remaining Kenyan Shillings in payment of the entry visa? Nope! Sadly, the only bank machine available is on the other side of immigration, and you can’t get to the other side without paying the visa fee…but how can you pay the visa fee without getting access to the bank machine?…you get the idea!

The art of travel links closely to personal approach and style: politeness goes a very long way and can help resolve what might seem at first like an insurmountable logistical challenge; fits of anger, impatience or arrogance will inevitably exacerbate any issue you might be facing ‘en route’, and you have a great deal of influence on the way you react to a situation.

Learn to enjoy the moment when things don’t go as planned

Delayed train in London as you are heading to Heathrow for a flight across the pond? Don’t worry, sip a nicely chilled Bollinger at the champagne bar at Paddington Station (what else would one order, but a favourite of James Bond when in the UK?).

Delayed connection to Singapore from Tokyo on a first (quick) stop in Japan? No worries, the sushi at Narita is far better than what can be found in some reputable restaurants in Canada, and you may even have an opportunity to learn to appreciate the delicate flavours of cold sake: Kampai!

It can get even better when the unexpected small pleasure is topped off with a courtesy upgrade for the next leg of the trip.

Mastering the art of travel

A rare morning when you have (OK, have made!) time for breakfast – What will you choose? Scrambled eggs and toast in a loud, clanging lobby restaurant at the Imperial Hotel Osaka, or a traditional Japanese breakfast upstairs, where you are greeted with soft music and warm and friendly staff who walk you silently to your table and bring a fixed-menu breakfast?

The art of travel is often in the details: it can be found in the most unexpected locales and circumstances, but only if your spirit and your eyes are attuned to finding these gems of life experience.

It was a world of difference, and an experience of quiet serenity (and a still unidentified, but delightful breakfast) that remains uniquely part of my stay in Osaka. I had a similar experience watching the sun rise over the Mediterranean in view of the snow-capped mountains of Lebanon and the famed Corniche de Beirut, while enjoying the unparalleled hospitality of the Intercontinental.

Travel is about much more than simply going somewhere. Leaving Canada in 40-below temperatures and landing at Dampasar Airport Bali, stopping dead in one’s tracks and dropping laptop and carry-on to simply enjoy the first breeze of tropical air made the rest of the (“work”) week a fantastic one!

Your experience of travel comes down to the experience you create for yourself, personally and professionally.

Need the science to predominate your business travel? OK, understandable, but for your own sake, let a bit of creative art enter into the personal aspects of your travel, even if the purpose of your trip happens to be commercial!

Do you take the time to enjoy your surroundings on business trips? What are some of your best moments enjoying the “art of travel”?

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

Due diligence on a trading partner means:

• The nature of the prevailing legal tradition and the ability (or not!) to enforce redress even if you do “win” the case
• The nuances and complexities of cross-cultural interaction and negotiation
• Selection of local representation

…the list is long, and for many, daunting.

Diligent finance means you get paid

As an exporter (to take one view on the conduct of trade), if you do everything correctly and succeed in closing an attractive deal – or even better, establish a promising relationship – but somehow fail to get paid in the end, after producing and shipping the agreed goods or services, then all that effort and all the skill and effectiveness may be for naught.

This is where a generally misunderstood and underappreciated element of international commerce comes in: trade and supply chain finance.

Before your eyes glaze over in despair and disappointment at the prospect of  a discussion of – ugh – finance, think of this as your “SHOW ME THE MONEY” moment.

Trade is a great deal of fun, and it is personally and professionally enriching, but it is, after all, most commonly a commercial undertaking, at the end of which one hopes to be paid handsomely, for having ventured where others dare not.

What do we mean when we say trade finance?

Trade finance – quite literally the financing of international trade – has a long history of operating modestly and quietly in the background, facilitating billions in annual merchandise trade flows without seeking so much as a tip of the proverbial hat in acknowledgment.

It is unassumingly enabling the flow of financing in support of trade, while at the same time, helping to mitigate risks of all kinds, in the most challenging markets on the globe. In this respect, one might say that trade finance is very Canadian in character: effective, low-key and unpretentious.

In our training and advisory activities, and in recently published “Financing Trade and International Supply Chains” (Gower, UK), we argue that trade financing at its core is about some combination of four elements:

• The facilitation of secure and timely payment across borders
• The provision of financing to one or more trading parties
• The effective mitigation of a wide variety of risks
• The enabling of information flow about aspects of the physical and financial flows related to a trade transaction or relationship

Trade finance accounts for trillions of dollars worth of trade transactions

While the use of traditional mechanisms like documentary letters of credit (L/Cs) are in (relative) decline in many markets, the long-established and much-maligned L/C still facilitates roughly 10% of annual merchandise trade flows, which are in the $18 trillion range today.

It does so on the basis of rules and practices that are broadly understood and accepted throughout the world, in no small part due to the work of the International Chamber of Commerce Banking Commission in Paris, and the related jurisprudence that has evolved around such mechanisms.

More recently, and particularly in the post-2009 economic and business environment, many trading partners have opted to shift away from traditional mechanisms, despite their advantages, due to cost and process intensiveness.

Companies of all sizes, in markets around the world, are increasingly conducting business on open account terms – where the exporter produces and ships the agreed goods, and the importer sends payment at an agreed point in the transaction.

Financial institutions and trade finance ‘boutiques’, as well as various technology-based platform providers, have been working to evolve their value proposition in this area.

The brand new world of supply chain finance

Supply Chain Finance (SCF) is so new, in fact, that there is a multi-association effort underway now to devise a common set of nomenclature and terminology around the financing of international supply chains.

This effort falls under the auspices of the ICC Banking Commission that involves numerous specialty industry associations.

Until recently, some providers of traditional trade finance would have contended (perhaps some still do) that there is nothing fundamentally new in SCF. This is, in my view, a short-sighted perspective that ignores one major reality:

The shift to SCF models motivates bankers, financiers and traders to look at the conduct of trade in the context of an ecosystem of trading relationships, and not merely on a bilateral, one buyer, one seller approach.

The need for supplier finance programs

Even as governments tout the importance of SMEs as engines of economic value-creation, there exists an environment (globally) where small and medium-sized enterprises report ongoing, serious challenges in accessing timely and affordable financing in support of their international ambitions. The evolution of trade and supply chain finance is both critically needed and more than welcome

Supplier Finance Programs (also referred to as Buyer-Led Supply Chain Finance, among other terms) are one of the most popular and growing favours of SCF in the market today.

The key in such programs is that a large global buyer engages with their primary banker to provide financing to strategically important members of their (typically emerging market based) SMEs. This is done on the basis of invoices submitted by the qualifying suppliers and approved for payment by the buyer.

In effect, the invoice(s) are discounted, and the supplier receives funds significantly earlier than would otherwise be the case, improving cash flow and working capital.

This financing is extended on the basis of the credit standing of the large buyer (since the bank is ‘lending’ against an invoice that has been approved for settlement).

This tends to make the financing less expensive than what the supplier would be charged on their own merit, and allows the buyer to assure a steady and sustainable supply of key production components from strategic suppliers.

Innovation in SCF solutions

In addition to various SCF techniques taking hold in the market, there is a very visible increase in the application of technology to the provision of trade and supply chain finance.

Trade-related documentation is being increasingly ‘dematerialized’ and dealt with in electronic format. Likewise, settlement and financing models, are shifting from paper-based models to data-driven solutions that take the subjectivity out of payment and financing decisions.

This also accelerates the payment and financing process significantly, and thus helps to inject material amounts of liquidity – read cash – into the global market.

This at a time when industry estimates (Asian Development Bank, 2015) suggest that there is a global gap in trade finance in the range of $1.9 trillion annually, and at a time when government and international institutions are increasingly focused on sustaining the success of SMEs in international markets.

The perennial mission for those of us engaged in this business, to get more Canadian companies and more SMEs in general interested in international markets, continues to be challenging. Post-crisis realities, however, strongly suggest (again!) that market diversification is a critical target for the Canadian economy.

One way to enable companies in pursuit of such opportunities, is to ensure the availability of adequate levels of affordable trade and supply chain finance.

Another would be to provide competent technical advice and the vision necessary to see that there are transformational forces at work in the business of trade and the financing of trade today.

Complacency among traditional providers is a serious risk, when Facebook now has a banking licence from the central bank in Ireland, PayPal is entering the working capital lending business and encouraging cross-border commerce, and Alibaba announces that it will support its trading community with trade financing solutions.

Bottom line? Trade finance is not a luxury or an esoteric branch of financing to be ignored in the hopes it goes away or fades into the background of a transaction. It is a strategically critical enabler of trade activity, and an evolving part of next-generation international commerce.

The advice and support you get in this area can make or break your international trade aspirations and strategy, so challenge conventional thinking and limited vision from your trade financiers, if you run in to it.

What aspects of your international trade financing can you change to improve your business strategies?

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.