Magazine article Business Credit

Credit Management-A View from Both Sides of the Atlantic

Magazine article Business Credit

Credit Management-A View from Both Sides of the Atlantic

Article excerpt

How credit managers conduct business depends upon which side of the Atlantic Ocean they re on, as different circumstances and credit practices face U.S. and European businesses. Credit managers working in companies having operations in both Europe and the U.S. are usually more aware of how business credit differs between the two regions. One noticeable difference is the title of the top credit executive in a business: in the U.S., that person is often called the Credit Manager or Director of Credit. However, as David Marsh, CICE, CBF, Credit Manager, Novus International Inc., said, "In Europe you're often called Credit Controller." William Bastiaan, CICE, the immediate past president of FCIB and current Board member who worked as a Global Credit Risk Manager for a Dutch-based firm, noted that in Europe, (except for the UK and Scandinavia,) "if you say 'credit manager', people will often ask you next, 'what does that mean'?"

Even the role a credit manager plays may be different. "The further south you go, the less power a credit manager has," said Bastiaan. Perhaps the biggest difference is that European credit executives are more likely to be involved in cross-border sales than their U.S. counterparts. Despite commonality of political purpose and business environment offered by the European Union, each European country is distinct, offering the same challenges of country/company risk that U.S. credit executives face when exporting there. This is a big factor in the prevalent use of credit insurance by European companies, unlike in the U.S.--European credit executives often use it even for domestic sates. "The Europeans have been export-focused for so much longer, they've come to trust their credit insurers," said Jeff Jankowiak, partner in San Francisco-based International Risk Consultants, Inc., and member of FCIB's North American Advisory Council. Patrick Connelly, founder and CEO, Institute for Capital Development--Bucharest, Romania and Director, Institute for Credit/Risk Management, University of South Florida, said, "merchant insurance began in the high Middle Ages, and has grown and expanded ever since."

In the U.S., even for export sates, credit insurance has not been a prominent means of mitigating credit risk. "We investigate it every couple of years and have concluded that it's just not cost-effective," Marsh said. For export transactions, Bill Kulkens, International Credit Manager, Miliken & Co., said, "U.S.-based credit managers try to get some other type of guarantee, such as a promissory note and letter of credit." One of the reasons Europeans have retied upon credit insurance is that unlike in the U.S., credit information is often difficult to obtain on a company. He added, "They don't have as free-flowing a level of credit information, which handicaps them, so they must rely on credit insurance."

In the U.S., many businesses are equipped to get credit information and perform risk analysis to arrive at their own credit decisions. In Europe, they typically outsource the credit approval process to a credit insurer. Gilbert Bird, Jr., International Credit Supervisor for Degussa Corp., said the German office of his company uses credit insurance for European sales. "The credit insurer comes back to them with credit information: it makes their job easier, and affords a revel of protection." Kulkens noted that in the U.S., industry credit trade groups have evolved as reliable providers of credit information on businesses, and are used to sharing information.

In the U.S., there are several credit reporting agencies including NACM Affiliates, providing credit reports on a regional and/or national basis. In Europe, the country of the business in which a sale is being made may determine what credit agency would be best suited; and the quality of information in credit reports is dependent on the quality of financial information available in those countries. While information on companies in the U. …

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