Adaptability to Global Events Will Determine Exporters’ 2022 Results

Exporters around the world are feeling more and more uncertain as a series of shocks have unsettled their plans for 2022, according to a new study from Allianz. 

To help businesses adapt, the report also includes insights and recommendations from a series of entrepreneurs and policymakers, including Sandy Kemper, the CEO and founder of C2FO. 

The Allianz Global Trade Survey 2022 examined attitudes at 3,000 companies in six high-export countries: the United States, United Kingdom, China, Germany, Italy and France. Respondents were surveyed before and after the start of the Russia-Ukraine war. 

Not surprisingly, pessimism ruled the post-invasion polling. Across the board, attitudes typically declined by double-digit percentages when measured post-invasion. This followed relative optimism pre-invasion in early 2022 when corporations had generally acclimated to the late-stage COVID era.

The survey identified three overarching trends:

1. To push back against anticipated revenue losses, many companies emphasised export markets and investments in new markets. 
2. More companies were concerned about slow payments and nonpayments. Among European exporters, at least 40% believe payment terms will increase. 
3. If worst comes to worst for the global economy, most businesses see government help as the ultimate lifeline in the form of state-backed loans and direct subsidies. But unless there’s a major shock, they doubt there will be as much help as what was seen during the worst of the pandemic.

Kemper: There’s a better solution for supporting small businesses

In an essay in the report, Kemper wrote that generous government funding was a massive help to many companies. 

“But research shows that there is still a sizable share of fragile Small and Medium Enterprises (SMEs) around the world,” he noted. “The greatest financial relief we can give these SMEs is faster payment of their outstanding invoices – liquidity. The lending programs launched by the world’s governments and central banks for SMEs have been extraordinary, but even more dollars will be needed.” 

Typically, small businesses have significant accounts receivable — as much as $16 trillion globally, with about half of it owed by large companies. 

“So what if we created low-cost funding specifically for larger companies to pay their small and mid-sized suppliers immediately?” Kemper wrote. 

“We would eliminate the need to underwrite loans for tens of millions of businesses, which are already overwhelming traditional finance channels. Do this at scale, and we could create USD8 trillion of immediate relief for the world’s SMEs without causing them to borrow a penny.” 

Other key insights and recommendations from the Allianz Global Trade Survey

Several other business leaders included insights, recommendations and trade solutions in the Allianz report. 

Global trade won’t grow as fast, but don’t give up on exports

Ludovic Subran, Chief Economist, Allianz

Summary: Exporters, already threatened by rising prices, transportation bottlenecks and renewed health issues, must also deal with war-inspired air, sea and land restrictions that tax their ability to ship and deliver products. 

Solution: Rather than accept stagnation or contraction, exporters can continue to adapt by seeking new export markets, suppliers and transportation providers, along with more investment for further international development. 

Adapting to local markets is crucial

Elizabeth Ducottet, CEO, Thuasne, a France-based medical device manufacturer

Summary: Thuasne has a global reach, but the culture and operating environment in different companies can be significantly different from what the company is used to, especially when it comes to raw materials, which can be hard to replace.   

Solution: What’s allowed Thuasne to succeed despite current challenges — and can help other exporters win — is close observation of how local markets work and then adapting to how they work, rather than expecting them to change. Acquiring an existing company in-country can help accelerate the adaptation process. 

Innovations will help make trade more efficient and profitable

Kevin Tan, CEO and Chief Investment Officer of Origin Capital Management

Summary: Exporters of physical goods are not the only ones facing challenges. Financial institutions and insurers are increasingly subject to fraud, regulatory scrutiny and risks from sanctions that constrict banking relationships, impacting large corporations and SMEs. 

Solution: Trade continues to grow globally, at nearly $28.5 trillion USD in 2021, and with more growth expected. New digital currencies, Web 3.0 advancements, and technological innovations that streamline logistics, for example, will lead to greater productivity and operating efficiency. 

The future of trade must be green

Ngozi Okonjo-Iweala, Director-General, World Trade Organization

Summary: The economic benefits of global trade have traditionally come with environmental costs, especially in the form of harmful emissions related to shipping. 

Solution: But trade policy could inspire new solutions — for example, by encouraging (or requiring) environmentally sustainable practices like wind and solar power. Increasing the globalisation of trade could also bring marginalised people and countries into the mainstream, incentivising more collaboration between the private sector and international organisations seeking eco-friendly solutions. 

Good communication, relationships are critical for enduring tough times 

Christian Greisberger, Head of Global Risk Management, Acer

Summary: When the pandemic hit, the computer and electronics maker was challenged by heightened demand resulting from online learning, work-from-home and in-home entertainment. Labour issues affecting logistics operations were another challenge. Necessary adjustments were made to accommodate supply chain, production, credit and prompt payment concerns. 

Solution: Acer relies on deep, diverse and long-standing supplier relationships to mitigate production interruptions. It also employs a strong and proactive communications strategy to communicate with customers about product features and deliveries. Further, it regularly assesses buyers’ risk and ability to pay, and grants payment extensions in the event of supply-chain delays or late deliveries.

The bottom line

While the current state of business and global trade are heightened by a confluence of highly unusual events, history has shown that over time, such circumstances are often followed by progress and success. Despite the downward trends documented in the Allianz study, the featured leaders’ comments provide measures of hope and optimism — and successful solutions — for meeting the current challenges. View the complete report.