Trade lessons learned from the corona year – “Finns rise from the ashes stronger than before”
Doing business in a Covid-19 environment has lasted already for almost one year. The first half of 2020 was plagued by poorly functioning supply chains, delayed payments, liquidity challenges and increasing fraud attempts. What’s the aftermath of the 2020 coronavirus outbreak?
The pandemic forced businesses to adjust rapidly and look critically at their practices. What solutions have helped companies to overcome their trade challenges? Could they be of help to other companies too?
Restrictions on movement hurt trade
Restrictions related to movement emerge as one of companies’ greatest trade challenges. This was also suggested by the export barometer conducted by Finland Chamber of Commerce: that restricting movement under exceptional conditions hurts trade. Movement restrictions have two main effects on businesses. First, they hamper service and maintenance operations. Second, trade and establishing new customer relationships is much more challenging when using remote connections only.
At the moment, establishing new customer relationships and trade largely rely on remote working. Although many organisations have already been using remote working before, they have had to learn new skills to prepare for the new normal and master remote encounters. Fortunately, various networks promoting international trade – such as embassies, chambers of commerce and Business Finland – have provided help in trade negotiations.
More need for working capital
During these exceptional times, companies’ behaviour has been characterised by attempts to increase their liquidity buffers. Meanwhile, the Covid-19 friction in supply chains has slowed down payments and lengthened payment times. For instance, in Europe the average payment times have increased by more than ten days. Companies are getting a greater number of requests about longer payment times, both for new deals and already executed ones. This situation has increased companies’ worries about credit losses.
Trade finance solutions, whether related to selling or buying, can provide support to the company’s cash position while also facilitating the business partner’s situation. Arranging financing for the buyer can often help in actually getting the deal. As one large company aptly put it, “those who understand trade finance, get more deals and less credit losses”.
Sales contracts play a key role
The role played by sales contracts has become more important during these exceptional times. Contract-related questions abound: When can a sales contract or order be cancelled? When does force majeure apply? What happens in the event of a lockdown? When a company is about to enter into a commercial contract, it should understand what exceptional events, unexpected circumstances or disruptions could mean in practice.
The company can then try to prevent risks by requiring specific contract terms, payment methods or guarantees to back the sales contract. For example, if the agreed payment method is confirmed documentary credit, the seller will get its money also in the event of a lockdown. It’s also possible to agree in advance with the business partner upon practices applicable in an exceptional situation.
We have what it takes
Once someone said to me that Finns rise from the ashes stronger than before. Indeed, Finnish companies do have what it takes to emerge relatively stronger also from the Covid-19 crisis.
Tehtävänä auttaa yrityksiä osto- ja myyntitoiminnoissa, erityisalueena ulkomaankauppa. Vahva usko digitaalisuuden tuomiin mahdollisuuksiin suomalaisille.