I am facilitating a credit executive conference in April and one of the participants has asked the group to discuss this topic. I have my own opinions on the key considerations for setting up a global credit policy but am interested in feedback from this forum. Hopefully we can have a lively discussion.
Specifically, what do you see as the relationship between a global credit policy and local/regional economic, regulatory and cultural differences? To what level do you require consistency? How do you manage adherance to the corporate policy? Is this best managed centrally?, Locally? etc.
Replies
Global policy on credit should define everything and should provide flexibility to factor local trade practices, which are habituated over a ling time horizon due to prevailing economic, market, regulatory and cultural situations.
Having said so, global policy may contain the following:
1. Guidelines for credit period and situations to not to extend credit.
2. Maximum credit period, which can be extended in the market.
3. Guidelines to arrive at credit worthiness of customer.
4. Policy on individual customer credit limit and credit limit to group companies. Group or related companies can be defined in the policy.
5. Policy to write off customer balances and level of approvals .
6. Policy for allocation of price between sale price and credit price.
The issue is either being made too difficult or too easy. The policy can be a good one, but local market issues, requirements, local credit borrower conditions, etc. can still impact credit quality, etc. The world has become more globalized in many respects of the market and economic impact, but local conditions, culture, etc. still can effect how and when you get paid.
Per Kurowski said:
The number one absolute must for developing an effective global credit policy, is eliminating the Basel capital requirements for banks based on perceived risks already cleared for by other means. These favor those already favored, “The Infallible” and thereby discriminate against those already being discriminated against, “The Risky”.
Those capital requirements only widen the gap between the haves, the history, the old and the have-nots, the future, the young.
And those capital requirements completely ignore that risk-taking is the oxygen of development.
http://subprimeregulations.blogspot.com/