With economic winds shifting and new trends emerging, it’s essential to keep ourselves informed and prepared. Today, we’re sharing a brief update on key developments impacting our world of credit. Remember, your thoughts matter to us. What are the stories keeping you on your toes as a credit professional?
Today’s insights:
1️⃣ Russian Government Introduces Hefty Tax on Wealthy Businessmen: This has potential implications for associated companies within the metal and fertilizer industries, in particular. As credit professionals, the scenario calls for a reassessment of credit risk and potential modification of credit terms for any such clients in these sectors.
2️⃣ Potential Shipping Levy Looms in France and beyond: The prospect of an emissions levy on shipping could escalate operating costs for the shipping industry and sectors reliant on it. This could lead to increased credit risk for these businesses, stressing the importance of staying updated and adjusting credit assessments accordingly. This is an important development for credit professionals dealing with companies in the shipping industry or those heavily dependent on it.
3️⃣ EU funding China’s Huawei in sensitive AI and 6G research despite curbs: While this may hint at opportunities for Huawei, it also speaks volumes of the EU’s strategic intent in the global tech race. Credit policies for companies in the Huawei supply chain, as well as this sector generally, will be very sensitive to such geopolitical developments.
4️⃣ Microsoft-Activision Acquisition Roadblock: The hiccup in Microsoft’s quest to acquire Activision Blizzard presents an intriguing subplot in the ongoing saga of big tech. It’s a stark reminder of the potential for financial uncertainties that can cascade through companies, suppliers, and partners alike. This highlights the importance for credit professionals to keep a finger on the pulse of mergers and acquisitions, understanding the stakes of the game in terms of credit risk.
5️⃣ Infineon considers moving more production capacity to US: Significant operational changes by a company, like moving production to another country, can disrupt its supply chain and impact its financial health and credit risk. As Germany’s largest semiconductor manufacturer, this company’s activities can ripple through a plethora of other connected industries, too. Potential disruption to existing supply chains may lead to a reevaluation of credit risk amongst the network of businesses associated with Infineon.
Dynamic Complexity
1️⃣ Macro-Economic Policies: The introduction of wealth tax in Russia demonstrates how macro-economic policies directly influence the financial stability of businesses, thereby affecting their credit risk.
2️⃣ Socio-Environmental Factors: The prospect of an emissions levy on shipping in France signifies how socio-environmental policies can directly affect industry operating costs, and consequently credit risk.
3️⃣ Geopolitical Decisions: The funding of Huawei by the EU despite curbs indicates that geopolitical decisions can trigger industry shifts and influence the creditworthiness of companies involved.
4️⃣ Market Consolidations: The roadblock in Microsoft’s acquisition of Activision Blizzard illustrates how market consolidations can introduce financial uncertainties, impacting the credit risk of not only the companies involved, but also their partners and suppliers.
5️⃣ Business Strategy Decisions: Infineon’s consideration of moving more production capacity to the US shows how strategic business decisions can disrupt supply chains and create ripples of financial instability affecting credit risk across industries.
We see these events confirm our perspective on credit professionals as navigators within a complex, interconnected system of dynamic variables. Our challenge is to maintain equilibrium within this system and preemptively manage risks.
This is achieved not only through reactive measures in response to events as they occur, but, more importantly, through proactive measures that predict, prepare for, and ideally prevent credit risk based on a holistic understanding of the ever-evolving macro and micro landscape. This includes maintaining comprehensive, timely knowledge and insights, fostering adaptability, and leveraging advanced tools and technologies to aid in sophisticated risk modelling and decision-making.
Daily developments are underscoring the evolution of credit risk management from a traditionally static, one-dimensional discipline into a dynamic, multi-dimensional practice. It accounts for the complexity and interconnectedness of various factors – economic, social, geopolitical, industrial, and strategic – in shaping the landscape of credit risk.
Our ultimate aim is to help credit professionals navigate these complexities and effectively manage risk in a rapidly changing world.
As always, we’re here to support you in navigating these changing currents.
Stay tuned for further updates and don’t forget to let us know what’s on your mind.
For more insight and analysis for credit professionals, visit Global Outlook.