Corporate governance and organizational structure

Corporate

The concept of credit management is the way that money is handled when money is borrowed from banks or credit providers. When managing international credit, there are far more risks involved with purely domestic credit sales. When money is borrowed from banks or credit providers in the international community, there is risk involved with potential changes in economies, government, and currency issues. When transactions are purely domestic, the chances of the economy drastically changing, the government being a volatile entity or the currency become vastly inflated or deflated are slim. When reflecting on past situations in the foreign markets, countries like Venezuela, experienced rash changes in government structure, and endured a coup d'etat in a short time frame that led Venezuela's precious oil commodity to be in jeopardy. In this situation, the risks of the commodity sales were grave but the potential consequence in becoming involved in trading with a country without a stable government are real and imminent.

Furthermore, other risks involved with international credit management include the regulations and customs of collecting money in different countries. When there are purely domestic credit sales, the seller knows the way in which the regulations, laws and customs work in collecting money; but, not having an extremely detailed understanding of how things are done internationally may mean that loopholes may be found and money may be lost as a result, or even if regulations are not followed meticulously could mean that money could be lost en route. Additionally, there needs to be an effective utilization of leverage technology that needs to operate smoothly, in terms of interacting with local banks and individuals while also providing global consolidation. Leverage technology can include ERP systems, multi-currency tables, and a collections system that can be utilized across several countries.

While managing credit overseas, there are several parts to the process- extra steps and extra considerations that need to be evaluated before moving forward. In domestic credit management, these extra pieces are not needed which makes the international credit management process significantly more complex.

Part II: