With reference to Raghu Krishnan's report, "Brexit tremor hits Infosys" (August 16), the UK's decision to exit the European Union (EU) has highlighted the importance of country risk analysis in the export business. How did a company of the size of Infosys overlook Brexit, when it was known that there was a good chance of the UK leaving the EU at least two years ago?
All export majors - whether in information technology or automobiles - should carry out rigorous country risk analysis. Recently, Bajaj Auto faced a receivables crisis for its exports to Nigeria. While payments were guaranteed through a letter of credit, the local government was restricting the outflow of dollars due to a currency crisis in that country. In such cases, local importers are not accountable as they have already cleared their dues in local currency.
Country risk analysis has remained on paper and in textbooks. Indian companies should revisit their export portfolios and trim their exports to countries, which are exposed to risks. Indian companies exporting to Libya and Egypt have had to write off their export receivables due to political crises in those countries and the resultant fallout of currency crisis.
Indian companies conduct due diligence of their import clients but give much less importance to country risk. In a way, the marketing teams of Indian exporters are responsible for this situation, driven as they were by their eagerness to achieve export targets.
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All export majors - whether in information technology or automobiles - should carry out rigorous country risk analysis. Recently, Bajaj Auto faced a receivables crisis for its exports to Nigeria. While payments were guaranteed through a letter of credit, the local government was restricting the outflow of dollars due to a currency crisis in that country. In such cases, local importers are not accountable as they have already cleared their dues in local currency.
Country risk analysis has remained on paper and in textbooks. Indian companies should revisit their export portfolios and trim their exports to countries, which are exposed to risks. Indian companies exporting to Libya and Egypt have had to write off their export receivables due to political crises in those countries and the resultant fallout of currency crisis.
Indian companies conduct due diligence of their import clients but give much less importance to country risk. In a way, the marketing teams of Indian exporters are responsible for this situation, driven as they were by their eagerness to achieve export targets.
K V Rao Bengaluru
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number