Protect your investment
When a company wants to acquire a business on foreign soil, the process often takes several months. The exchange rate at the end of the process could be less favourable than at the start. “Used at the start of negotiations, a deal containment hedge freezes the conversion rate until the transaction takes place,” explains Douville. “If the acquisition doesn't materialize, there's no obligation to purchase the foreign funds.”
Whether it’s while establishing a subsidiary in another country or once business is up and running, every company has to deal with exchange rate fluctuations of both the Canadian dollar and the local currency. “If the exchange rate is favourable at the time, but the account won’t be paid for 60 to 90 days, a forward contract can protect your currency’s value," says Douville.
Supporting working capital
Long-term contracts put pressure on working capital. “Structured trade financing can support 100% of the costs,” adds Douville. Suppliers can thus be paid at different points, from manufacturing overseas to shipping to Canada to local processing... then the bank is repaid the advanced sums straight from the customer account. A manufacturer’s advance does the same for exports, allowing all production costs of an order to be financed.
To export commodities to markets where payment times are long (60 to 90 days), financing receivables is another attractive option. “Upon receiving a valid invoice, the bank may allow some funds to be withdrawn, usually within 24 hours,” says Douville. “The advance can be paid off once payment is received.”
Protecting your intellectual property
Technology companies and manufacturers that deal with other countries run the risk of having their intellectual property stolen and marketed by a competitor. “Patents should be updated and when you use subcontractors, it’s prudent to give them only a portion of your manufacturing, not the entire product,” recommends Douville.
Adapting to cultural differences
In some countries, business etiquette is different from ours, starting with communication. English may be the recognized language of business, but it’s still not widely spoken in some places, such as Italy and Spain. Elsewhere, bureaucratic procedures differ. “In China or India, the process of incorporating or opening a bank account can take up to three times longer,” explains Douville. Using local advisors can help with such obstacles.
Relying on local knowledge
In addition to hiring foreign employees who are well acquainted with the local business reality, domestic companies can also rely on HSBC advisors around the globe to facilitate their paperwork. The HSBC network covers 90% of global trade and capital flows, thanks largely to its ISB(International Subsidiary Banking) offices, which act as an intermediary between Canadian and foreign institutions.
Growing despite the labour shortage
For Quebec businesses experiencing recruiting issues, international trade opens up opportunities for smart growth. “Mechanization and automation make it possible to increase production capacity to handle increased sales,” says Douville. “You can outsource some of your production or certain services abroad.” Another possibility is to acquire complementary businesses or a foreign competitor in order to expand your supply chain.
Read the Navigator report
To learn more about current international market conditions, HSBC's Navigator report is a valuable resource. Based on a survey of 2,500 companies in 14 countries, the report highlights outlooks for performance, efficiency, technology investment and foreign recruiting, as well as the most promising regions and obstacles to overcome.
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