Managing Risks along the Belt & Road. Navigating Country, Geopolitical and Business Entity Risks with data and analytics

Transcription

1 Managing Risks along the Belt & Road Navigating Country, Geopolitical and Business Entity Risks with data and analytics June 2018

2 FOREWORD The 'Belt and Road Initiative' offers significant benefits in connectivity, infrastructure and trade, through significantly increased engagement across many different countries. However, many of these countries face internal tensions and have relatively underdeveloped market structures, legal systems and governance frameworks. While Belt and Road investments can make positive contributions in the host countries, there is also the potential for these investments to exacerbate tensions and risks. Businesses looking to capitalize on the numerous Belt & Road opportunities, must take appropriate actions to assess, navigate and mitigate potential risks in their Belt & Road investments to ensure project success and long-term financial health. Dun & Bradstreet has compiled the most comprehensive and accurate repository of commercial data and insights in the world. Covering over 73 million verified businesses along the Belt & Road, Dun & Bradstreet is committed to helping companies develop a more informed understanding of their business relationships from macroeconomic forecast and insights to entity risk assessment and meeting regulatory requirements empowering businesses to navigate the ever-evolving risks in their Belt & Road investments and develop a long-term winning strategy in the Belt & Road Initiative. 1

3 CONTENTS Macroeconomic risks and opportunities of Belt & Road countries Understanding risk exposure when dealing with potential business partners along the Belt & Road The importance of 360-degree risk assessment and risk oversight for cross-border investments Managing Risks along the Belt & Road 2

4 1 Macroeconomic risks and opportunities of Belt & Road countries

5 Macroeconomic risks and opportunities of Belt & Road countries Businesses looking to conduct cross-border transactions is exposed to macro market risk: the risk associated with a country s overall political, economic and commercial status. It is important to understand the business environment by keeping an eye on macroeconomic trends, honoring both the economic and commercial numbers as well as the political context, in order to holistically evaluate the suitability of prospective investments and expansion plans. The D&B Country Risk team of analysts and economists continually monitor changes in the business environment for 132 countries, and provide analysis; commentary; and forecasting around country-wide developments. Current analysis of the latest D&B Country Risk conditions shows nearly 70% of Belt & Road countries* received Stable or Improving country risk outlook as of June 2018: Belt & Road countries* D&B Country Risk Outlook (June 2018) Improving Stable Deteriorating Rapidly Deteriorating Albania Austria Croatia Egypt Hungary Iraq Macedonia Slovenia Thailand Uzbekistan Vietnam Bahrain Bosnia & Herzegovina Bulgaria Czech Republic Estonia Ethiopia Georgia India Indonesia Israel Kazakhstan Kuwait Lebanon Morocco Myanmar New Zealand Oman Pakistan Panama Philippines Poland Qatar Korea (South) Romania Russia Saudi Arabia Serbia Singapore Slovakia South Africa Sri Lanka Ukraine United Arab Emirates Afghanistan Azerbaijan Bangladesh Belarus China Iran Jordan Kyrgyz Republic Latvia Lithuania Malaysia Nepal Syria Tajikistan Turkey Turkmenistan Yemen Cambodia Belt & Road countries* D&B Country Risk Rating Heatmap (May 2018) Dun & Bradstreet s Country Risk Rating provides a comparative, cross-border assessment of the operational risk of doing business in a country, distilled into a single, unique rating. The rating is divided into seven bands, ranging from DB1 to DB7, with 1 representing the lowest risk and 7 representing the highest risk. Here is an overview of the Country Risk Ratings of the Belt & Road countries* as of May 2018: *Belt & Road countries covered by the Dun & Bradstreet Country Risk Services team as of June Follow Dun & Bradstreet Hong Kong to download the latest D&B Belt & Road Market Risk Headlines today. Managing Risks along the Belt & Road 4

6 Asia-Pacific Regional Outlook A D&B Perspective (May 2018) Regional Growth Forecast We think Asian economies across the spectrum - from advanced to emerging to frontier categories - still have room to grow in Excerpt from D&B Country Risk Report in May 2018: All through 2017, long-term US borrowing rates hardly tightened, and US asset prices stayed elevated. These easy conditions transmitted to Asia: ten-year government bond yields for most Asia-Pacific emerging countries rose less than a percentage point in However, the short-term outlook turned in early 2018, as hints of stronger US wage inflation appeared. Since the start of 2018, most Asian sovereign benchmark bond yields have risen slightly, in line with the US 10-year Treasury yield, although some (such as those of Vietnam) have accelerated faster in a sign of higher interest rate and inflation expectations. So far in 2018, Asian equities have broadly been flat, slightly outperforming other emerging markets such as Eastern Europe. We think Asian economies across the spectrum - from advanced to emerging to frontier categories - still have room to grow in US oil supply increases in will help to dampen inflation pressures, albeit subject to political risks to supply from Iran and Venezuela, and the bottlenecks for US crude exports. Together with more stable domestic and external balance sheets, and deeper FX markets than 20 years ago during the Asian crisis, domestic savings bases in emerging Asia are more substantial, helping lower the domestic cost of capital. The more substantial concerns are medium term, and focus on corporate debt in China, Hong Kong and India, and on consumer debt in Thailand, Malaysia and South Korea. Part of the powerful rise in leverage has been 'healthy' financial deepening, but new financial system risks also exist. China and India are probably most at risk of loan asset quality impairing macroeconomic performance. India's recovery from the demonetisation shock in 2016, and the shock to supply chains from the new national VAT in 2017, is under way. However, non-performing loans will continue to appear in 2018, and the new bankruptcy mechanism is still largely untested. Small enterprises, especially in the informal, labour-intensive sector, have suffered a string of shocks, and employment nationally may still not have recovered to the pre-demonetisation period level. Find out how you can gain access to Dun & Bradstreet Country Information including detailed macroeconomic analysis, forecasting and commentary on 132 countries. Contact your D&B Account Manager or visit today. 5

7 2 Understanding risk exposure when dealing with potential business partners along the Belt & Road

8 Understanding risk exposure when dealing with potential business partners along the Belt & Road The data a company relies on to identify entity risks and set credit terms for Belt & Road investments have serious implications for the company s long term financial health. Having access to quality data and insights from a dependable source is essential to uncovering hidden risks and ultimately, assessing whether your business partner will meet its contractual obligations. Globally recognized as the industry standard for risk assessment, consulting the Dun & Bradstreet database is an important first step in evaluating potential business partners and vendors not for only identity verification before a commercial transaction, but also for long term planning and risk mitigation in areas such as avoiding payment defaults, maintaining a healthy cash flow and meeting regulatory requirements. Dun & Bradstreet also provides multiple types of analytics and scores that range from predictive (future) and performance-based (historical) to showcase your potential business partner s reliability and financial stability. Verifying the business entity with The Dun & Bradstreet D-U-N-S Number The Dun & Bradstreet D-U-N-S Number is a globally recognized unique identifier assigned to each entity (company) in the Dun & Bradstreet global database with over 300 million business records. Companies of every size around the globe rely on the D-U-N-S number to accurately and consistently verify their customers, suppliers and partners. Moreover, it is used to establish a D&B business credit file, which is often referenced by lenders and potential business partners to help predict the reliability and/or financial stability of the company in question. Apart from entity verification, the D-U-N-S Number also enables a holistic, single view of an entity by unlocking valuable insights in business relationships including operational data such as the business line, standard industrial classification code, terms of sale, number of employees, facilities, locations of branches/subsidiaries, legal events, corporate linkage and the full spectrum of D&B proprietary scores and ratings. 7

9 Evaluating an entity s financial strength and likelihood of delinquency Dun & Bradstreet s proprietary predictive and performance-based scores enable businesses to gain powerful intelligence for assessing risk and making credit decisions in future investments. From credit scores and ratings to comprehensive analysis on businesses across industries, Dun & Bradstreet s data and insights can provide a clear view of a counterparty s financial situation and the exact credit risk they pose. D&B FINANCIAL STRESS SCORE DELINQUENCY SCORE D&B RATING The D&B Financial Stress Score predicts the likelihood that the company will seek legal relief from creditors in the next year or cease operations and leave creditors on the hook. The score is based on a company s business history, payment habits, and industry norms. On a scale of 1 to 100, higher scores indicate a lower probability of failure. The Delinquency Score looks at the next 12 months and rates the business on the likelihood of it making severely delinquent payments, seeking legal relief from creditors or ceasing operations without paying creditors. It s calculated using such variables as available trade data, firmographic data, public records, and available financial data. The D&B Rating is Dun & Bradstreet s proprietary measurement system that evaluates a company s financial strength and size, along with its Composite Credit Appraisal. The rating is based on factors such as company payments, financial information, public records, and business age, offering an overall assessment of a company s creditworthiness. Understanding global relationships in the corporate family The Dun & Bradstreet Corporate Linkage facilitates risk assessment across different parts of a corporate family by visualizing the linkage relationship between companies and their majority-owned subsidiaries and branch locations. From multinationals with thousands of global locations to small businesses with a second branch office, this information provides valuable insight into relationships among the millions of active companies in the D&B global database. By understanding a potential business partner s global commercial footprint and hence, experience of working on similar projects, businesses will be able to identify the risks and opportunities that are specific to industries and business transactions. Moreover, insights on global corporate linkage can also help strengthen a company s compliance program by enhancing the depth of due diligence. A D&B Report allows you to accurately verify a business entity and uncover hidden risks before entering into a business transaction. Control your risk exposure and start making more intelligent risk decisions today. Contact your D&B Account Manager or visit Managing Risks along the Belt & Road 8

10 3 The importance of 360-degree risk assessment and risk oversight for cross-border investments

11 The importance of 360-degree risk assessment and risk oversight for cross-border investments Major macroeconomic trends and regulatory pressure prompting headlines have created new landmines for today s businesses. In a landscape of changing global risk, especially in Belt & Road countries where macroeconomic and geopolitical risks are significant, an effective risk management approach for investments will be critical to ensuring a company s long-term success. Risk management is a multi-faceted discipline, and Dun & Bradstreet believes strongly in sourcing multiple datasets to tell the full story of risk. It is important to gain a 360-degree view of risk on the companies you do business with and ensure business decisions are backed by reliable data and intelligent insight. Dun & Bradstreet provides a complete view of risk in your Belt & Road business relationships: MACRO-RISK COUNTRY RISK INTELLIGENCE & EVALUATION D&B Country Risk Rating Credit & Supply Environment Outlook Short-term Economic Outlook and Long-term Economic Potential FX, Transfer & Political Risks MICRO-RISK COMPANY RISK INTELLIGENCE & EVALUATION Company Profile & Operations Corporate Structure Line of Business (SIC) Ultimate Beneficial Owners (UBO) Company Financials Employee Size Trade Payment Experiences Sales Volume D&B Risk Predictor Market & Political Environment Outlook Country Profile & Statistics The Dun & Bradstreet D-U-N-S Number Court & Legal Filings D&B PAYDEX Score D&B Financial Stress Score D&B Delinquency Score Global Business Ranking D&B BUYDEX Dun & Bradstreet aggregates more than 30,000 sources of data to provide the insight needed to evaluate your potential business partners, gain valuable risk insights and determine appropriate credit term. Nearly 90% of the Fortune 500, and companies of every size around the world, depend on Dun & Bradstreet to help them discover truth and meaning in their data, and to find the best customers, partners, and vendors to do business with. Partner with Dun & Bradstreet to elevate your risk management strategy in your Belt & Road investments. Contact your D&B Account Manager or us at enquiry.hk@dnb.com to learn more today. Managing Risks along the Belt & Road 10

12 Dun & Bradstreet Hong Kong ABOUT DUN & BRADSTREET Dun & Bradstreet (NYSE: DNB) grows the most valuable relationships in business. By uncovering truth and meaning from data, we connect our customers with the prospects, suppliers, clients and partners that matter most, and have since Nearly ninety percent of the Fortune 500, and companies of every size around the world, rely on our data, insights and analytics. For more about Dun & Bradstreet, visit DNB.com.