International Financial Management

International trade has been conducted for over 2,000 years. A host of institutional arrangements, some of them quite elaborate, have developed over the years to facilitate such activity. Major international banks, in particular, are key players in bringing together importers and exporters. This chapter introduces and describes these institutional relationships.

The chapter first introduces the fundamental problems of international trades. It then examines the important documents that control the ownership and insurance of goods that are being shipped internationally. Commercial banks require these documents when they provide financing to importers and exporters. We then look at alternative payment methods and a variety of ways in which exports can be financed.

While you may not be surprised that major money-center banks and large insurance companies are actively involved in financing and insuring international trade, the range of their services may surprise you. For example, the February 2016 issue of Global Finance, a monthly magazine, lists its annual Winners Profile of the best trade finance providers. Some of the winners and their descriptions are as follows:

Best Trade Finance Bank – Citi Citi's Treasury and Trade Solutions (TTS) franchise provides integrated cash management and trade finance services to multinational corporations worldwide. It is distinguished by its massive global footprint. The bank does business in 160 countries (with experts on the ground in 96 of them) and 140 currencies.

Best Trade Document Management – HSBC HSBC offers a range of electronic trade products and solutions to speed up the trade cycle, improve accuracy, and reduce operating costs. Its Document Tracker lets customers check the delivery status of their export documents and track shipments via the HSBC website. Document Express automates the process of preparing export documentation. With some 5,800 specialists in 56 countries, HSBC offers more than 100 products and services that can be combined into a customized solution for managing trade risks, processing trade transactions and financing trade.

Best Trade Credit Insurance Provider – Euler Hermes Paris-based Euler Hermes, the world's leading provider of trade credit insurance, is a subsidiary of Germany's Allianz group. Its trade products insure companies against accounts-receivable losses caused by credit risks like foreign buyers’ insolvency or bankruptcy. Euler Hermes has a network of risk experts in more than 200 countries. Its proprietary online information service, Eolis, connects to a global risk platform with data on more than 40 million companies.