March 28, 2013
Among the litany of issues facing small businesses in the current economic climate, minimizing exposure to cyber-security threats doesn't get the attention it perhaps deserves. For every widely-reported large-scale data breach there are maybe a dozen or so small businesses that fall victim to the same threats, often with much more devastating results.
A recent hearing held in the House Small Business Subcommittee on Health and Technology investigated the federal government's role in helping small businesses protect themselves from the dangers of cyber attacks, a role that could prove to be substantial, as the hearing found that the nation's smaller firms are ill-prepared to handle data breaches and other threats to their customers' personal information, as well as their own.
Statistics revealed in the hearing found that nearly 60% of small businesses close within six months after a cyber attack. Any number of reasons could be given for why these attacks are so damaging, but most pressing is that most small companies simply don't have the staff to police this type of behavior, according to witness William Weber, senior vice president and general counsel with Cbeyond in Atlanta.
"An October 2012 study of [small and medium-sized business] security practices by the National Cyber Security Alliance and Symantec interviewed more than 1,000 businesses with less than 250 employees and found that: 90% do not have an internal IT manager focused on technology-related issues; 87% do not have a formal written Internet security policy; 68% do not provide any cyber-security training to their employees and 83% do not have an automated system that requires employees to regularly change their passwords," he said.
Others noted that small business' exposure to cyber attacks has increased as certain new technologies, such as cloud and mobile computing, have been adopted. "Unfortunately, the growth of information technology has also attracted a growing number of cyber criminals looking to steal sensitive information—including intellectual property and personal financial information," said Subcommittee Chairman Chris Collins (R-NY). "Small businesses generally have fewer resources available to monitor and combat cyber threats, making them easy targets for expert criminals. In addition, many of these firms have a false sense of security and believe they are immune from a possible cyber attack. There is clearly a gap in education and resources."
No specific legislation to assist and inform small businesses has been proposed, however similar efforts have come dangerously close to ensnaring the free and open exchange of trade credit information, which is vital to the American economy. Any bill will have to successfully give small companies the tools they need while respecting the distinction between consumer and commercial information.
- Jacob Barron, CICP, NACM staff writer
Be the First
Be among the first to take Financial Statement Analysis, Interpretation and Credit Risk Assessment, an updated version of, and replacement for, the Financial Statement Analysis 2 certificate session.
When: May 18-22
Why: It's the cornerstone of NACM's new Certified Credit and Risk Analyst (CCRA) designation!
Where: NACM's 117th Credit Congress & Exposition
What a difference a couple of years makes. The previously confident, almost boastful bloc of nations known as the BRICS (Brazil, Russia, India, China and recently-added South Africa) seem to be making a lot less credible noise at a recent summit. At least one expert believes it's a foretelling of the reality that the bloc was an unnatural fit from the start, and that more are coming to that realization.
News coming out of the BRICS meeting has not featured much in the way of solid policy being made other than the establishment of a $100 billion foreign currency pool to shield member nations from wild currency valuation swings caused by other nations struggling with recession or economic malaise. What was expected to be the big news heading into the meeting was a firm agreement to establish a BRICS development bank, one designed to challenge traditional economic powerhouses like the International Monetary Fund. However, reports indicate that some major obstacles have impeded a functional agreement between the BRICS themselves.
Octávio Aronis, an attorney with Brazilian law firm Aronis Advogados who is deeply involved in credit and collections, characterized the BRICS as not being a real member bloc in their actions. The nations have massive differences in cultural norms, business and political mandates, expected growth levels and geographical concerns, among others. "Although we are called the BRICS, we are all so completely different from each other," Aronis told NACM. "They're four or five countries that are growing, but all with situations and numbers. It's great for Brazil and India to be paired with Russia and China, but I'm not sure how China and Russia would take a good position from such an engagement."
Aronis added that it is hard to believe the BRICS will function well long term on the proposed development bank, or any other ventures because even blocs that do have similar economic positions and cultures have problems functioning with any cohesion. A prime example of such is Mercosur, which includes Brazil, Argentina, Venezuela and Uruguay, among others. Still, he said each of the emerging BRICS nations has something to offer international exporters because even slowing growth among them has been at a higher rate than places like the European Union and the United States.
The sentiment that the BRICS do not comprise a real, functioning bloc appears to be rising. In a February NACM interview with Ludovic Subran, chief economist at Euler Hermes, he noted it was difficult, if not unfair or completely misleading, to continue looking at those nations as a group, since they demonstrate more and more how little they have in common.
- Brian Shappell, CBA, NACM staff writer
FCIB Annual International Credit & Risk Management Summit in Prague
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May 12-14, 2013
The Corinthia Hotel Prague, Prague, Czech Republic
Join us on May 12-14 at FCIB's Annual International Credit & Risk Management Summit to discover insight from distinguished speakers, participate in thought-provoking sessions and network with leading experts and your peers in an educational environment.
• Basel III and the Impact on Working Capital Requirements, Letters of Credit and Guarantees
• Different Security Methods across Europe and Best Practices
• Risk Awareness in Today's Global Trading Conditions
• Early Warning Signals: Keeping a Pulse on Your Counterparties
• The Effects of Global Instability on the Treasury Department
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To view the entire program, click here.
We look forward to seeing you in Prague!
Though the agreement may face some budgetary hurdles in the future, this week the Obama Administration took the first step toward a Transatlantic Trade and Investment Partnership (TTIP) with the European Union by notifying Congress of its intent to start negotiations.
Originally teased in last month's State of the Union address, the TTIP has quickly become one of the president's top trade priorities, along with the Trans-Pacific Partnership (TPP), which last week gained a new potential member as Japanese Prime Minister Shinzo Abe announced that Japan hoped to join TPP negotiations in earnest. Taken together, the TTIP and TPP signal an effort by the Obama Administration to build on the United States' existing trade relationships that are already some of the strongest in the world.
In particular, the economic relationship between the U.S. and the EU currently generates goods and services trade flows of about $2.7 billion a day, according to a 2012 estimate. Exporters on both sides of the Atlantic already have few hoops to jump through in order to sell to their cross-ocean counterparts, but since the volume of trade between the U.S. and the EU is already so high, any further reduction in trade barriers could provide exponential increases.
"The decision to launch negotiations on the Transatlantic Trade and Investment Partnership reflects the broadly shared conviction that transatlantic trade and investment can be an even stronger driver of mutual job creation, growth and increased competitiveness," said Demetrios Marantis, Acting U.S. Trade Representative, in his notification letter to Congress. "With average U.S. and EU tariffs already quite low, new and innovative approaches to reducing the adverse impact on transatlantic commerce of non-tariff barriers must be a significant focus of the negotiations."
- Jacob Barron, CICP, NACM staff writer
Best Practices for Rolling Out your Credit Card Surcharge ProgramJoin Scott Blakeley, Esq. and Ronald Clifford, Esq. of Blakeley & Blakeley LLP on April 8 to hear how credit teams can create a potential sales channel due to the recent MasterCard and Visa class action settlement when they discuss:
• The ability to apply a surcharge to card transactions;
• To surcharge or not: elastic/inelastic demand;
• Notice and disclosure requirements to card-paying customers of intention to surcharge;
• Cap on surcharge: how much of the transaction fee may be charged to the customer;
• And much more.
Learn about, and register for this NACM teleconference by clicking here.
Also refer to Business Credit's April issue, pp. 40-41, for preliminary information on the ten states where surcharging is illegal.
At a global economic forecasting meeting this week in Washington, DC, one of Dun & Bradstreet's (D&B's) top economists was bullish on the prospects for U.S. companies, especially manufacturers, in the medium term. However, some significant healing from the recession late last decade may need to be worked out first.
Paul Ballew, D&B's global chief data and analytics officer, said the often stalled progress of the economic recovery should accelerate in the United States in the near future, though 2013 may prove lackluster. Among threats are the ongoing debt crisis in key exporting target nations in the European Union, slowing growth and rising high debt-to-GDP ratios in the increasingly important BRICS, consequences of domestic monetary easing policies and political risks in unstable regions (e.g., Middle East and North Africa). The word for the present economic outlook is, he stressed, "conflicted."
"A conflicted environment should not be treated as an unusual experience," said Ballew. "Be prepared for an uneven, choppy world that is going be with us for most of the decade. The healing process takes time; it just does." Part of that stems from the depths of the problems of the recession that started at the end of 2007, which he characterized as the "ultimate Black Swan" and a "1 in 400" worst-case scenario.
All that aside, Ballew believes that U.S.-based businesses are ready to surge when the global recovery does find its footing. This will be largely due to dramatic strides made in restructuring by U.S. companies, especially medium-sized and larger ones. "The private sector is healthier in many ways than it was in 2006 or perhaps in two decades," he said, noting particularly the performance of manufacturing, and how balance sheets have improved dramatically since January 2005. Granted, top-line sales growth has been tough to come by, but businesses are "leaner and meaner" going forward.
Ballew admitted that small businesses were "hit broadside," and took the worst of the downturn and slow rebound. This is also the area most puzzling or difficult to stabilize because, unlike their larger public counterparts, small businesses were less able to make cutbacks in order to join the "do-more-with-less" culture. They also received less targeted and effective assistance in the form of federal government programs, and are far less transparent to potential creditors and investors, which underscores the need for outside assistance and analysis. Again, this all reinforces the word of the day: "conflicted."
- Brian Shappell, CBA, NACM staff writer
Make Better Credit Decisions with Industry Credit Groups
Credit groups are an effective management tool, allowing credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data about the most recent payment practices. The purpose of exchanging information is to help group members separate fact from fiction, so competent and realistic credit decisions about a customer can be made.
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Contact your local NACM Affiliate to learn more about NACM credit groups and to find the group for your industry.
The letter "B" in the BRICS nations hasn't been doing so well lately. "The idea that the emerging markets like Brazil's would revolutionize the global economy was dominant as recently as four years ago," said Chris Kuehl, PhD, NACM economist. "That was when Brazil was pounding along with growth rates as high as 7%. The sense was that Brazil would be joining China in the surge to the top of the economic heap. It was also thought that India and Russia would be right there with them."
"Those heady days are long gone, as only China still seems worthy of all these expectations," he added.
According to Kuehl, Brazil benefitted from a boom over the last decade that was fueled by an insatiable demand for the commodities they export. "This led to a huge influx of foreign investment from those who wanted to somehow capitalize on that demand," he said, which turned out to be temporarily profitable and ultimately unsustainable.
Despite Brazil's decline in the economic power rankings, and a future that looks somewhat underwhelming but not universally bleak, the United States has continued to work with the nation and its political and business leaders to deepen trade ties for each country's mutual benefit. Bilateral trade between the two nations has more than doubled in the last decade, hitting $76 billion in merchandise trade in 2012, and the Obama Administration is very keen on seeing such expansion continue.
The U.S.-Brazil CEO Forum wrapped up last week in the capital city of Brasilia, with five areas that officials in both countries believe could be improved: tax and trade issues, education and innovation, infrastructure, energy and aviation. "We heard many recommendations from the CEOs on topics ranging from tax issues, to efforts that will ease travel between our two countries, to cooperation on infrastructure development, and to support of educational exchanges and workforce development," said U.S. Deputy Commerce Secretary Rebecca Blank, who co-chaired the forum. "This establishes a strong agenda for our work over the months and years to come."
Blank also announced that as part of the Administration's continued efforts to engage Brazil, along with the rest of Latin America, the Commerce Department will lead an infrastructure-focused trade mission to Brazil, Colombia and Panama in May, the goal of which will be an increase in U.S. exports, as well as the sharing of U.S. expertise in infrastructure development.
- Jacob Barron, CICP, NACM staff writer
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Less than one year after its lavish opening, Revel AC, Inc. has made official its filing for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Camden, NJ. The filing, heavily rumored since last month, was made following a debt-for-equity swap agreement which was signed off on by secured lenders. The bankruptcy hearing is tentatively slated for mid-May.
NACM's Industries to Watch series recently highlighted the glut of gaming operations in the Eastern United States as a source for potential problems in the industry. Only a week later, widespread rumors were circulating that the operator of Atlantic City's Revel resort property sought high-powered attorneys specializing in bankruptcy filings to look at its finances, which already included $1.5 billion of debt and just over $1 billion in assets at a time when economic growth was easing. Revel's financial situation was further hampered by additional legalized gaming operations becoming available in neighboring states, as well as the financial setbacks of potential local and regional customers due to the effects of Hurricane Sandy. Part of the restructuring plan for Revel includes giving up its entirely non-smoking status, the only Atlantic City casino offering the health-conscious amenity.
Meanwhile, a key hurdle in a municipal bankruptcy case was debated in California this week. A judge there heard arguments over the eligibility of the Chapter 9 filing of Stockton, CA. Arguments wrapped this week in the case, which is one of the first to include potential plans to not only slash retiree and pension benefits, but also short bondholders, creditors and other insurers. No timetable for a ruling has yet been announced.
Representatives for the city officially filed for Chapter 9 protection in federal court in the state capital of Sacramento in June 2012. Negotiations since that time, mandated by a then-new California state law requiring attempts to work out solutions without court involvement or hastily-considered filings, failed.
Stockton is among many U.S. cities, including several others in California, struggling to get out of crushing debt wrought by expensive union contacts, pension payments and tax base shrinkage caused by the real estate collapse. At the time of filing, Stockton boasted the nation's second-highest foreclosure rate.
In China, solar producer Suntech Power's main subsidiary officially accepted a petition putting it into insolvency restructuring on March 21, as had been expected earlier in the week. Suntech had been among the biggest power players in the global solar power products industry, in part because of its deep price undercutting of U.S. and EU-based competitors, who alleged they were receiving government subsidies deemed illegal by international trade mandates. Suntech caused widespread speculation earlier this month that it was experiencing a cash crunch likely to spiral into some sort of insolvency-based restructuring in the near future. Such troubles emphasize the out-of-balance ratio of solar product manufacturers and service providers throughout the world to the level of demand from consumers willing to pay for them during a global economic downturn.
- Brian Shappell, CBA, NACM staff writer
Manual of Credit and Commercial Laws, Volume III: Construction Issues—Get your Update Now!
New for 2013, language and state laws have been updated throughout the entire volume including:
- Chapter on Personal Property Liens thoroughly rewritten
- Chapter on Trust Funds updated
- Chapters on Liens and Bonds updated
Entire volume updated to reference liens, bonds and trust funds applicable to the 21st century.
Watch for future updates of volumes I, II and IV.
Click here to get your copy of volume III and for more information about Manual updates and the wide array of resources available to today's credit professionals.
To view past eNews issues or to visit the NACM Archives, click here.