Global Trade is Complex and Growing Rapidly
Economies of the world are becoming increasingly global in nature. This is being driven by several factors, including:
- Businesses need to grow top-line revenue by finding new customers, regardless of their location.
- Businesses need to lower costs by finding the cheapest sources of supply, regardless of their location.
- Significant changes in government policies are paving the way for freer trade across borders (e.g., the North American Free Trade Agreement, European Economic Union and World Trade Organization).
- The evolution and subsequent maturity of new information technology and technology-based business models.
Ultimately, the extra complexity and risk of global trade translates directly into a worsened cash flow position and increased procurement and logistics costs, because businesses must carry a greater amount of working capital. First, businesses carry more inventory to accommodate longer order cycles and uncertainty in the global supply chain, and second, businesses carry more accounts receivable because they are less efficient at managing their global financial supply chain.