International business easily summed up by Saudis and sheep

Rebecca
Tonn

My fears — that all the espresso in the city would not suffice to keep me awake during an early morning international business seminar — were entirely unfounded.

Roy Becker’s presentation to a group for the Office of International Affairs at the Pikes Peak Workforce Center was witty, memorable and useful.

Becker, president of Roy Becker Seminars, an adjunct faculty member of Denver University’s international MBA program and a professor at the University of Colorado at Denver, has many years of experience working in the international departments of several major banks.

Using real-life scenarios as examples, he talked about the challenges, pitfalls and rewards of doing business with other countries.

Becker transformed the proverbial PowerPoint presentation into an interactive game: “Are you Smarter than an Exporter?”

Two volunteers competed against each other, guessing what the audience’s answers would be. The audience had multiple choices about what actually happened in various international business scenarios.

For instance, what happened during the 1970s when several ships, loaded with dry, bulk cement, waited for access to the harbor in Nigeria for a couple of years (suffice it to say the harbor was rather crowded), and the cement took on moist air (big surprise) and became enormous blocks of cement?

Multiple choice options: “A. They gave priority for the ships to unload. B. They sunk the ships. C. They turned the ships back.”

Well, turns out that the cost of unloading gargantuan blocks of cement was prohibitive, so the answer is “B” — they sunk the ships! (Imagine the look of surprise on yours truly’s face.)

Of course, he had the audience’s full attention after that example, and the mini-seminar was certainly more lively than most, accompanied by much laughter and audience participation.

For a more recent example, Becker cited the case of the 57,000 sheep — which Saudi Arabia ordered from Australia during 2003, paying $3.1 million in advance.

The contract specified that only 5 percent of the sheep could have scabby mouth disease. A Saudi Arabian vet inspected them in port and declared that a whopping 6 percent were diseased. (Stop laughing, this is serious business, here.)

Australia refunded the money, and sought a country to accept the sheep for free. Meanwhile, 5,000 died from the heat. After 57 countries declined the gift, Eritrea, which was in the midst of a famine, accepted the sheep — but only after Australia “sweetened the pot with a gift of $1 million in food,” Becker said.

There is a moral to this true story. “If you’re an exporter, and payment is contingent on passing inspection — make sure your inspection is done at the point of shipment,” he said.

Point made. And how.

And, Becker told would-be entrepreneurs, contrary to popular opinion, that there is no “central” location for controlling currency exchange rates. Rates change around the clock.

“It’s the last truly free, unregulated market,” he said. “And any news event or even just a rumor can trigger a blip in the exchange rate — the markets can go crazy.”

So, in international transactions, whoever is willing to deal in the other party’s currency takes the foreign exchange risk.

U.S. importers and exporters “need to look for ways to mitigate country risk (or sovereign risk),” Becker said. “Mitigate — but not eliminate — otherwise you also eliminate reward.”

Rebecca Tonn covers banking and finance for the Colorado Springs Business Journal.