Expertise

“You can’t hedge against political risks”

Andreas Gerber, Head of SME Business at Credit Suisse in Switzerland, discusses the challenges of export and export financing in the mature markets of Europe, America and Asia – and explains how SMEs can still grow in spite of tough competition and increasing uncertainty.

Lengthy experience in supporting SMEs: Andreas Gerber, Head of SME Business at Credit Suisse Switzerland
Lengthy experience in supporting SMEs: Andreas Gerber, Head of SME Business at Credit Suisse Switzerland

For the greatest part of the 30 years that Andreas Gerber has worked at Credit Suisse, he has been supporting corporate clients and SMEs in particular. He is now responsible for all business with Swiss SMEs throughout this major bank. In an interview, he shares his extensive experience of recipes for success among exporting Swiss SMEs and export financing in mature markets.

Tough competition, yet growth in mature markets is possible

“In Europe the environment is highly competitive across the board, albeit with variations from sector to sector, of course”, Gerber explains.

“In my experience, however, the USA is essentially even more competitive. They play by different rules there. Ultimately, for many American customers of Swiss SMEs, claims to quality are not enough. A trade partner in the USA is more likely to say that the supply terms, the accuracy or the longevity of the relationship may be less important than a lower price.”

At the same time, Gerber is seeing increasing competitive intensity in the emerging markets of Asia, particularly China. “The local providers there are building up ever-more know-how and, depending on the sector, you can work just as well with a Chinese business as you can with a European supplier if you are a big company – that’s something companies can no longer ignore.” In general, China is slowly developing into a mature market with a strong internal demand, for example in regions like the Pearl River Delta, “which in some areas is technologically far ahead of Europe”. With regard to the simplicity and reliability of doing business, however, China still shows many of the characteristics of a developing country, Gerber says.

In spite of intense competition, growth in the mature markets is still possible – Andreas Gerber is convinced of this.

“We all know that the long-term trend shows the Asian market is growing very fast. However, it would be a mistake to see this as a reason not to invest in mature markets.

The cultural proximity, the established business connections, and the level of trust should not be underestimated, he says.

In Gerber’s estimation, exporters will primarily be able to grow in this environment through innovation and new products. On top of this, he says, “not all mechanical engineering groups or pharmaceutical companies in mature markets have already considered Swiss suppliers”, so there is still huge potential for tapping into new customer groups.

“The limitations tend to lie in the general dynamism of growth in mature markets.”

This involves the economic situation, the development of technology, and the basic structures of a market that facilitate growth, explains Gerber.

He advises companies to not underestimate the differences between Switzerland and the mature markets if they want to make the most of their opportunities. Every EU country from Portugal to Poland has different regulatory and cultural conditions, without mentioning Japan or the USA, which are culturally much more oriented towards the domestic market. Gerber:

“I only know a few companies that have tapped into the USA and didn’t initially come away with a few battle scars – whether because of legal issues involving product liability, local competition, or cultural differences that can often be misjudged.”

SMEs need to hedge against currency fluctuations

In order to avoid financial risk, Andreas Gerber recommends that all SMEs, particularly those with less export experience, consistently hedge against currency fluctuations – a “hedge”, of course, sometimes means certain losses on margins, but the extreme ups and downs of the last few years have shown just how crucial this sort of protection can be. The currency constellation, he believes, is the biggest challenge for export financing in mature markets.

Companies also need to consider just how much they trust their business partners and to what extent they wish to set up guarantees for their turnover. Last but not least, it is important to identify the right partners for banking affairs, so that payment transactions can be processed seamlessly.

Mildly positive growth in 2019 – despite the increasing unpredictability of the political environment

Unlike currency risks, you can’t hedge against political risks, Gerber stresses, and it is impossible even to plan for them. He is concerned by the increasingly unpredictable regulatory and political environment in which global trade takes place – furthermore, he believes this trend will continue over the next few years.

“Despite this, I expect to see mildly positive growth for our export economy in 2019; our companies have a good pipeline and are well positioned”, Gerber explains. “For SMEs, internationalization remains a huge opportunity rather than a risk.”

About Credit Suisse in Switzerland

Credit Suisse supports private, corporate and institutional clients in Switzerland. As the leading bank for entrepreneurs, Credit Suisse is assisting some 100,000 Swiss SMEs, as well as a large number of big companies. The range of services it provides here covers all areas relevant to the lifecycle of a business – from establishing a company to the allocation of venture capital, credit business, and even advice on M&As and listing on the stock exchange, as well as the matter of succession planning. On top of this, there are also private wealth management services for entrepreneurs, for which Credit Suisse has its own team of specialist consultants available. More information at: https://www.credit-suisse.com/microsites/private-banking/entrepreneurs/en.html

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