Global sporting events can prise open new chances for businesses – trade finance can help
Peter Maerevoet, Special to Gulf News
Like any major sporting event, the FIFA World Cup 2022 in Qatar will bring an influx of sponsorships, tourism, and a wealth of new opportunities. Businesses are aiming to make the most of this experience, but are also wary as they are at the post-Covid recovery stage. Therefore, most businesses want to ensure their moves are as profitable as possible, while involving minimal risk.
Catering to a global market can be quite challenging for any local business, especially if it involves foreign direct investments (FDI). Nevertheless, doing so successfully will mean growth for both the business and the local economy. Therefore, businesses need financial backing and support that will aid them in taking the step forward in terms of investments and scope of work while managing the risks of international trade.
Economic impact of sporting events
Evidence shows how hosting major sporting events increases FDI. The Investment Promotional Agency Qatar already reported that investments worth $19.2 billion were secured in Q2-2022 alone. As seen in other countries that have hosted major sporting events, the trend for FDIs tends to increase too.
According to PwC, the Middle East’s sports business is forecast to increase by 8.7 per cent over the next 3-5 years. The GCC sports sector is expected to grow the quickest overall, while the global sports industry is only expected to grow by 3 per cent. As hosts for the World Cup, many investors are now looking at Qatar and even possibly its neighbours like the UAE, which had a $13.79 billion FDI inflow in 2019, the highest in the region.
Some major beneficiaries of this event will be the tourism sector along with corporate travel and representatives to whom local business owners will have the chance to sell their products and services. The government expects to see a $17 billion boost in its economy due to the World Cup. The question now is, are businesses ready to go international?
Reduce risks in international transactions
Expanding into international trade can take businesses to the next level and is a natural next step for any enterprise. Events such as the World Cup pave the way to a number of openings – but it’s not without its risks. Here are a couple of risks with international trade and how they can be mitigated.
Payment terms and delays
One of the biggest challenges in international trade is payment. Long credit periods that can extend up to 90 or even 180 days after the goods have been dispatched are common. This can drain the company’s working capital, which in turn affects the smooth running of operations, payments to suppliers and overall working. However, using trade finance can insulate your business from these risks.
When it comes to payments, it is best to work with an intermediary. The intermediary advances the funds to the client and the buyer pays back the intermediary on the due date. This provides timely cash and ensures that businesses are able to fulfill their financial obligations on time.
Issues like political unrest, economic downturns, and currency exchange rates can derail the delivery of goods and services or the transaction itself. Opting to seek the support of trade finance companies can help businesses navigate smoothly in international markets. They can offer the best advice on how to make the most of the current situations and utilize the opportunities in the global market.
Economies of scale
Most of the major sporting events last for a limited period of time and need to be capitalized on; however, being limited by current spending power can prevent businesses from doing so. Trade finance can help businesses place larger orders with suppliers to achieve economies of scale, which raise the possibility of more profits over a limited time and strengthen buyer relationships. This helps businesses enhance their competitive edge and buying power.
In essence, with a financial trade intermediary, you won’t be venturing into new opportunities on your own. You will be covered against business risk, cash crunches and any other business hiccups, helping you achieve your financial goals to your best potential.