When the going gets tough, do you start packing?

An excerpt  from my upcoming book Fluent In Foreign

The answer is “sometimes.” Over the last 20 or so years, my business has weathered a number of political and military crises the nature and consequences of which at times were so perilous and unpredictable that it often seemed like the best thing to do was to pull up stakes and go home. 

First, there was a GKCHP coupe d’état in 1991 in Russia a couple of months after we received our official distribution rights and opened for business. Then, in October, 1993, I landed in Moscow two hours after President Yeltsin dismissed the Parliament only to find tanks and armored infantry vehicles assemble on the approach to the city from the airport. Two days later, the entire world watched as Russian tanks fired on the Parliament building.  At the time, our subsidiary already had a radio communications system built out in Moscow and my staff picked up live transmissions during the gunfights at the Ostankino Tower.

Of course, who can forget the spring of 1996 when, in anticipation of presidential elections where the communists threatened to return to power, all the money seemed to be sucked out of the financial system and our business came to a screeching halt.

The financial crisis of 1998 was not any more fun. Although I did not have much exposure in Russia at the time, our clients did, and their losses totaled millions of dollars. Not the best time to seek increased business.

Then we lived through 20004, Orange Revolution in Ukraine, 2006-2008 gas wars between Russia and  Ukraine, which threatened to cut off supply to the European Union. The war that  took place in August, 2008 between Georgia and Russia.

Then there was the chaos and turmoil of the global financial crisis of 2008 caused by the greed and extraordinary risk taking of certain elite business interests. The collapse hit the U.S. and the world pretty hard, but it almost devastated countries like Ukraine, Hungary and Latvia…  Yet, behind crisis, opportunities lie.

You either don’t do it or you do it. But if you choose to do it, do it right. I am talking here about foreign expansion of your business. Earlier in the book we talked about doing extensive homework and self-analysis prior to deciding to enter the foreign markets. We discussed the need for jumping hurdles and overcoming the problems that will come up along the way. But once you decide to do it, you have to commit and you cannot be scared. There may be military coups, economic and political crises, disease pandemics, natural disasters, competitive threats, criminal threats and other very unpleasant events. Each has to be carefully and rapidly assessed, and in some cases any of these events, or a combination of them, may force you to abandon your chosen market, as Gary did in Chapter 20. Although I fully realize that each political turmoil, financial crisis, or a cataclysmic event must be risk assessed on a stand-alone basis, more often than not, however, these events are precursors to bigger and better things and overcoming them can be a highly rewarding experience down the line.

If you were to study the events in Russia over the last 20 years, you will see that after each crisis the country came back with stronger and more robust economic expansion. Similar observations can be made about other markets, including the U.S. There was the devastation of the 1929 stock market crash and the Great Depression that followed.  But a few years later the U.S. came roaring back. What about the 1987 crash, and the dot com meltdown? All these events seemed to spell doomsday at the time, but those committed to the markets long term found great opportunities in the aftermath of these events.

The same process is taking place right now as the world is gripped in the vice of the global financial crisis. Countries like Poland, Hungary, Ukraine, Iceland, to name just a few, have been hit terribly and their economies ravaged.  Egypt, Libya, Yemen and Tunisia are battling their authoritarian leaders and Japan is dealing with consequences of major tsunami, earthquakes and nuclear accident. Yet, fundamentally, most foreign markets remain sound long term and are poised to resume their economic growth in a few years after these devastating events. You do not want to be shaken out of any market at the bottom.

Take a long-term view. If you are operating in these markets already; re-assess your company’s position. Play defense and control spending. Look for acquisition and consolidation opportunities.  If you are thinking of entering any of these markets, it may be a great time to do it, as the costs of everything from labor, advertising, real estate, and other inputs have been greatly reduced.  Stake your claim and position your business for growth.

Then again, think back to Cuba in 1959. That coup, by the Castro-led revolutionaries, has so far been irreversible and has plunged that country into oblivion. Here again I will emphasize the importance of having political risk coverage, which would protect your business from such perils as expropriation, nationalization, terrorism and currency inconvertibility.

To help you make right decisions, you should become completely plugged in to the numerous economic and political information sources. From credit agency reports, to U.S. State Department briefings, to assessments of IFI economists, bankers and political analysts, you should monitor the state of your chosen market daily.  Simply reading global papers or listening to CNN may not be enough. You need to have access to reliable local information. If all this sounds like a lot of work, it is. But there is no other way to diligently protect your financial investment.

It takes guts, patience and money to navigate your business through crisis, but if you decide to weather the storm and are properly protected, you are likely to be handsomely rewarded for your patience.

Alexander Gordin © 2011 All rights reserved

“Fluent In Foreign” book is being published by the Princeton Council on World Affairs via Xlibris and will be available both in print and electronic form directly from the www.princetoncouncil.org, as well as at all major online book sellers and at select book stores around June 1st. Advance orders are now being taken. Please contact info@princetoncouncil.org

Currently, as part of their membership drive, Princeton Council on World Affairs is offering a complimentary signed copy of the book, along with a 20% membership discount to all new members who join before April 30th. (contact akoval@princetoncouncil.org to receive the promotion code)

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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