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Clearing the hurdles: how to navigate complex regulations

Global expansion can be hamstrung by thorny trade and financial requirements. Here’s how one company overcame bureaucratic challenges.

*This partner content was produced by the Financial Times on behalf of Citi Commercial Bank

Building bridges and breaking barriers in international trade has never been more important. In many small and medium sized enterprises (SMEs) operating globally, beleaguered CFOs and CEOs are facing circumstances that constrain business to an unprecedented degree. The geopolitical tensions between the US and China, for example, have impacted supply chains across the world, while the ongoing effects of Brexit have seen red tape tie up UK businesses and their trading partners. 

Add in the aftershocks of Covid-19, ever-changing data privacy regulations, evolving trade agreements such as the US-Mexico-Canada Agreement (USCMA) replacing NAFTA, and the fact that the World Trade Organization noted that these barriers affect SMEs more than large organizations, and you have something approaching a perfect storm. 

Deep local knowledge is key to expansion success

It’s a view shared by the United States International Trade Commission, which points out that SMEs may lack the resources and local knowledge needed to navigate these increased complexities. But while these challenges are significant, they’re not insurmountable – provided companies employ some expertise to help them on their expansion journey.

Volex, a global leader in integrated manufacturing for performance-critical applications and a supplier of power products, is a case in point. A new management team in 2015 prompted a change in strategy with the company expanding quickly to become a more profitable and acquisitive operation, buying related businesses around the world and growing its product offering. 

Today, Volex is a more diverse and resilient business with a global footprint spanning 28 sites on three continents with over 11,500 employees across 24 countries serving the complex industrial technology, consumer electricals, electric vehicles, medical and off-highway markets.

“We’ve doubled in size over the past five years and our plans are to double in size again,” says Volex Group CFO Jon Boaden. A $400mn investment in acquisitions since 2018 necessitated moving into markets where they previously had no presence. “We have vastly expanded our manufacturing, too,” Boaden says. “We’ve advanced manufacturing capabilities in Mexico, the US, China, Indonesia, Turkey, Vietnam, India and more.”

Company acquisitions can bring banking challenges

However, Boaden points out that this expansion comes with its own headaches. For example, acquiring owner-managed businesses means they may be relatively unsophisticated when it comes to foreign currency exposure. And moving into new territories means tackling different regulatory requirements, which can be particularly stringent in Volex’s sector.

The firm’s partnership with Citi Commercial Bank has proved invaluable in addressing many of the expansion challenges. “Citi has proved really proactive and insightful when it comes to banking strategies,” he says. “We can leverage Citi’s platform across every country we operate in. We haven’t yet found a country where Citi can’t support us in dealing with the intricacies of overseas business.” This consistency in banking operations, with the same processes and controls being used worldwide, also reduces risk to Volex’s margins from currency conversion.

Huaijin Bao, Global Head of Industrials at Citi Commercial Bank, is keen to point out that while Citi’s initial role was to help with financing acquisitions, working capital and ensuring a smooth-running banking process in new territories, this has opened up as the relationship has deepened.

“We enjoy a wide-ranging advisory role with Volex,” says Huaijin. “Not just on banking matters such as local regulations or global cash management, but also with industry insights. Our Industrials team comprises eight or nine subsectors, many of which are downstream industries that Volex is involved in, such as EV, consumer electronics, industrial technology and med-tech. This multi-sector expertise means we can advise our clients not just on their industry, but also share insights with them around adjacent and interconnected sectors. This means we can provide clients with a much broader view of trends and developments across relevant verticals.”

Boaden agrees, pointing out that Citi has provided him with a “tremendous amount of intelligence and a wealth of research” that has helped inform Volex’s growth strategy. “With Citi’s help, we’ve identified the right markets, the right customers and the right ways of working. The business is operating incredibly well at the moment. It’s all coming together.”

All opinions expressed by the participants in this article are their own and do not necessarily represent the opinions of Citi Commercial Bank

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