March 3, 2022
Semiconductor Production Could Be Coming Back to the US
Annacaroline Caruso, editorial associate
Semiconductors were one of the first victims of the supply-chain crisis. Production of the small, but vital computer chip, declined sharply over the last two years, while demand surged by 17%, according to the U.S. Department of Commerce.
The global computer chip shortage has held back manufacturing and sent prices skyrocketing. In the U.S. alone, semiconductor production dropped from 37% to just 12% over the last 30 years, according to the White House. But there are plans in the works to change that.
“Intel, the American company that helped build Silicon Valley, is going to build its $20 billion semiconductor ‘mega site’,” near Columbus, Ohio, said Biden, Tuesday, during his State of the Union speech.
And a bipartisan group of 22 governors urged Congress last week to finalize a $52 billion funding plan, known as the CHIPs Act, that would help boost U.S. semiconductor manufacturing. “We can all point to industries in our states that have been impacted—from auto manufacturing to consumer electronics, home appliances, medical devices, agriculture, defense and more,” the governors wrote in a letter.
The House passed the bill in early February, which sets up negotiations with the Senate on compromise legislation. It must pass both chambers before it can be sent to the White House for President Joe Biden’s signature. Congress has not yet set a date to vote, but the legislation is expected to be a main agenda item over the coming weeks as pressure to pass the bill increases.
If the CHIPs Act passes, the U.S. would still need to collaborate with other countries. “It’s pretty obvious that there are portions of the supply chain where, if you’re really serious about shoring up capability for the U.S., you’re going to need foreign companies to participate, whether that’s in the tools, in some of the upstream chemicals deals, in the actual fabs and the processes themselves,” Sreenivas Ramaswamy, senior advisor to the U.S. Secretary of Commerce, told Material Handling & Logistics.
But some organizations are skeptical self-sufficiency is a realistic answer to fixing the semiconductor shortage. According to the Boston Consulting Group, it would take between $900 billion and $1.2 trillion in upfront costs to create a global self-sufficient semiconductor supply chain. That includes $350-420 billion for the U.S. portion and $175-250 billion in costs for China.
“Fully ‘self-sufficient’ localized supply chains would create substantial incremental costs and lead to a 35-65% increase in semiconductor prices,” the report reads. “The solution to these challenges is not to pursue blanket self-sufficiency through large-scale national industrial policies that come with a staggering cost and questionable execution feasibility.”
Personal Guarantees Provide Payment Leverage
Bryan Mason, editorial associate
Nearly 69% of credit professionals who responded to a recent eNews poll request a personal guarantee on a case-by-case basis, while 17% never require them. A personal guarantee is a legal promise by an individual to repay credit issued to a business, should the business not repay the debt. Personal guarantees provide an extra level of protection to the creditor.
“A personal guarantee is an unsecured written promise from [a principal of the company],” said Juanita Reyes, credit manager for Eastern Quality Foods (Ponte Vedra Beach, FL). “If the company defaults, the creditor can pursue the individual’s personal assets to recover the debt.”
A personal guarantee may be warranted when a customer’s credit file does not support the projected risk, Reyes said. If the owner has substantial assets to support the liability, a personal guarantee will be requested. “We also use cross-corporate guarantees when billing a subsidiary affiliate—the child account of a larger parent company—to ensure obligations will be met,” she added. In these cases, the parent company agrees to cover the debt if the subsidiary defaults.
Reyes verifies the financial information of the guarantor. “We must verify personal assets; otherwise, the personal guarantee is not a useful tool.”
Personal guarantees also can ensure proper business practices are being followed, said Marlene Groh, CCE, ICCE, regional credit manager for Carrier Enterprise LLC (Charlotte, NC). “I believe in personal guarantees when owners do not clearly separate their personal lives from their business lives by mixing and mingling funds. We request a personal guarantee on every account.”
Groh acknowledged that many companies will ignore the personal guarantee stipulation and will proceed to sign the contract without addressing it. However, larger companies are more likely to push back, she finds. When asked, however, customers will often comply.
Personal guarantees protect your interests when customers are not paying in a timely manner, Groh said. If an individual refuses to sign a personal guarantee, she reminds the customer that a personal guarantee is just a piece of paper. “It means nothing unless you do not hold up your end of the bargain.” From her experience, personal guarantees similar to lien rights in construction projects move her company to the top of the list for payment because the guarantor does not want to become liable.
“A personal guarantee is a tool I have used more times than I can count,” Groh said. “It is the ace in my back pocket that I pull out to win a hand or a collection on an account. I value having it in my arsenal and don’t like to be without it.”
Heightened Threat of Cyberattacks with Russian Invasion of Ukraine
Annacaroline Caruso, editorial associate
U.S. businesses should be on high alert for potential increases in cyberattacks from Russia in retaliation against recent economic sanctions, warned the Cybersecurity and Infrastructure Security Agency (CISA) this week.
“We need to be prepared for the potential of foreign influence operations to negatively impact various aspects of our critical infrastructure with the ongoing Russia-Ukraine geopolitical tensions,” CISA Director Jen Easterly said in a statement. “We encourage leaders at every organization to take proactive steps to assess their risks from information manipulation and mitigate the impact of potential foreign influence operations.”
Ukraine has fallen victim to Russian hackers in recent weeks, and the destructive wiper malware could cross borders into the U.S. and other allied nations. “Further disruptive cyberattacks against organizations in Ukraine are likely to occur and may unintentionally spill over to organizations in other countries,” reads another advisory from CISA.
Certain factors have created a perfect environment for cyberattacks to disrupt U.S. organizations and business trade, said Brett Hanft, CBA, credit manager with American International Forest Products, whose company has been hit by a cyberattack in the past. “With so much focus on Ukraine, this could be a time that the U.S. could be more vulnerable to cyberattacks.” Add into the mix remote workforces, which make it easier for cyberattacks to obtain or wipe out personal and work information in one location, Hanft added.
New York took proactive measures last week in case the state becomes a target. New York’s Gov. Kathy Hochul and New York City Mayor Eric Adams announced the creation of the Joint Security Operations Center (JSOC)—the first-of-its-kind hub to coordinate joint local, state and federal cyber efforts, including data collection, response efforts and information sharing.
“Technology runs our water, controls our electricity, and notifies us during an emergency, so cyberattacks have the ability to bring our entire city to a halt if we are not prepared,” said Adams during an announcement. “Our city is a prime target for those who want to cause destruction, and while New York City Cyber Command is already a national model for impeding these threats, it’s time our cybersecurity gets moved to the next level.”
Construction companies also could be a main target of these attacks, according to Construction Dive. “Largely because of a lack of resources, [construction companies] often don’t have dedicated IT individuals [and] they don’t have the internal resources that can be focused on building … maintaining and monitoring robust cybersecurity and defensive systems, so they are frequently targets and do have some significant vulnerabilities,” Raymond Monteith, senior vice president with HUB International Limited’s risk services division told the news outlet.
Banks also are preparing in case they become victims of Russian ransomware. “Global banks, already top targets for cyberattacks in peacetime, are increasing network monitoring, drilling for cyberattack scenarios, searching their networks for threats and lining up extra staff in case hostile activity surges,” a Reuters report reads.
With the quickly evolving crisis in Ukraine, credit professionals should be vigilant about the risk of cyberattacks and take the following proactive steps to protect highly sensitive credit information:
- Create new and strong passwords
- Verify where emails are coming from and think before you click
- Require multifactor authentication for especially sensitive documents
- Store a backup of documents on a thumb drive or other external device
- Ensure all software is up to date
- If working with Ukrainian organizations, take extra care to monitor, inspect and isolate traffic from those organizations and closely review access controls for that traffic (CISA)
At NACM’s 126th Credit Congress & Expo, Hanft will share tips and best practices he learned firsthand when his company experienced a cyberattack. Check out, Cyber-Attack: A Different Perspective When It Happens to YOU!
Step Back and Let Others Lead
Francis Eberle, Ph.D.
When I talk to groups, I often tell them that leaders should step back more. The biggest concern I hear in response is that if they step back, they won’t be able to help their employees do the task right. I will probe and ask what “do the task right” means. Usually, they describe steps to do the task, and then launch into outcomes they don’t want, such as embarrassing the company, insulting a client, a grammatical error, inadequate research, and so on. These outcomes feel like they could be the result of a fully hands-off approach. That is an incorrect assumption about what stepping back as a leader means.
As in many areas of leadership, the best way to step back is multifaceted. If done well, everyone benefits. Yet it is not handing an employee complete autonomy without expectation. Stepping back begins with trust and an understanding of the employee’s strengths.
In fact, trust is one of the most common missing pieces in many workplaces. According to a recent McKinsey survey, 89% of employees feel it is an essential responsibility of their leaders to provide a safe and respectful workplace. Leaders can build trust through creating workplaces that are both psychologically and physically safe, where employees feel heard, valued and respected. Leaders can understand their employees’ strengths through tools such as assessments and examining how recent projects have gone—what portions went well and seemed easy for the employee? Which were more difficult? Managers who are concerned with the development of their people will typically pay attention to employee strengths naturally.
There are a handful of variations for stepping back, depending on the expertise of the employee and level of risk of the task. From a traditional perspective, many companies have several levels of review for most tasks. Here are four ways that leaders commonly think about stepping back and delegating:
- Hand it completely off to an expert employee with minor check-ins.
- Hand it off with guidance, and ask the expert-employee-in-training to check in certain points of the task or project.
- Hand it off by partnering the employee with senior expert employee so they work together. This level is for the employee-in-training.
- Hand parts of the task off. This allows for flexibility, depending on the resulting progress. This level is for a developing employee.
A different and more structured approach is the GRPI Model developed by Richard Beckhard in 1972. GRPI stands for Goals, Roles, Processes and Interpersonal Relationships and represents four areas and interrelated aspects. The GRPI is a four-step planning tool to help team leaders ensure productivity, efficiency and quality through better communication and delegation. Briefly explained here:
G – Are the Goals and expectations clear and agreed upon?
R – Are Responsibilities clear and understood?
P – Are the Processes to achieve the results understood by all involved?
I – Are there any Interpersonal relationships that are key and potential problems that could arise?
These questions also can be used in an after-action review to examine what was learned and whether there are areas that could be improved as the leader continues to step back and increase delegation.
To step back, a leader also has to step up. Stepping up means providing the vision, goals, objectives and audience necessary for the task. Employees need to know how what they are doing fits into the company’s vision and goals. Stepping up is leading, not managing. It is providing frameworks or expectations for the completion of a task.
Effective leaders can step back when they know about their employees’ capabilities, the task and audience for the task. Stepping up and stepping back are a pair of skills necessary for effective delegation and new initiatives. As stated by Elsbeth Johnson in her book Step Up, Step Back, “Meaningful autonomy is real empowerment.” She means managers and leaders are then truly able to excel, take on more responsibility and learn as they lead.
Reprinted with permission by Price Associates.
Credit Congress Spotlight Session: Take Your Game
to the Next Level—Using Emotional Intelligence to Advance Your Career
Speaker: Jake Hillemeyer, Dolese Bros. Co.
Duration: 60 minutes
Credit Congress Spotlight Session:
When and If to Help a Distressed Customer
Moderator: Chris Ring, Speakers: D'Ann Johnson, CCE, A-Core Concrete Cutting, Inc. and Eve Sahnow, CCE, OrePac Building Products
Duration: 60 minutes
Get Yourself Ready for 2024: Goal Setting and Future Planning
Speaker: Hailey Zureich, zHailey Coaching
Duration: 60 minutes
Mastering Mechanic's Liens in Iowa: Distinguishing Commercial, Residential and Public Projects
Speaker: Chris Ring, NACM’s Secured Transaction Services
Duration: 60 minutes