Risk comes in many forms. After passing the $1 billion mark in sales in less than 16 years of operations, International Fleet Sales (IFS), a San Leandro, Calif.-based distributor of U.S.-origin General Motors vehicles, faced difficult decisions about both its risk tolerance and the need to balance growth with risk management. It had become apparent that the company’s sales had become concentrated with relatively few large customers that required ever larger deals to meet their needs. The related risks took two forms—the risk of sales concentrated in too few customers and the risk of extending credit to these clients to facilitate larger deals.
The company, which serves an international customer base by offering unrivaled expertise in export services, logistics, parts, service and training, had initially reacted to the situation by becoming more conservative in the risks it was willing to assume. However, it quickly became apparent that this more conservative approach was hampering sales and customer relationships.
“A good customer from South Korea placed a very large order but did not have enough working capital available to finance the deal,” said IFS president Mike Libasci. “We were concerned that extending credit for the deal was too risky because we couldn’t handle the loss if we took a hit. But we also didn’t want to lose the deal.”