Economic & Trade Risk Insights
 

Finding, getting, and keeping customers is the challenge every business faces. Very few are lucky enough to have new prospects lining up at the door. However, how can you be sure that the customer, after all your hard work, will pay? What can you do to get a client to pay an invoice—and pay on time?   Suffering a non-payment event—whether it’s your first, the most recent, or the most significant—can feel overwhelming. Damage to companies caused by non-payment of invoices is never solved overnight. Restoring optimism and trust is an ongoing challenge.   Non-payments can actually add up and damage your company on multiple fronts. Even ignoring a relatively-small invoice can hurt your bottom line—especially if you depend on receiving a payment in time to pay expenses or if you rely disproportionately on a small number of clients, AKA “concentration risk.”   So what do you do when a customer doesn’t pay?   Knowing where to start is essential.

This article delves into the strategic role of trade credit insurance within the broader spectrum of corporate insurance, highlighting its significance in bolstering corporate risk management portfolios.   Trade credit insurance stands out as a pivotal component of corporate insurance, designed specifically to protect companies from the financial distress caused by the default or insolvency of their customers. In today's globalized economy, where businesses increasingly extend credit to their clients, the risk of non-payment poses a significant threat to financial stability. Trade credit insurance mitigates this risk, ensuring that companies can pursue growth opportunities without the looming fear of bad debt.   The relevance of trade credit insurance has been further amplified by recent economic events. The COVID-19 pandemic, for instance, has underscored the fragility of global supply chains and the domino effect that disruptions can have on trade receivables. Similarly, geopolitical tensions and trade disputes have introduced additional layers of risk for companies engaged in international trade. These developments have propelled trade credit insurance to the forefront of strategic risk management discussions, highlighting its importance in maintaining financial liquidity and securing the supply chain against a backdrop of global uncertainty.   Moreover, trade credit insurance offers more than just financial protection. It provides valuable insights into the creditworthiness of potential clients, supports better credit management, and enhances the ability to secure financing by improving lenders' confidence in the company's financial health. By covering receivables, it not only guards against unexpected losses but also facilitates a more aggressive market expansion strategy, knowing that the risks are well-managed.

Explored the multifaceted nature of business risks that large corporations face.

The Accounts Receivable Turnover Ratio is a simple accounting tool to measure how efficient a company is at extending credit to customers and recovering these debts on time.   A high accounts receivable turnover ratio indicates that credit management processes are working well and that customers are settling their debts on time. A low ratio indicates that credit may have been extended to unreliable or uncreditworthy customers, or that in-house debt collection procedures are inefficient.   The accounts receivable turnover ratio is commonly used to gauge efficiency, optimise internal processes, and maximise profitability.

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Excess of Loss (XoL) insurance is a bit like tailor-made clothing. Mass-produced standards don’t always accommodate the individual and, if given the choice, wouldn’t we all prefer a perfect fit, every time?   That’s the benefit of XoL with Allianz Trade: we adapt the policy to our clients’ needs and existing credit procedures, not the other way around. And clients the world over are embracing this custom solution.