Trade credit insurance (TCI) is one of the very best ways to protect against this type of risk. Here at Coface we offer a range of TCI solutions, helping to protect companies against the dangers of unpaid invoices as part of a comprehensive trade credit risk management strategy.
While trade credit insurance can be lifesaving for companies when buyers fail to meet agreed credit terms, it's always better to avoid risk from the outset. This is another area where Coface is able to assist, by providing detailed analysis of a potential buyer's credit risk and the possibilities of non-payment.
Trade credit insurance and risk management: Case studyCoface insures the receivables of an SME that produces electronic components in Hong Kong, China and Taiwan. This company was recently on the verge of signing a contract stipulating 150-day credit terms with a major manufacturer of electric appliances. However, Coface's research revealed that the manufacturer had sustained significant financial losses in recent years, and we advised our client of the serious trade credit riskassociated with this organisation. As a result, the SME declined the opportunity and the manufacturer later filed for bankruptcy after failing to pay a competing electronic components business.
This case study underlines how effective risk management doesn't just involve the right TCI policy, but also working with a trade credit insurance company like Coface that is able to properly assess the risk level of potential trading partners.
Of course, it isn't always possible to accurately predict the risk of every buyer, which is where a trade creditpolicy appropriate to your business comes in handy.
Coface's trade credit insurance policiesEvery business faces a different level of trade credit risk, which can vary based on the nature of their organisation as well as their relationships with buyers. Accordingly, Coface provides several different types of trade credit insurance policy:
● EasyLiner trade credit insurance for SMEs is specifically designed for Australian businesses operating both locally and abroad, with a turnover of between AU$750,000 and $5 million.
● TradeLiner is for mid-sized companies and offers protection for businesses with a turnover of more that AU$7 million, insulating them against commercial, political and environmental risk.
● Coface Global Solutions (CGS) is tailored towards companies with large, multinational clients, and is designed to be flexible and appropriate to a wide variety of international markets.
● Coface's Single Risk solution works for ad-hoc projects, making it simple to tweak a trade credit insurance policy to the specific challenges of a certain market or industry.
Each of these policies is optimised for the clients who require them, making it far less likely that outstanding accounts receivable will have a negative impact on cash flow. In combination with an appropriate risk management strategy that identifies and avoids companies with a history of bad debt, these solutions are the very best way to protect an organisation of any size against the consequences of non-payment.
If you're still not sure which TCI policy suits your business, it's a good idea to undergo a Customised Credit Opinion assessment. During this process, our expert team will look at the risks of non-payment associated with your client base, and evaluate what level of trade credit insurance is the best fit.
For more information on TCI and trade risk assessment, or for a free quote, get in touch with Coface today.
OUR OFFERS TAILORED TO YOUR NEEDS
TradeLiner secures your commercial transactions and protects you against the risk of unpaid invoices.
You can develop your turnover with peace of mind, and access new bank financing solutions. You benefit from all the advantages of credit insurance.
“ Coface Global Solutions” (CGS) is designed specifically for the management of large multinational clients.
With this system, your purchases are more cost-effective and your credit management policy is optimised for your subsidiaries. With our local support team in 99 countries, CGS coordinates and structures your credit insurance solution on a global scale.
Because the world is unstable, Coface offers its “Single Risk” solution to companies and financial institutions exposed to commercial and political risks abroad. Changing legislation, contract breaches, expropriation, nationalisation, armed conflict, labour unrest, acts of terrorism, etc. are all possible reasons for taking out cover on a case-by-case basis for your business.