# Managing trade credit and insurance in the context of international commerce expansion  Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2016-09-16 Category: INSURANCE Category URL: https://financedigest.com/category/insurance Meta Title: Managing Trade Credit Risk: Strategies for Global Growth Meta Description: Understand the impact of credit risk exposure on company assets. Learn about the challenges of trading internationally and how to mitigate risks effectively. URL: https://financedigest.com/managing-trade-credit-and-insurance-in-the-context-of-international-commerce-expansionhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/holding-a-glowing-earth-glo-1736844515788-compressed.jpg) By **Mike Feldwick,** Head of UK & Ireland at Tinubu Square Mike Feldwick Trade credit risk exposure is a top concern for CEO’s and CFO’s, understandably, since it is estimated that customer debts often represent more than a third of company assets. For organisations who already trade internationally, or plan to do so, there is the additional challenge of understanding local economic, political and cultural issues that can impact on a company’s finances and credit decisions. Because payment defaults are felt throughout every level of an organisation, any additional exposure to risk is increasingly being put under intense scrutiny by stakeholders. They expect tighter governance to be applied to credit [management and risk](https://www.financedigest.com/improving-risk-management-in-the-insurance-industry.html "Improving risk management in the insurance industry") mitigation particularly if the company is broadening its geographical horizons. This is particularly appropriate in the wake of the European Referendum result in June, which has [already had an impact on exchange rates](https://www.financedigest.com/czech-interest-rates-already-at-high-level-central-bank-governor-says.html "Czech interest rates already at high level, central bank governor says") and fluctuating confidence. There is nothing more certain about the [global market](https://www.financedigest.com/polyurethane-dispersion-market-globally-expected-to-drive-growth-through-2031.html "Polyurethane Dispersion Market Globally Expected to Drive Growth through 2031") than the fact that it constantly shifts in terms of both risks and opportunities. Whether companies have their eye on [Latin America](https://www.financedigest.com/the-latin-america-capnography-equipment-market-to-get-an-innovative-undertone.html "The Latin America Capnography Equipment Market To Get An Innovative Undertone"), Africa, Asia or other parts of Europe, credit managers are under pressure to arm themselves with real-time, industry specific and local intelligence about prospective and existing customers. To be effective, they have to look not just at the customer, but any other [companies within the customer’s group](https://www.financedigest.com/title-medical-imaging-equipment-services-market-to-witness-huge-growth-by-2031-with-profiling-leading-companies-agfa-gevaert-group-althea-group.html "Medical Imaging Equipment Services Market to Witness Huge Growth by 2031 with Profiling Leading Companies – Agfa-Gevaert Group, Althea Group"), the regions they are located in, the markets in which they trade, the executive team and where ownership resides. Added to this is the importance of real-time intelligence. Companies have used credit reference agencies for data on prospective customers, but if it’s not current, then it won’t help to assess the security of their debts right now when a credit decision needs to be made and the full exposure to [risk must](https://www.financedigest.com/banks-and-insurers-right-to-prioritise-technical-skills-in-operational-risk-but-must-not-overlook-training-in-nurturing-talent.html "Banks and insurers right to prioritise technical skills in operational risk but must not overlook training in nurturing talent  ") be understood. **Turning to insurance –** To protect themselves, some [companies turn to trade credit insurance](https://www.financedigest.com/allianz-trade-wins-global-banking-finance-reviews-best-trade-credit-insurance-company-asia-pacific-2022.html "Allianz Trade wins Global Banking & Finance Review’s Best Trade Credit Insurance Company Asia Pacific 2022"), particularly within Europe, where it is common business practice.  In fact, European insurers dominate the international trade credit [insurance landscape and over time have reworked existing policies](https://www.financedigest.com/what-type-of-life-insurance-policy-is-right-for-me.html "What Type of Life Insurance Policy Is Right For Me?") to protect clients who trade internationally. This domination, however, is likely to change as important geographies, such as [North America](https://www.financedigest.com/stellar-innovation-to-drive-the-north-america-scar-treatment-market.html "Stellar Innovation to drive the North America Scar Treatment Market"), the Far East, Latin America, India and large swathes of Asia offer huge opportunities for market penetration. As trade in these areas increases and ambition amongst exporters grows, there will be an increasing [demand for credit](https://www.financedigest.com/credit-union-loans-in-high-demand.html "Credit Union Loans in High Demand") insurance, but a blanket policy approach will not be sufficient, any more than it is for UK-based exporters. The established insurers, recognising the need to evolve, are overhauling their services to customers, but at the same time, new companies are emerging, and both are increasingly using tools that enable them to tap into invaluable local [market intelligence](https://www.financedigest.com/social-business-intelligence-market-to-reach-a-valuation-of-us29-bn.html "Social Business Intelligence Market to reach a valuation of US Bn") and insight on local buyers. This is particularly true in [emerging markets](https://www.financedigest.com/electric-vehicle-transmission-market-emerging-growth-analysis-future-demand-and-business-opportunities-2027.html "Electric Vehicle Transmission Market Emerging Growth Analysis, Future Demand and Business Opportunities 2027") or territories with low credit insurance penetration. These tools also prompt best practice, enhance processes and help to provide good governance, and this reaps dividends in the form of support from reinsurers. Instead of standard products, insurers can build tailor-made solutions and adopt a multi-niche, customer-centric [strategy to boost policy growth](https://www.financedigest.com/industrial-gauges-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Gauges Market Competitive Growth Strategies Based on Type, Applications, End User and Region"). **Being** [risk attractive –](https://www.financedigest.com/bafin-guidance-on-sustainability-risks-a-practitioners-view.html "BaFin Guidance on Sustainability Risks – A Practitioner’s View") Clearly the more information that [insurers and businesses](https://www.financedigest.com/business-insurance-what-does-it-cover.html "Business Insurance: What does it cover?") have, the more likely they are to make good credit risk decisions. In addition, if an [insurer knows that their client is already accessing real-time data](https://www.financedigest.com/how-data-is-revolutionising-car-insurance.html "How data is revolutionising car insurance") on its customers in order to be more risk-aware, it also becomes considerably more ‘risk attractive’ – a more interesting prospect for the insurer. So what kind of [information are businesses getting through software](https://www.financedigest.com/software-to-display-your-businesss-important-information.html "Software to Display Your Business’s Important Information") tools? At the very least they can [see the credit status of existing and potential customers](https://www.financedigest.com/britains-metro-bank-returned-to-profit-in-september-sees-no-customer-stress.html "Britain’s Metro Bank returned to profit in September, sees no customer stress"), not just on a monthly or weekly basis but automated so that alerts are triggered as and when an event arises. [Software programs can track every aspect of a customer’s business](https://www.financedigest.com/why-no-code-beats-custom-software-and-turnkey-solutions-for-business-automation.html "Why no-code beats custom software and turnkey solutions for business automation") from their supply chain and their credit history, to their clients and the factors that make them able to pay or likely to default on credit. Visibility into the immediate financial health of customers allows companies to understand their own exposure to [risk](https://www.financedigest.com/is-2022-the-year-green-finance-incorporates-climate-risk.html "Is 2022 the year green finance incorporates climate risk?") and assess whether they have the appetite for it. _While we cautiously welcome green fiscal shoots, many parts of the world are experiencing a level of economic uncertainty,or their [markets are being badly affected by evolving political or regional](https://www.financedigest.com/ph-meter-market-regional-industry-segmentation-analysis-by-production-consumption-revenue-and-growth-rate-by-2027.html "pH Meter Market Regional Industry Segmentation, Analysis by Production, Consumption, Revenue and Growth Rate by 2027") turmoil, which makes the credit risk landscape even more difficult to understand and vulnerable to rapid fluctuations._ Businesses, and their insurers, could be blindsided, seeing what appears to be an increase in trade and improve their credit terms overseas, when the reality is that suppliers with better intelligence can [see financial issues developing](https://www.financedigest.com/the-next-upcoming-years-to-see-the-dental-lasers-market-develop-on-an-organic-note.html "The Next Upcoming Years To See The Dental Lasers Market Develop On An Organic Note") and reduce their exposure. It would not be wise to be the business still [holding the majority risk](https://www.financedigest.com/ai-holds-the-key-for-both-competitive-advantage-and-risk-mitigation-in-2022.html "AI holds the key for both competitive advantage and risk mitigation in 2022").This also has a knock-on [effect in terms of customer](https://www.financedigest.com/5-simple-steps-to-an-effective-customer-complaint-response-strategy.html "5 Simple Steps to an Effective Customer Complaint Response Strategy") relations. Credit managers who are unable to make clear decisions due to a lack of information, will also lack the [confidence to continue trading with the customer](https://www.financedigest.com/instilling-customer-confidence-in-the-pandemic-era.html "Instilling customer confidence in the pandemic era") and this ultimately could see a decline in growth. The need for credible, up-to-date information about customers is abundantly apparent, and particularly when trading overseas. Without the ability to determine the credit risk of companies operating in unfamiliar [areas](https://www.financedigest.com/soccer-standing-areas-at-premier-league-grounds-to-be-allowed-from-january.html "Soccer-Standing areas at Premier League grounds to be allowed from January") based on “on the ground” intelligence, an accurate picture cannot be constructed. Increasingly the most effective way to do this is by using a [software tool that synthesizes daily intelligence from global sources](https://www.financedigest.com/why-should-investors-be-paying-more-attention-to-open-source-software.html "Why should investors be paying more attention to open source software?"), and not just local. _Businesses also have a duty to their stakeholders, from [board members](https://www.financedigest.com/passendo-powers-up-with-raft-of-new-board-members.html "Passendo powers up with raft of new board members") through to employees, and of course their own suppliers and insurers,to determine the nature and extent of the risks they are willing to take in their export arrangements. [Risk management](https://www.financedigest.com/early-detection-of-mismatched-trades-is-key-to-managing-risk-and-maximizing-profits-on-the-pl-desk.html "EARLY DETECTION OF MISMATCHED TRADES IS KEY TO MANAGING RISK AND MAXIMIZING PROFITS ON THE P&L DESK") and good governance therefore are essential, and can be efficiently managed with the right intelligence tools in place._ [www.tinubu.com](http://www.tinubu.com) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---