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الأربعاء، 10 فبراير 2016

Have your Trade Credit Insurance before it’s too late: By Anthony Bechara

Have your Trade Credit Insurance before it’s too late:
What is the best thing that companies are good at in our MENA region?
“Nagging” (This client defaulted his payment, this client went bankrupt, I can’t export my goods because too many financial guarantees required, etc). I just can’t understand why companies keep nagging of their receivables balance having additional zeros every month, while the solution is just a phone call away: “Trade Credit Insurance”!!!
In simple definition, Trade Credit Insurance = Accounts Receivable Insurance is a policy that protects the company’s assets against their own customers’ failure to pay their debts for whichever is the reason (subject not excluded in the policy).


Let’s put it this way:
What is the company’s most valuable thing? “Assets”
What is the most important component in Assets? “Cash”
So why are you putting all these cautious measures (AML, Compliance, Credit Limit, etc) that limit your market transactions (domestic & foreign) to cover their cash? You can simply modify the measures to cover the exclusions that are in the Trade Credit Insurance policy and forget the rest.
Even though large firms are trying to hide the real economic picture in the MENA region, due to the oil prices shortfall, with pessimistic recovery view in 2016, the picture isn’t so pleasant especially for the SME sector. Large firms “might” have reserves and the desire to sustain operations in the region, but what the firms that relies on each invoice individually to cover their expenses?
Following many reports from international rating agencies about the change of risks environments in different MENA countries, I strongly recommend that a Trade Credit Insurance policy to be a mandatory requirement for any SME wishing to get a commercial license. Just like a professional having a Professional Indemnity policy (Architect, Lawyer, financial institutions, etc). The trade credit insurance policy will protect all stakeholders against any disruption in the business model.
Why Now?
Because simply our countries’ risk profile is changing as per the international credit rating firms reports, so before that affects the tailoring option that we have from the reinsurers, let’s benefit from it now.
Some of the advantages for a Trade Credit Insurance Policy are:
·         Grow sales safely domestically and abroad to new and existing customers;
·         Protect your business from risk of customer default and catastrophic loss;
·         Reduce bad debt reserves;
·         Obtain greater access to funding and secure better finance options;
·         Expand export markets and offer competitive terms overseas.
We are used in our region to adopt reactive approaches when it comes to Risk Management, and we’ve been lucky enough that merely there were no Economic catastrophes so far due to high Oil prices in the last decade.
Well!! Welcome to the Era of Non-Oil economies in the MENA region, during which economic diversification has become a must for sustainability, which fragments the markets more and expose them to new unforeseen risks with different frequencies and probabilities.
Taking this fact across the Corporate & SME worlds, new challenges will require:
·         Strong financial stability;
·         High credit absorption; and
·         International expertise to be brought to the region (especially for Green Energy initiatives)

Therefore, one of the main guarantees for the success of Domestic & International trading is Trade Credit Insurance which can be purchased today at a reasonable price, so please do so before the market gets more fragmented and then it will be too late.