After another turbulent and financially painful year, 2023 could be make or break for many struggling companies. Andrew Share assesses the trade risks and explains how Coface can help you make the right business decisions to minimise your exposure.
How is it possible to achieve growth in the face of the multiple headwinds that are currently buffeting Britain and the global economy?
It’s not just the government that has been wrestling with this question with its multiple budget statements; it was top of the agenda at the recent CBI Conference and is a theme of many newspaper columns. But while opinions differ about how to get the UK economy moving, businesses are experiencing the perfect storm, and confidence is ebbing away.
I’ve been working at Coface for more than two decades, but this may be the first time that I can see trading risks confronting our clients from all directions. Even before the invasion of Ukraine, there were persistent pressures on the global supply chain and labour shortages caused by the pandemic and the consequences of Brexit. The war has made the situation worse, driving up the cost of every element in the production cycle—raw materials, processing, and delivery—while dampening consumer demand.
And there have been self-inflicted wounds too. Although the Bank of England was expected to raise interest rates, September’s ill-fated mini budget meant the hike was more sudden, steeper, and harder to manage. Businesses that had been able to service their debt will find themselves paying considerably more as their existing loan deals expire, which could tip some over the edge, while others will still need to borrow more to cover their increasing costs.
Amid so much uncertainty, it would be understandable for businesses to go into survival mode until things improve. But playing it safe can be counterproductive if your established business relationships actually leave you more exposed or you lose ground to your competitors.
My advice to businesses right now is to take a thorough 360⁰ look at where you sit in the value chain and understand the risks and opportunities for the short and medium term. During the pandemic, many companies were caught out because they focused on whether their customers were at risk of insolvency but not the risk to their supply chain. The lesson from that experience is that you don’t just need to know who you are selling to but also who you are buying from and the size of the risk, and this is where Coface can help.
As Coface UK’s Director of Business Information, I’m proud to be able to offer business intelligence that goes far above and beyond standard credit references. That’s because as a trade credit insurer, we can leverage the expertise of over 700 risk underwriters and risk analysts worldwide with access to real-time financial, trading, payment, and fraud information on millions of companies from multiple sources, including reports from our 50,000 clients, financial accounts, analysts on the ground, and global partners. Their underwriting decisions inform our business information services, but they also underpin our own credit insurance business, so you know we have a stake in making the right call.
Coface can create personalised business information solutions to meet your specific needs. The unique insights we are able to provide include:
- Debtor Risk Assessment (DRA): a powerful tool that distils our years of experience, adjustments from analysts, and a wealth of unique data assets into a score to indicate the probability of payment default within a 12-month horizon. The scoring process and scale are consistent whether the company is in the UK, Europe, the Americas, Asia, or Africa, and we actively monitor scores to take account of the latest data updates.
- Customised credit opinions: our assessment of a company’s probability of default in the context of your business requirements and the value of the goods or services. It enables you to see the limit we would be prepared to cover, but with no obligation to obtain insurance.
- Credit reports: from a snapshot overview to more detailed information about a company’s financial health and payment behaviour, our cost-effective reports can be used as a quick ‘sanity check’ to confirm who you are dealing with or feed into your existing decision-making process.
With the challenging economic climate likely to persist through 2023, a trustworthy source of business intelligence could be your most valuable asset. As a credit insurer, Coface has the resources, data, and risk expertise to help you make informed choices about who you do business with and trade with confidence.
Andrew Share,
Business Information Director