Credit Risk Management

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Credit Risk Management

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Credit Risk Management

  1. 1. How have you been<br />MANAGING<br />your credit risk?<br />
  2. 2. One of your<br />biggest customer<br />defaults<br />on its payments.<br />Suddenly<br />$ 1,000,000<br />in invoices goes<br />unpaid.<br />
  3. 3. Your numbers sink into the red.<br />You lose cash flow.<br />Stop company’s growth in its tracks.<br />Accounts Receivable<br />that go unreceived<br />hit your bottom line<br />Okay, but what can I do?<br />HARD<br />Damage shareholder’s equity.<br />
  4. 4. Accounts Receivable Insurance<br />
  5. 5. Protects from unexpected and catastrophic losses resulting from:<br /><ul><li>insolvency or “non/slow-payment” by its buyers
  6. 6. political events</li></li></ul><li>The Risk Management matrix…<br />High<br />High Impact<br />Low Frequency<br />High Impact<br />High Frequency<br />Impact<br />Low Impact<br />Low Frequency<br />Low Impact<br />High Frequency<br />Low<br />High<br />Frequency<br />
  7. 7. …and the strategic value of Credit Insurance.<br />High<br />High Impact<br />Low Frequency<br />High Impact<br />High Frequency<br />AVOID<br />INSURE<br />Protects Shareholder’s Equity<br />Impact<br />INSURE<br />Low Impact<br />Low Frequency<br />Low Impact<br />High Frequency<br />Protects company’s profitability<br />KEEP<br />Low<br />High<br />Frequency<br />
  8. 8. Risks faced by companies trading in domestic and international markets:<br />
  9. 9. Benefits<br />Protect Balance Sheet:<br />Usually 80% of your business comes from 20% of your customers.<br />Credit Insurance gives liquidity for unexpected losses, reducing your equity and provision needs.<br />Manage your bad debt reserve and write-offs with greater certainty.<br />Enhance Credit Management:<br />Receive unbiased, third-party credit opinions on your customers.<br />Reduce your credit investigation costs.<br />Accurately budget and forecast your premium costs and bad debt write-offs.<br />
  10. 10. Benefits<br />Increase Sales:<br />Credit Insurance is the unique corporate guarantee issued by supplier.<br />Entry new clients, regions, markets, protected. Go abroad.<br />Increase of your current ‘clean’ exposure with existing clients.<br />Improve Financing<br />Policy can be endorsed to a Bank which is assigned as Loss Payee.<br />Offer your insured receivables as collateral for loan facilities.<br />Sell your receivables without recourse ensuring off-balance sheet.<br />Increase the pool of ‘eligible’ receivables and advance rates.<br />
  11. 11. Policy Concepts<br />Commercial Risks<br />Insolvency (Chapter 7, 11)<br />Protracted default (non-payment from due date)<br />Disputes are NOT COVERED<br />Political Risks<br />Transfer-Risk, Government Moratorium<br />Exchange Controls, Discharge of Debt<br />Contract frustration, Civil turmoil<br />
  12. 12. Standard Credit Insurance Structure<br />SUPPLIER is the policyholder<br />Sales term<br />Buyer<br />Buyer<br />Buyers<br />Supplier<br />Payment<br />Issues a Trade Credit Insurance Policy<br />Non-payment guarantee<br />Indemnification<br />
  13. 13. Secured Receivables Loan (Forfeiting)<br />SUPPLIER is the policyholder, BANK is the Loss-Payee<br />Sales term<br />Buyer<br />Buyer<br />Buyers<br />Supplier<br />Payment<br />Secured Receivables Finance<br />Issues a Trade Credit Insurance Policy<br />Payment<br />Non-payment guarantee<br />Indemnification<br />Bank<br />Indemnification<br />Rights endorsed to Coface<br />
  14. 14. Credit Limits<br />Concepts:<br />One credit limit per company (CNPJ or tax number).<br />Group analysis, individual decision.<br />Objective notch with subjective correction.<br />Credit evaluation:<br />Prior to selling, review in a year basis or negative information<br />Full monitoring during contract period<br />
  15. 15. Default<br />VERY HIGH RISK<br />MEDIUM HIGH RISK<br />LOW RISK<br />Score and Risk Category<br />Coface attributes a Score to all of your buyers<br />0<br />1<br />2<br />3<br />NS<br />4<br />5<br />6<br />7<br />8<br />9<br />10<br />Non Investment Grade Aggravated<br />Non Investment Grade<br />Investment Grade<br />D<br />CC<br />CCC<br />B- to B+<br />NS<br />BB- to BB<br />BB+<br />BBB-<br />BBB<br />BBB+<br />A- to A+<br />AA- to AAA<br />
  16. 16. Cofanet | Online Access<br /><ul><li>Credit Limits Management
  17. 17. Search for companies, request credit limits, send notifications.
  18. 18. Consult company Score
  19. 19. Export database to source your ERP
  20. 20. Your direct channel with Underwriter
  21. 21. Put in your comments, a commercial approach, any additional information
  22. 22. Decision is automatic and online available
  23. 23. Multi-level users access
  24. 24. From only-view to full-access user login</li></li></ul><li>Coface Group | Key Figures<br />A global provider of trade receivables solutions<br />€ 1.6 billion<br />Turnover in 2010<br />€ 364 billion<br />Guaranteed receivables<br />€ 50 billion<br />Financed receivables<br />67 countries<br />Direct presence<br />135,000<br />Clients worldwide<br />6,600<br />Employees<br />
  25. 25. Coface Group | Shareholders<br />BPCE– France<br />Banques-Populaires e Caisses D’Epargne fusion<br />2º largest financial group in France<br />Ratings : Fitch: A+ | Moody’s: Aa3<br />71,5%<br />Natixis – France<br />Focused in CIB (Corporate and Investment Banking)<br />Strong financial basis: 9.1% tier one ratio pro forma<br />Ratings: Fitch: A+ | Moody’s: Aa3<br />100%<br />Coface Holding - France<br />Global player in Trade Receivables Management<br />Global presence thanks to Credit Alliance Network<br />Ratings: Fitch: AA- | Moody’s: A2<br />
  26. 26. Coface Group | Worldwide Presence<br />Poland<br />Bulgaria<br />Luxembourg<br />Germany<br />Czech. Rep.<br />Croatia<br />Norway<br />Austria<br />Romania<br />Estonia<br />Netherlands<br />Belgium<br />Russia<br />Finland<br />Portugal<br />Denmark<br />Serbia<br />Hungary<br />Spain<br />U.K<br />Slovakia<br />Kazakhstan<br />France<br />Sweden<br />Slovenia<br />Latvia<br />Ireland<br />Switzerland<br />Canada<br />Turkey<br />Lithuania<br />Italy<br />Korea<br />Ukraine<br />Greece<br />Saudi Arabia <br />Japan<br />Liechtenstein<br />Brunei<br />Bahrain<br />China<br />U.S.A<br />Djibouti<br />Iran<br />Cyprus<br />Hong Kong<br />U.A.E<br />Israel<br />Malta<br />Taiwan<br />Libya<br />Jordan <br />South Africa<br />Bangladesh<br />Kuwait<br />Oman<br />Mexico<br />India<br />Algeria<br />Lebanon<br />Qatar<br />Malaya<br />Benin<br />Syria<br />Pakistan<br />Burkina Faso<br />Yemen<br />Argentina<br />Philippines<br />Cameroon<br />Brazil<br />Singapore<br />Ivory Coast<br />Chile<br />Thailand<br />Egypt<br />Colombia<br />Vietnam<br />Mali<br />Indonesia<br />Costa Rica<br />Morocco<br />Australia<br />Ecuador<br />Mauritanian<br />Panama<br />Senegal<br />Paraguay<br /> Sudan<br />Direct Presence<br />New Zealand<br />Peru<br /> Chad<br />Uruguay<br />Togo<br />CreditAlliance Partners<br />Venezuela<br />Tunisia<br />A broad network thanks to the CreditAlliance Partners<br />
  27. 27. Coface Brasil | Key Figures<br />R$ 92 million<br />Turnover in 2010<br />R$ 20 billion<br />Guaranteed receivables<br />€ 20 million<br />Authority for LATAM<br />54%<br />Market share<br />190<br />Clients<br />80<br />Employees<br />
  28. 28. Coface Brasil | Market Share<br />Including domestic and export markets, as Dec-2010<br />Market Share (%)<br />Turnover* – in BRL million<br />*Considers only short-term credit insurance<br />
  29. 29. Thank you and success!<br />Kiyoshi WatariSenior Sales Manager<br />Global and Structured Deals<br />Contact<br />Praça João Duran Alonso, 34<br />12th Floor – Brooklin Novo<br />São Paulo - SP<br />Phone: +55 11 5509-8526<br />Mobile: +55 11 8609-2233<br />Email: kiyoshi_watari@coface.com<br />www.coface.com.br<br />

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