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Credit Risk Management

Credit Risk Management

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    Credit Risk Management Credit Risk Management Presentation Transcript

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