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
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
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Credit Limits Management
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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: firstname.lastname@example.org www.coface.com.br