‘Who should I cover?’ is a question we often get asked by CFOs looking to mitigate their trade risks. The answer is straightforward: all of them, or at least those that can potentially expose your business to a loss that could threaten your financial stability.
What are the benefits of insuring your entire portfolio?
A portfolio approach is the most cost effective and far-reaching way of minimising trading risks. At Atradius, in common with most of the leading trade credit insurance providers, we often cover all of our customers’ credit transactions.
By spreading risk, we can work with you to keep policy premiums to a minimum. You will also be protected against unexpected sudden defaults. If uninsured, these ‘black swan’ events can often be the hardest to bounce back from.
Of course, minimising risk is only one part of the value that credit insurance delivers. When you cover your portfolio of customers, you will additionally gain independent insights into their creditworthiness and risks associated with the markets in which they operate. The more customers you cover, the wider the insights you will gain.
What should you consider when choosing which customers to insure?
Atradius can help you make sure your insured portfolio has the right mix. In addition, we have put together a number of points for you to consider when putting your portfolio together.
- Do you have a large exposure to any individual customers?
- Do you have customers who place very large orders?
- How much time and resources you need to spend checking new customers in new markets?
- Do you have customers in countries with a weak local currency?
- Do you have any ‘blue-chip’ customers that you are 100% sure can always pay?
A balanced credit insurance portfolio will help you address any areas of potential risk, while remaining cost-effective and minimising the time and effort spent on ongoing credit checks.
