Supply chain finance entails risks across the transaction cycle: risks around transaction, credit, currency, interest rate changes, fraud, and operations can cause deep problems for all parties involved. The Buyer’s credit risk is central to the transactions, so sellers and financiers alike are looking to mitigate that via shorter payment periods, better analysis, and, notably, credit insurance.
Before agreeing to assume the credit risk of a particular Buyer for SCF usage, insurance companies examine the Buyer’s financial profile, trade history with its suppliers, and risk concentration across the largest suppliers.
While SCF and factoring platforms can extend funding on more agile terms than SCF programmes run by corporate banks, insurers take a measured approach on insurance limits for funding deployed through such counterparties. SCF platforms should thus ensure that both financiers and the insurers have sufficient visibility into the underlying risk, whether it’s on the transaction or entity level. Real-time financial and compliance monitoring can provide valuable insights into the financial well-being of the supply chain and identifying potential issues before they turn into significant problems.
Find out more about which risks emerge in Buyer-Supplier-Banks relationships — and how credit insurance companies tend to mitigate them — by watching the session “Risk management in SCF?” at the Tallinn SCF Summit 2023. https://lnkd.in/eHE9RZGC
Panelists:
- Federico Avellán Borgmeyer, Chief Partner Officer at the efcom gmbh (factoring software company);
- Magnus Lindgren, Director Credit Specialties Nordics at the Marsh;
- Karel Krejčí, MBAčí, Principal Director, Working Capital and Trade Finance at the Accenture;
- Gabriele Sabato, CEO and Co-founder at the Wiserfunding;
- Senem Dedeoglu, Vice President - Senior Relationship Manager at the Bank ABC;
- Ben Grant, Head of Alliances and Partnerships at Aronova.