Missed Buyer Failures 2017

We are talking to Doug Collins, Regional Risk Director for Atradius, and discuss Missed Buyer Failures for 2017.

Baltimore, January 2018

 

One of the benefits of protecting Accounts Receivable with Credit Insurance is the possibility to be paid up to 90% of the invoice value in the event of slow or non-payment. 
While obviously a helpful feature, there is still a certain amount of work and time that has to be invested in these events, which a business could direct elsewhere.

Wouldn't it be better avoid these losses all together?

 

 

 

 

Past dues

 

 

 

 

Risk Underwriters monitor the good standing of thousands of companies and can help customers steer away from high risk shipments when they observe deteriorating trends.
This is what Atradius was able to accomplish in 2017, especially considering the big names that suddenly filed for Chapter 11, leaving thousands of creditors wondering if and when they would be able to see their invoices paid.

 

We discuss this topic with Doug Collins, Regional Risk Director for Atradius, Americas.

 

What is a Missed Buyer Failure?

"A Missed Buyer Failure is a potential loss our customers could avoid by our warning that one of their buyers could become insolvent."

What companies fall under this definition?

"2017 has witnessed a large number of companies filing for Chapter 11 bankruptcy across numerous industry sectors including retail, metals, chemicals, electronics and telecommunications.

When we see certain ‘red flags’ that suggest a company is vulnerable to bankruptcy, we put these large companies under the close monitoring of our Special Risk Management Team

Doug Collins Doug Collins
Atradius


Some examples are HH Gregg, Rue 21, M&G Polymers, Ciber Inc, and General Wireless."

What is the total amount of losses you steered your customers away from?

"During 2017, we alerted our clients to $166M of potential losses, and this only considers the 23 buyers on our Missed Buyer Failure list; we also monitor and review thousands of companies to establish they are creditworthy counterparties for our customers."

How does this translate in practice?

"When we see certain ‘red flags’ that suggest a company is vulnerable to bankruptcy, we put these large companies under the close monitoring of our Special Risk Management Team (SRM).

Video conference with buyer

 

 

 

 

 

 

The SRM Underwriters are typically in close contact with the companies they manage; they perform in-depth liquidity and operational analyses and also facilitate insurance coverage where feasible for our customers.

Where the SRM Team sees a deteriorating trend or signs of imminent loss, they will caution our clients about future shipments and adjust coverage accordingly to avoid potential losses from a non-payment.
In some cases, we can work with the company and reinstate coverage should the situation stabilize or improve and we are comfortable the company in question should remain solvent."

 

What else would you recommend a company to do in order to avoid this type of losses?

"All businesses should be careful when selling on credit terms, especially when it comes to big size invoices that, if unpaid, could impair their own cash flow and liquidity.

Aside from monitoring payment experience, it is a good idea to seek visibility into a company’s financial position to evaluate their ability to pay, especially where receivables balances are large, and keep the communications open at all times.

We realize this might be hard to do especially for smaller businesses or for companies with a high number of open account customers, or when dealing with foreign buyers. 

For all these reasons, working with skilled insurers in trade credit management like Atradius might prove to be the best decision for any company looking to trade and grow safely."
 

 

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Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation, advice or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.