Economic uncertainty and countries “at risk” fuel nightmares for many in international trade

By Mark Attley

Over the last several weeks, Export Development Canada (EDC), Canada’s export credit agency has been presenting its Spring 2010 economic update to audiences across Canada.

Peter Hall, EDC’s Chief Economist, presents a complex topic in easy to understand terms – although I will let you be the judge of that, should you care to read the 132-page report. The report provides a Canadian perspective, along with insightful commentary and data on the global economy. While Peter is cautiously optimistic, he refers to five key risks, any one of which could derail the emerging global recovery.Spring 2010 ICBA Advantage newsletter

From a credit manager’s perspective business-as-usual must continue, but arguably more pressure is on its way to increase / relax credit as the perception of a flawless recovery takes hold. Credit managers know all about managing risks, which is fine if risks are predictable, but in the current environment the only predictable thing is the non-existence of predictability! Right now, it’s not just commercial default risk that needs to be considered, whole country default risk is a concern.

On top of this, publicly traded companies are undergoing increased scrutiny as rules about the management and evaluation of credit risk as laid out in the International Financial Reporting Standards (IFRS) are being adopted across the globe. John Middleton of ICBA Canada addresses this issue in ICBA’s spring newsletter (download the newsletter here).

The question that keeps trade credit insurance managers up at night these days is: How equipped is anyone to properly assess and manage in this environment? Risk transfer, i.e. insurance, has to be part of the credit risk management process. ICBA members around the globe are uniquely equipped to work with companies to help navigate these uncertain times. No one entity needs to fight the nightmares alone.

(Mark Attley is an ICBA Canada broker and co-founder and President of Millennium CreditRisk Management Limited – a credit and political risk insurance specialist – www.mcm.ca. ICBA is the world’s largest team of independently-owned, specialist trade credit insurance brokerages. Partners combine local service with global coordination to provide trade credit and political risk insurance solutions for multinational companies.)