Phillip Krinker

Learn how to avoid customer default

14th May 2018 Phillip Krinker 0 Comments

The recent political and economic crisis scenario brought with it many of the challenging situations and difficulties that companies are now experiencing. One of the major difficulties, which has given many businessmen sleepless nights, is the increased level of default.  

A Serasa study shows that defaulting companies in Brazil hit a record number in May 2017. About 5.1 million taxpayer ID numbers were listed as invalid, most of them have been listed since March 2015, when the survey started to be conducted. In comparison to May 2016, there was a 15.9% increase.  Company debts reached an amount of R$ 119.2 billion. On average, there are 11 delinquent debts per taxpayer ID number, totaling an average amount of R$23 thousand.

Serasa also points out that the first half of December 2017 revealed that 20% of the companies pose a high credit risk in commercial operations with their counterparts.  That is, one in every five Brazilian companies is in this risk category, due to an excessive number of delinquent listings on account of bad checks, defaults with banks and suppliers, as well as protests, judicial recoveries or adjudicated bankruptcies.   

How to prevent default?

Given this situation, companies, on the whole, require to strengthen their internal credit approval systems and controls, and to seek protection tools like, for instance, Credit Insurance, which provides a safety net for assets receivable.

Increased default aggravated by a growing number of judicial recoveries and bankruptcies, contributes to the heightened interest of the companies in Credit Insurance: The current scenario demands planning and assertivity from managers, and requires them to perform their business roles with utmost efficiency.    

The change in posture is confirmed by an increase in Domestic Credit Insurance purchases, which have grown approximately 55% in three years.  The segment has grown and has become more solid and known, driven by the effects of the crisis.  

Lack of knowledge in the Brazilian Market     

Credit Insurance is frequently divulged worldwide, especially in Europe and in the United States, in Brazil it is still little used, but it is growing.  There is lack of information about its existence, and concurrently Brazilian companies lack this culture. This type of insurance is new in Brazil.  It arrived here in 1998, initially it was used to cover exports made by multinational companies that felt the need to protect themselves against possible defaults.       

In 2003, all the major worldwide insurers established operations in Brazil, and the placements of Domestic Credit insurance started at that time.   

Credit Insurance is a powerful tool that prevents serious problems, and it can be tailored to any type of company, by combining information and the necessary covers, thus ensuring the survival of your business in the event of possible aggravation of the crisis and collapse of the economic market.      

In view of the above scenario, CredRisk Seguros is prepared to offer innovative solutions that best meet the needs of your company, and to assist you in evaluating the best option to minimize the credit risk. Request a quotation!