Risk of buyer defaults in the market

Policy Benefit:

Buyer and risk insights, business growth

Metal Care Center encountered a significant obstacle in the form of risk of buyer defaults in their market. These uncertainties posed a substantial and potentially devastating threat to the company's financial stability.

While the company aimed to offer open terms to its customers the prevalent risks made achieving this goal a complex task. Metal Care Center needed a robust and effective solution to mitigate these risks while ensuring sustained business growth.

Metal Care Center found the answer through its strategic partnership with Allianz Trade in Middle East. This partnerhsip provided the company with a valuable tool – Trade Credit Insurance. With this insurance in place, Metal Care Center could extend open credit terms while safeguarding its receivables.

This marked a pivotal moment in the company's operations, providing the confidence to expand its market presence.

  • Enhanced Risk Management: Trade Credit Insurance provided Metal Care Center with the ability to receive prompt feedback about potential defaulters in the market. This allowed them to proactively assess the creditworthiness and background of specific buyers. This crucial information empowered the company to make more informed decisions about which customers to extend credit to, reducing the risk of bad debt and enhancing overall risk management.
  • Improved Financial Planning: Having access to information about the creditworthiness of buyers and the assurance of receivables being insured in case of defaults enabled Metal Care Center to plan its finances more effectively.
  • Letter of Credit (LC) Expansion: By assigning the insurance policy to its banks, Metal Care Center was able to expand its Letter of Credit (LC) lines. This strategic move not only provided a financial safety net but also allowed for more frequent and effective utilization of LCs.
  • Business Growth: The combination of all these advantages resulted in revenue growth for Metal Care Center. Since the adoption of a TCI policy in 2012, up until 2014 Metal Care Center has been able to grow the business by 20%.