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Alix McCabe: How often have you heard one of these old chestnuts in a boardroom, or back office?


Speaker 1: I don't need insurance. I trust my business partners.


Speaker 2: My company's too big to fail.


Speaker 3: My customers would never stick me on payments.


Alix McCabe: Those are just some of the excuses that business owners tend to bust out when asked why they don't have trade credit insurance, but they may be overlooking one important detail.


Christina Montes de Oca: Trade credit insurance can be an incredibly powerful tool, not just for protecting your business from risk, but for dramatically growing your business.


Alix McCabe: And that is a worthwhile topic to explore on.

Hi, and welcome to Wheel of Risk, proudly presented by Allianz Trade. I'm your host, Alix McCabe. On every episode, we spin the wheel, land on a new worry, and then tackle it head-on by bringing you expert insights and advice to help you keep your business solvent, secure, and well ahead of the competition. Today I'm thrilled to welcome a longtime colleague and friend to the podcast, Christina Montes de Oca is Chief Commercial Officer for Allianz Trade Americas. She's been with us for almost 20 years, which is incredible because Christina, that must mean you started when you were what, 11?


Christina Montes de Oca: Yeah. Thanks for making me feel old.


Alix McCabe: Welcome to the podcast. We're really glad to have you. So first things first. Okay. Why don't you take a deep breath and give our old wheel a spin?


Christina Montes de Oca: Here we go. I got it.


Alix McCabe: That's what we do.


Christina Montes de Oca: All right, here we go. Let's spin that wheel.


Alix McCabe: Nice. It looks like this is going to be a bit of a myth-busting episode.


Christina Montes de Oca: Woo.


Alix McCabe: You've landed on the cost of growth.


Christina Montes de Oca: Busting. Makes me feel good.


Alix McCabe: Nice. Well, grab your calculator because there'll be some math. Let's get to it.

It's a dilemma that merchants have been dealing with since before the birth of the barter system. Hit sales targets now, or work to improve sales for the future, and companies today aren't all that different from their counterparts back in the ancient age of business. If anything, the pressure to deliver results is even greater and with that increased pressure comes increased risk. Christina, we know that times are tight right now and asking business owners to add another line item to their budgets can be a tough sell. What are some of the common misconceptions that you hear about trade credit insurance?


Christina Montes de Oca: Let's start with the fact that we are not a factor or factoring company. A lot of times we get confused with factors who exist to lend money. Allianz Trade doesn't give out money. We actually partner with factors and a lot of our customers’ factors every day to enable them to make good credit decisions.

So that's one of the biggest misconceptions is that we lend money. If we get into more of our product specifics, many businesses say they don't need trade credit insurance because all of their clients are good. Nobody would ever go bad. I've been doing business with five generations. My grandfather and my great grandfather and my great- great- grandfather, we've known each other forever and nobody will in those relationships let us down. And so those longstanding relationships, sometimes cloud judgment and so we hear, "I don't need your product." And so those are probably the most common misconceptions.


Alix McCabe: So credit insurance doesn't lend money. We're not a factor, and my clients are as good as gold, so I don't need it, right?


Christina Montes de Oca: Pretty much. Yeah.


Alix McCabe: Okay. Is it safe to say in your opinion that there's a general lack of awareness about the benefits of trade credit insurance?


Christina Montes de Oca: I think so. I think most of our efforts in the market is around education that the product is even available. So a lot of times when you first make an introduction into a business, they think you're there to compete with their bank or lend them money. They don't understand the full value proposition, what we bring. And so I think that general lack of awareness just leads to what are you here for? Are you selling me information? Are you lending me money? They just don't get it.


Alix McCabe: So we're going to get into this a little bit more later on, but how does the cost, specifically the cost of credit insurance generally factor into that initial conversation?


Christina Montes de Oca: You have to look at the cost in different ways. So if we go back to the misconception that all my clients are good and nobody would stiff me, right? And you try to evaluate our program on, what is my cost to transfer my risk to you, it becomes hard to justify the cost of the program because you start with, "I don't have any risk, so I don't need to transfer any risk to you. So, therefore what am I paying for, right?" We need to look at trade credit insurance in the lens of how is this going to enable my business to grow.

And we do that by allowing you to make better decisions, allowing you to make more informed decisions based on information that we may be able to provide and gather for you. So to summarize, what I'm saying is if you just look at it as pure risk transfer, you think all your clients are good. You don't need me to lend you money that I'm not lending anyway. Then you're like, "What do I need this product for?" But when we start to dig into the value proposition and the enablements and then we really get into cost justifying why we exist.


Alix McCabe: Okay, that makes sense. And I want to pick up on something that you just mentioned, which was that focus on the growth angle as one of the benefits or one of the elements of the value proposition. So how exactly does credit insurance allow a business to grow?


Christina Montes de Oca: So credit insurance allows you to pick up clients that you might not be comfortable with, or sell more to customers, that you're not comfortable selling at that level too. So you're able to expand your business, you can expand to global markets worldwide. We've become a very globally connected economy, and so being able to sell outside of your local network is critical to being successful today. And then when you've previously said no, maybe understanding why you said no and using partners like Allianz Trade to help you say yes and take on more business and take on more growth.


Alix McCabe: Okay, great. So selling more to your existing customers, expanding to new markets and maybe being able to offer and extend more credit than you previously were comfortable with.


Christina Montes de Oca: Correct.


Alix McCabe: So let's say you're a US- based company that's looking to expand to foreign markets. What are the potential blind spots?


Christina Montes de Oca: So overall, I think the initial issue that the businesses have when expanding globally is how do I vet credit worldwide, right? So in your own country, in your own state, in your municipalities, you understand what your local laws, regulations, how you vet credit, who you go to, to vet credit, maybe what associations you belong to that share information. There's associations for that. But how do you do that, say in China, or how do you do that in Germany, right? You don't have that network there.

Well, Allianz Trade has a global network of 70,000 customers, 5, 500 plus employees across 160 countries. So we have that visibility worldwide and we have one centralized database of information that we're all able to tap into.

So if you're a business looking to expand globally, which is almost essential, right, in today's world of this interconnected business world that we live in, you basically have access to a worldwide credit department that you would otherwise have to figure out how to build on your own, right? How do you go hire credit people in another country? So it simplifies and allows you to outsource that credit function to somebody that's built that network over a long period of time.


Alix McCabe: So I warned you earlier that there would be some math involved here. I'm sorry about that, but let's get into the numbers. So say you're a company with $ 25 million in sales, okay, first, how much would a policy to cover that revenue cost?


Christina Montes de Oca: So we generally give broad guidance at a credit insurance policy costs about a quarter of 1% of your sales revenue, of your insured sales revenue, okay? So if we start with about that on 25 million, that's give or take 50,000, there's other factors that may make that a little cheaper. And there are other factors that may make that more expensive, depending on risk profile, concentration industry, what's happening in the economy. But that's our general guideline to start with about a quarter of 1% of your sales revenue.


Alix McCabe: Okay. So now secondly, and maybe even more importantly, how much could you conceivably grow that revenue?


Christina Montes de Oca: So that comes down to looking at the factors in your business. So if you look at your profit margin, let's just use easy round numbers so we can all follow the math, right?


Alix McCabe: I need that.


Christina Montes de Oca: Let's say you use 10%. So let's say your margin's 10%, which is probably a little high, but the math is easy. You turn your accounts receivable eight times per year because you've got 45- day terms of sale. If you just add three new customers that you would normally turn away, that would pay for the program and you don't even have to go out and find new customers. So you could probably just already look within your book where you're restricting credit. Partner with us to look at why you're restricting it. Are you making the right decision? Are you being too conservative? Can we help you loosen up a little bit? If so, you can expand your sale to somebody you at least already have some relationship and partnership with, which is probably a little bit more comfortable to do before just going out and sourcing new customers.


Alix McCabe: Okay.


Christina Montes de Oca: But I will say this, I'm sure if you ask your sales department, they can go find new customers, they could probably bring in a list of all the customers that credit already turned down on their behalf that they were told they couldn't give credit to, right? So I know sales side like to say that the credit side is the sales prevention team. So I think if you put those two sides together, it'd be pretty easy to find some sales growth opportunities that would immediately pay for the policy.


Alix McCabe: So, let's flip that scenario, okay? Say you're a business that doesn't have credit insurance, how could that force you to pass on potential opportunities that come your way? You were kind of talking about this just now.


Christina Montes de Oca: Yeah. So when you have no visibility into the customer or the financials, you may pass on the relationship altogether, right? And so when you partner with us, you have access to that information. You have access to our risk colleagues to talk about the financial condition of a company. It doesn't mean that because we say yes, you have to still sell to that customer.

At the end of the day, we empower you and we enable you with the information we have to still make those decisions. But look, if our advice was wrong, in the end, if we told you to go and sell, we back it up with the insurance product. So first we like to say our value is our information, our partnership with our risk colleagues, and at the end of the day, the insurance product is there, if we all got it wrong,


Alix McCabe: So we talked a little bit about the cost. And broadly speaking, if we're saying a quarter of 1% of sales, not super prohibitive, right? So why is there still in your view this disconnect between the price of credit insurance and the payoff?


Christina Montes de Oca: Yeah. For some reason, credit insurance isn't a mainstream product in America. So in a lot of other markets, it's part of the business insurance package annual process. You talk about your liability insurance, you talk about your D& O insurance, your officers, et cetera, and you talk about trade credit insurance. For whatever reason, our market has evolved where it isn't part of the annual business review. We've evolved a distribution network where there is specialists in our product, which is different than the generalist that sell everything else.

And so there's this constant effort to marry the two together to evangelize the trade credit insurance product. It's also a little bit different because it isn't just an insurance product that you buy and then you wait until there's an accident, you take it off the shelf and use it, right? It's a daily living breathing product. I mean, you can be asking for new customer approvals, asking for information on a daily basis and making credit decisions. So there's definitely an education and onboarding process to fully utilize the benefits of the product. And so I think there's just a misconception there. So it takes a lot of extra effort and work to really understand it.


Alix McCabe: Okay. So you mentioned a little bit about credit insurance being more mainstream in foreign markets, in other markets outside of the US and maybe even North America. Do you have a hypothesis on why that is? Why are the attitudes towards credit insurance different here in the US?


Christina Montes de Oca: Yeah. I think it comes down to culture. I think Americans tend to be a little bit of a bigger risk-taker. If we look at our average credit limit size for small businesses. I mean, this is just data and facts, they're bigger than the average credit limit size is for small businesses in other countries. And so we know that our small businesses here are willing to trade at higher levels without any protection. Again, is it a willingness, or is it an unknown of the product, right? So that's what we're here to do. We're here to expand the market and we're here to grow the market because we believe it's an extremely valuable tool that not enough of the market understands and not enough of the market utilizes.


Alix McCabe: So how do you think we address that sort of disconnect? How do we win the hearts and minds of business leaders in the US?


Christina Montes de Oca: So it really comes down to greater education, pounding the pavement, working with partners in the market like bankers, brokers to raise awareness. We work with local associations in our local business markets, in our local business communities.

So we have a pretty broad distribution network. It's a big market, big country and geographically dispersed. So we've invested heavily in making sure we have enough people spread out, participating in all of the markets on this proactive outreach that's really necessary in this market to help everybody kind of understand the value that we bring and provide.


Alix McCabe: So education is key. Those are good insights. Uh- oh, so I'm afraid that music means it's almost time to wrap things up. We do have some delightful wheel of wrist swag waiting for you backstage, Christina. But before we say so long, I'd love for you to sum up your thoughts on today's topic. So just think of it sort of as like a lightning round.


Christina Montes de Oca: Wow. Alix, no pressure there.


Alix McCabe: Sorry. What is the number one thing you want our listeners to remember about our conversation?


Christina Montes de Oca: Let me see if I can answer this precisely. I think the number one thing I'd like us to take away is we're here to help businesses make more informed business decisions that'll ultimately enable you to grow. So if we evaluate and view trade credit insurance as an enablement tool, we enable you to grow, we enable you to expand, we enable you to tap into the global network. I think that's the most critical value proposition that we bring to the table.


Alix McCabe: Those are solid points. Thank you so much for being part of Wheel of Risk, Christina. We have loved having you here in our studios.


Christina Montes de Oca: It was a pleasure being here. Thank you for having me as well. I enjoyed participating today.


Alix McCabe: So my guest today has been Christina Montes de Oca, Chief Commercial Officer at Allianz Trade Americas. I'm Alix McCabe, and this is Wheel of Risk, brought to you by Allianz Trade. Thank you so much for listening, and if you learn something, which we hope you did, we'd appreciate if you could leave us a positive review. Also, I'd love to connect with you on social media. You can find me, as well as Christina on LinkedIn. So hit us up. Talk to you soon.