Risk underwriting teams: how they assess your risks

Risk analysis and underwriting is becoming ever more important as businesses try to navigate an increasingly volatile market. Not only do these teams act as trusted advisers during key decisions, but in a way they also act as your external credit management department, allowing you to save from investing in additional risk management experts or purchasing information on potential clients.

We spoke to Jason Robinson, Head of Special Risks Unit, Allianz Trade in the UK and Ireland, and Federico Monti, Senior Risk Underwriter and Export Import Manager for Allianz Trade in Italy, to get an insight into the role of the risk analysis and underwriting teams and the benefits they bring to businesses of all sizes.

The primary risks that the underwriting teams are required to evaluate are the risks of non-payment or insolvency. But there is an enormous range of risks that can affect companies and their ability to meet payment obligations. 

The risks can range from macroeconomic trends such as regulatory changes, market risks or political challenges, to microeconomic risks like operational, liquidity or credit risks. But other factors also constitute a threat to the financial stability of a company such as strategic or reputational risks, as well as extraordinary risks, linked to natural phenomena, which can be frequent in some regions of the world.

According to Jason, analysis of a company may involve financial ratio analysis, discussions with the company management team to assess its strategy, ownership and management, and an assessment of the resilience of the business. Concretely, the idea is to identify what may threaten the assets and viability of a company, predict future events that present risks, and calculate the financial impact these risks could have.

“My team is primarily dealing with complex groups and a number of distressed scenarios, which require bespoke credit risk solutions,” says Jason. “What we bring to the customer is better-informed decisions and a trusted partner they can discuss with.”

For Federico, whose role is dedicated to exports, it is important to understand the political situations in countries across the globe. He says: “It is my responsibility to understand what is going on in countries in the world. It requires continual effort to try to anticipate future scenarios and what challenges these might present for our customers.”

Much of this ability comes down to depth of experience. As Jason explains: “A risk analyst who has been reviewing information, speaking to  customers’ clients and doing complex credit analyses for a number of years, starts to build up an intuition of where something might not be quite right. But it’s still very much built on the basis of data, research and investigation, speaking to clients and doing detailed financial analysis.”

While the credit risk analysts play a crucial role in collecting such information, it is then down to the risk underwriters to interpret the data, analyse the exposure to risk and determine credit limits.

To do so, risk underwriters quantify the risks of financial operations and analyse the solvency of our customers’ clients based on the examination of financial statements and solvency ratings. They also use internally-built sectorial and regional reports to identify trends that may impact customers. They complete the analysis with an examination of the viability of the projects customers plan to undertake in the short, medium and long term.

Jason compares the process to creating a mosaic: “Each piece of information you get is a tile on the mosaic and, eventually, you build a bigger picture. Once you’ve got enough information, you can then make a really informed decision, which ultimately leads our customers to having more confidence in the trade decisions they take.”

Anticipating future scenarios and the subsequent challenges these might present for businesses is a highly skilled job that requires the ability to analyse large amounts of data.  

As Jason observes: “The network of information and the scale of data that we gather through our risk analysis at Allianz Trade is second to none. And it’s one of the key advantages for our customers.” Indeed, Allianz Trade’s proprietary intelligence network analyses daily changes in corporate solvency representing 92% of global GDP.

Federico adds: “With our high-quality economic research department, the capabilities we have for analyses of the macroeconomic environment has proved to be particularly outstanding.”

In many cases, the information disclosed to Jason and Federico is private and confidential and can only be gained as a result of the trusted relationships they have built with the customers and their clients. “This is essential and helps us make the decisions that others wouldn’t be able to make,” Jason adds.

These relationships are a crucial part of this work. “The relationships are absolutely paramount to Allianz Trade as a business and how we build up that relationship with our customers,” Jason says. “The more we know about the customer, the better we can tailor their credit limits, thus optimising the business relationships of our customers and their clients.”

The regional structure of our organisation also helps us to stay close to customers locally, allowing our risk underwriters to engage with a customer’s clients in their own language and in their own territory.

The Covid-19 pandemic has created a lot of new uncertainties in business environments, heightening the sense of risk for businesses and placing the role of the risk underwriter in the spotlight.

Jason acknowledges that customers have really appreciated the level of certainty that this service can provide in the midst of an international crisis. However, this also presents a challenge for our risk underwriters.

“We’ve probably contacted more companies than we have ever done before,” says Jason. “The world has been changing so fast that information is becoming out of date very quickly.”

Federico welcomes the challenge of the new business environment: “It gives us the opportunity to prove the importance of our services to our clients and the added value we provide in assessing the risks for them — and allows us to help them survive and thrive in this difficult context.”