Tom Danson, Managing Director of Trade Credit & Surety at PIB Insurance Brokers, discusses how the uncertain economic outlook may lead to increasing insolvencies, making the management of your credit risk increasingly important.
Recent economic updates from the world’s leading international credit insurers, Allianz Trade and Atradius, predict that global business insolvencies are to rise by 19% in 2023 as government support provided by major markets during the pandemic expires and inflationary pressures jeopardise corporate cash flows.
Weaker economic outlooks due to high inflation and an increase in energy prices have led to monetary tightening with 2.9% growth expected for the global economy in 2022, followed by a predicted 1.7% in 2023. With many governments implementing strong fiscal policies over the past couple of years, it is still unsure whether these measures will have enough of an impact to reduce the rise in insolvencies.
Beyond 2023, insolvencies should remain constant as insolvency levels will have largely returned to normal, and so called “zombie firms” that cannot survive without support, will have already gone bankrupt. In the coming years, firms will have to adjust to an environment without significant government support. For firms that have taken on a lot of debt during the pandemic, this could be a challenge.
PIB’s Trade Credit & Surety division is helping businesses navigate this period of uncertainty and market volatility by protecting its credit risk. Credit Insurance enables business growth, identifying those customers who can pay and avoiding those who can’t whilst protecting their trade receivables against the unknown. Managing credit risk is increasingly more challenging for businesses as pressures build for this to be offered so they can remain competitive, however PIB’s non-payment solutions encourages growth whilst making sure businesses get paid.
If you would like to understand more about how PIB can help manage your credit risk, then please get in touch with Tom.