The Ultimate Solution To Counterparty Credit Risk

Timothy Woods
Timothy Woods
05.05.2015

Maximising and protecting your profits is arguably more difficult than ever before.

Chief among the risks that you must manage is counterparty credit risk.

Yes, there are methods your company can employ to cover risk with counterparties, such as the use of a letter of credit. But these methods are expensive and they aren’t practical for universal use with suppliers and your own customers.

Navigating your company through a business landscape burdened with increasing challenges calls for a robust credit risk management process.

Has your business been victim to a payment default in the past? If so, you will be fully aware of the impact it can have on your bottom line.

Wouldn’t you want the peace of mind of knowing that you only do business with reliable partners?

That any and all counterparties are thoroughly screened and continually assessed for any signs of credit danger?

Where your business could be at risk

The economy at local, national and global level faces more challenges than ever before in the post-WWII era.

Such risk means that your clients and suppliers have to manage their operations more effectively, in a more tentative business environment.

If they take a sizeable enough financial hit, it could be your business next to feel the pinch through lower business levels or an inability to pay you.

Some important causes of credit risk include the following:

  1. Exchange rate volatility

Losses in the FX market can be instant and catastrophic

  1. Lack of financing

Mainly due to the sharp decrease in lending to the corporate sector from banks and traditional lending institutions since the Global Financial Crisis. The associated credit risk has since been forced upon the corporate sector

  1. Political and macroeconomic issues

Matters such as government stability, monetary stimulus and geopolitical conflict

  1. Global economic instability

Slow global growth, a precarious banking sector and downturns in trade levels to name a few developments that can increase risk to your company

  1. Compliance with demanding regulation requirements

Since the Great Recession so much regulation has been passed into law, requiring significant expenditure in terms of capital and resources on the part of companies to comply with, which can in turn stifle their ability to focus on their business

Effectively managing your credit risk

Your clients and suppliers all have their own unique set of credit risks.

The nature of the post-2008 rejigged financial system as well as the increasingly globalised business environment means that to optimise your risk protection your business needs an effective system in place.

The potential cash flow impact and monetary cost of failing to have a proactive credit risk management system cannot be ignored by CFOs.

SwissMetrics offers such a comprehensive risk management system in a user-friendly online platform.

Through your SwissMetrics account, you will be able to:

  • Monitor your counterparties’ financial performance with ease, updated daily
  • Process budget and forecast financials
  • Get insights on potential future financial results for companies based on the current and projected business environment*
  • Access credit reports based on historical results
  • Receive all important updates and news on each company, updated in real-time
  • Access robust aggregate risk management data and information on your counterparties

Interested in what we can do for your company?

Click here for more information on SwissMetrics, your corporate credit risk expert.

*If there are negative business environment indicators (chiefly from the types of aforementioned risk exposure), depending on their magnitude, future business results are more likely to be negative compared to historical financial results. SwissMetrics analyses and shows you this information, aiming to provide further indicators for future performance of companies.

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