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Credit Management Think Tank

The Future of Credit Management Credit Insurance at a crossroad “Code of Conduct ” 16 February 2011. Facilitated by :. Credit Management Think Tank. 2015. 2. The Future of Credit Management “Code of Conduct ” Welcome ! . Jean-Louis Coppers CEO CRiON. Facilitated by :. 3.

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Credit Management Think Tank

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  1. The Future of Credit Management Credit Insurance at a crossroad“Code of Conduct” 16 February 2011 Facilitatedby: Credit Management Think Tank 2015

  2. 2 The Future of Credit Management“Code of Conduct”Welcome ! Jean-LouisCoppersCEO CRiON Facilitatedby:

  3. 3 Who is CRiON ? • Specialised credit insurance broker • Marketleader in Belgium (30% of the market) • Premium: € 30 million • Insuredshipments: € 20 billion • Q*For - Quality Label • Member of Aon Group500 offices in 120 Countries59.000 employees • Credit management audit & consultancy • Credit management software CRiONhelpsyou to masteryour credit risks

  4. 4 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • 11u05 -11u30“Credit insuranceafter the OctoberRevolution of 2008”- Elsje Verdoodt, Group Credit Manager, Umicore- Frederic Wittemans, Senior Director EU credit, Ingram Micro- Peter Van Den Broecke, CFO, Daikin

  5. 5 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • 11u30 Results of the “Credit Management Thinktank 2015 – 2020” “The Code of Conduct”- Rudy Aernoudt, Prof. EuropeanEconomics- Paul Becue, author “Credit Insurance, The Invisible Bank” - Jean-Louis Coppers, CEO, CRiON • 12u15 Questions & answers • 12u30 Small Lunch

  6. 6 Umicore Experience with credit insurance during the economic crisis 2008-2010 Elsje Verdoodt, Group Credit Manager, February 16th 2011

  7. Introduction to Umicore • We are a global materials technology company with activities centered around 4 business areas : Catalysis, Energy Materials, Performance Materials and Recycling • Our mission is to make “materials for a better life” • The majority of our growth comes from clean technologies: • technologies that are specifically designed to optimize the use of natural resources and to reduce environmental impact • We are listed on NYSE / Euronext Brussels with a market capitalization of some €4.5 billion

  8. Global presence: 14,400 people in 80 industrial sites Europe • 7,342 people North America • 38 industrial sites • 744 people • 12 industrial sites Asia/Pacific South America • 3,025 people • 1,097 people • 22 industrial sites • 5 industrial sites Africa • 1,512 people • 3 industrial sites Figures include associated companies as of end 2010

  9. Umicore in figures • Geographic spread of sales * At February 10 2011

  10. Credit insurance @ Umicore Umicore has a track record of credit insurance of more than 25 years. Since 2007, a worldwide credit insurance contract insures risks related to sales for most Business Units. We expect from our credit insurer : • Information on the financial health of customers : prevention of claims by setting the right credit limits / no surprises in P&L • Stability of cover or at least mutually agreeing on exit scenario’s • Financial partner, being ready to understand our business and risks. • Collection service for unpaid invoices

  11. How did we know there was a crisis ? • Increased credit risks demonstrated by : • Increased requests from customers to reschedule payments • Increased level of contract repudiation by customers • Increased level of bad debts • More difficult collaboration with credit insurer: • Unilateral changes to the contract (obligation to report overdues / waves of ‘mass’ decisions) • High level of credit limit reductions and cancellations • Very low acceptance rate on new requests • Frustrating way of working : • Hard to reach usual interlocutors or anybody • Negotiated decisions being regularly overruled by computer decisions

  12. Reaction by Umicore • Identify problem cases : • After a period of high metals prices (2007) and combined with a period of low ordering, our credit limits were high. “Only” 10% of the reductions or cancellations were instantly problematic. • Of these, respecting the lower or 0 limit gave many times rise to breach of contract / contingency losses • 80% of newly requested limits were not fully approved • Discuss problem cases with the insurer. • For remaining cases, asses if a “Umicore” limit (no cover) can be set-up • Financial /commercial situation of customer • Trade and payment experience • Contribution to Umicore result /contingency risks • Approval by Umicore Management in function of authorisation. KNOW YOUR CUSTOMER

  13. “Credit insurance facilitates your business…we agree, in normal economic circumstances. During the crisis, it has also been a complication of our business approach”

  14. 14 Ingram Micro Europe Frederic Wittemans Sr Director European Credit February 15, 2011

  15. Ingram Micro: A World Leader In IT The world's largest provider of technology products and services A Fortune 2009 "Most Admired Company" • 2009 annual revenues: $30 billion • Customers in more than 150 countries • Present in 11 European countries • 90.000 + customers in Europe • About 120 persons in credit departments in Europe Ingram Micro No. 67 on 2009 Fortune 500 list With 30 years experience in IT Distribution * All information as of fiscal year 2008 unless indicated

  16. Credit Insurance in Ingram Micro • IM EMEA is credit insured since 1999 • We are with same partner since 2006 • Our focus is on Partnership ! • Credit Insurance is one of the pieces in our credit management process

  17. Experience during crisis • IT distribution sector was hit just as many other sectors. • we saw the first signs in Dec 07 and prepared ourselves accordingly. • As such our credit organisation saw this as the big test to see how robust our set up and tools are.

  18. Credit Insurance relationship – Tested ! 20% + reduction of cover

  19. 3 Types of Reductions Reductions made by insurer

  20. Ingram Micro’s reaction

  21. Our Expectations for Credit Insurer:a real partnership

  22. Daikin Europe N.V. 22

  23. 39.132 worldwide Corporate Profile (as of March 31, 2010) 42.000 9.000 1.000 (€ mio) 8.350 8.318 37.000 Company Name: Head Office: Chairman & CEO: Incorporated: Cons.Turnover: Cons.Operating profit: # Employees: Daikin Industries, Ltd. Osaka (Japan) Mr. Inoue February 11, 1934 7,817 Mio € FY2009 336 Mio € FY2009 >39,000 Operating Profit Sales 900 7.817 8.000 825 800 7.000 32.000 5.885 700 6.000 5.115 600 27.000 4.703 522 5.000 500 4.037 433 426 3.693 4.000 393 400 22.000 336 310 288 3.000 300 2.000 17.000 200 1.000 100 12.000 0 0 FY09 FY02 FY03 FY04 FY05 FY06 FY07 FY08 F09: 131 JPY / EUR AC Sales Result per Region R09 Sales per business unit R09 Daikin Industries Ltd. ORGANISATION Other2.9% EMEA27% Chemicals8.4% Other28% Japan36% (In)direct expansion88.7% America9%

  24. Corporate Profile (as of March 31, 2010) Company Name: Head Office: President: Incorporated: Cons. Turnover: Cons. Operating profit: # Employees: Daikin Europe N.V. Ostend (BE) Mr. Minaka 1973 1,614.8 Mio € FY2009 162 Mio € FY2009 4,265 Daikin Europe N.V. ORGANISATION • 100% subsidiary of Daikin Industries Ltd. • Core activities: Sales and manufacturing of air conditioning, refrigeration and heat pump equipment. Europe’s number 1 player on the Air conditioning market • Powerful sales network in more than 50 countries, throughout Europe, Africa and Middle East • Production plants in Belgium and Czech Republic, GermanyOther European factories: McQuay Italy and McQuay UK • Continues prominent growth figures during the last years. Comparedto the beginning of the millennium, the sales amount tripled. Turnover (x1000) Manpower 2500 5000 turnover operating profit 4500 manpower 2000 4000 3500 1500 3000 2500 1000 2000 1500 500 1000 500 0 0 FY03 FY04 FY05 FY06 FY07 F08 F09

  25. AIR CONDITIONING HEATING APPLIED SYSTEMS REFRIGERATION Pillars of growth PRODUCTS

  26. Daikin Europe’s Presence Daikin Europe’s Sales Presence ORGANISATION

  27. Credit insurance Daikin ( ° 1981 ) • Move towards more centrally negotiated policies • Diverse risks : • distributors / end customers / installers / wholesellers • Europe / Africa / Middle East • Japanese culture on credit ( insurance ) • credit insurance is not widely spread or even unknow • “zero risk” approach

  28. Daikin experience 2008 - 2009 • Turnover decrease • Limited increase DSO & Bad debt ratio • Premium rate rather stable • Reduction or cancellation of limits : • no real reason related to customer • no time to take countermeasures OK but …….FRUSTRATION : cfr Japanese image : loss of trust ( take away umbrella ) • very limited transparency on evolution of limits • no diversification ( e.g. country approach )

  29. Daikin Europe actionplan : • Professionalisation own credit management : • credit control manual • intense follow up and coaching affiliated companies • evaluationsysteem credit management • Internal rapporting ( EMEA level ) was increased : • evolution own risk • KPI and target setting ( DSO, overdue, bad debt ) • Introduction collection & dispute software • More intense communication with insurers ( exchange available information )

  30. Expectations towards insurers : • Improve communication  Anticipate problems / solutions  More transparancy about limits (new, cancellation, reduction ) 2. Diversification premium / limits ( based on quality of credit management )

  31. Our success depends on your continuous support. Thank You

  32. Code of Conduct Facilitatedby: Credit Management Think Tank 2015

  33. 33 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • The rationalefor, and principles of a code of conduct • Impact onsix different aspects:- Enhancecompetition- Stimulatetransparency- Minimizefraud- Changeperception- Reduce “air”- Increasesustainability Facilitatedby:

  34. 34 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • The basic principles of the code of conduct:- Openness and accurate information exchange- A win-win for all parties- Mutual trust and dialogue- Maximum use of IT possibilities- Discretion and professionalism Facilitatedby:

  35. 35 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Contracting parties of the code of conduct Facilitatedby:

  36. 36 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Characteristics of the code of conduct- Gentlemen’s agreement- Every policy- Yearly report- Belgian - European- Widely announced- Brokers Facilitatedby:

  37. 37 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Commitments of the credit insuredcompanies • Support credit inquiry • Build a healthy credit managementCertification? • Deliverrisks and paymentbehavior • Informinsureruse of credit lines Facilitatedby:

  38. 38 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Commitments of the credit insurancecompanies • Informinsured of insured creditCustomerfriendly databases accessible to the credit insured • Communicate rating + motivation • Explainclear business strategy, objective criteria • Transparentprice setting procedures • Developproducts in order to avoidsystematic and abrupt volatility Facilitatedby:

  39. 39 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Commitments of the brokers • Promoteuse of Code of Conduct • European Code of Conduct • Coordinateyearly report on the respect or non respect of the Code Facilitatedby:

  40. 40 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Commoncommitments • IT  facilitatetransmission of information • Promoteaddedvalue (preventiverole of credit insurer !)of credit insurancethrough:- federations- SME organizations- schools, educational programs, academicnetworks Facilitatedby:

  41. 41 The Future of Credit ManagementCredit Insurance at a Crossroad: “The Code of Conduct” • Summarytable Facilitatedby:

  42. 42 The Future of Credit Management“Code of Conduct”Questions ? Facilitatedby:

  43. 43 The Future of Credit Management“Code of Conduct”Conclusions Jean-LouisCoppersCEO CRiON Facilitatedby:

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