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Knowledge Now Suppliers fail to find credit insurance


CIPS - Chartered Institute of Purchasing & Supply
Purchasing & Supply Supply Management

Credit insurance has only appeared on most buyers’ radar since the onset of the current economic downturn. However, as reported, particularly in the Financial Times, credit insurance is now becoming an issue that can have a significant impact on the viability of supply chains. As the financial position of more and more companies becomes increasingly perilous, insurance risk grows and insurers are reassessing the viability of their products and withdrawing cover in many cases. The FT reported that, in one week in November, at least 12,000 British businesses had their cover withdrawn. The construction, retail and leisure sectors were particularly badly affected. The total figure is believed to be significantly higher and still rising.

What is credit insurance?
Credit insurance can offer cover across a business’s entire turnover, but it is insurance of the business’s key accounts which has potential for the greatest impact on the supply chain. In this context, credit insurance provides cover to businesses against the risk of their customers becoming insolvent or not being able to meet the agreed payment terms. It enables a supplier to better assess and manage its risks, enabling it to secure its cash flows, avoid any cash flow gaps and trade with customers with increased confidence.

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