As businesses continue to expand across borders into Africa, they potentially face a number of geopolitical threats such as expropriation, discrimination, political violence, forced abandonment, trade agreements and exchange controls – collectively known as political and trade credit risks.
Political and trade credit risk was rated #2 in the top 10 risks facing multinational businesses on the African continent according to Chubb’s latest 2019 Multinational Risk Research Survey. This risk followed closely behind Cyber risk which was ranked #1, followed by terrorism risk at #3.
The Multinational Risk Research Survey released by Chubb Insurance South Africa, in collaboration with Commercial Risk Africa highlights the key concerns of African risk managers and insurance buyers and draws attention to the trend among risk managers towards managing specialist and emerging exposures within a multinational programme structure.
Understanding Multinational Risks
Olivia Wright, Political Risk and Credit Underwriter at Chubb Global Markets, says there is a direct link between domestic political decisions and the economy of a country. “This in turn has a direct effect on the health of a multinational’s debtors’ book across many diverse regions. It is, however, possible to prepare for some of the potential impact of unforeseen political upheaval and resulting trade complications with appropriately scoped insurance and risk management solutions.”
Chubb Insurance highlights some of the political and trade credit risks faced by multinationals on the continent:
What Does This Mean for Trade Credit?
Most customers today require credit terms in order to buy goods and services. A reluctance to offer credit can place suppliers at a distinct competitive disadvantage. Furthermore, with competitors often having trade credit solutions of their own in place, multinationals frequently have no other choice than to provide a trade credit solution.
Despite the uncertainties in today’s marketplace, granting credit can mean the difference between missing out on opportunities and successfully securing competitive tenders. It is also often a lifeline to maintaining the ability to secure sustainable and profitable growth in both new and mature markets.
Addressing the Risk
“It is crucial to work with an insurer that is able to combine financial strength with prompt claims handling, in addition to being structured to deliver effective political and trade credit risk insurance around the globe,” says Olivia.
“Chubb is home to some of the most experienced political and trade credit risk insurance professionals in the world. Our people have an established knowledge of how political risks relate to different business sectors and companies. Our regional capabilities are backed by global reach and underpinned by in-house country risk analysts who have deep understanding of your organisation’s political and trade credit risks on the ground,” concludes Olivia.
Conducted during 2018, the Chubb Multinational Risk Research Survey comprises responses from 481 correspondents from key industry sectors in 24 African countries.
Olivia Wright is Political Risk and Credit Underwriter at Chubb Global Markets. This article originally appeared in Cover Magazine.
Chubb South Africa: Multinational Risk Research Survey
Learn about the key concerns of African risk managers and the trend towards managing specialist and emerging exposures within a multinational programme structure.