Credit risk in 2018

Now that 2018 is firmly under way, the topic of credit risk is more pertinent than ever. For businesses of all sizes – and especially for our own HAI members – lessons must be learned from the eye-opening stories of the past 12 months. In this issue of The Hardware Journal, James Riordain – General Manager for CRB (Credit Risk Brokers) – reflects on Carillion’s collapse and the potential for more like it.

We’ve all heard the figures surrounding the devastating Carillion failure in the UK – £1 billion in trade debt, a combined estimated 30,000 suppliers & subcontractors owed money, an almost £500m pension gap, and thousands of jobs at risk. But did you know that only an estimated 3% of the trade debt was actually credit insured by suppliers and sub-contractors?

Was Carillion deemed too big to fail? Of the £750m of its unsecured creditors, only £30m is likely to be paid out by the credit insurers. It would appear that businesses trading with Carillion felt there was no need to protect themselves with a credit insurance policy. In Ireland, we have felt some ripples of this collapse already, with some projects struggling to be completed until things can be resolved – most notably certain school building works.

What other insolvencies have been impacting our HAI network recently?

Albeit overshadowed by Carillion news, in January Denis Moriarty Civil Engineering Contractors Ltd entered Examinership, with more than ¤18m in unsecured creditors. The HAI members who could be at risk of losing hard-earned profits are joined by pages of other creditors too. The domino effect could make the start of 2018 a difficult one for many SME’s. Creditors for Walsh Mechanical, Precision Electric, and Manley Construction all had significant claims being assessed and paid out by the Credit Insurers. These demonstrate the very real dangers which still exist for companies of all sizes trading in the sector, despite the apparent growth.

It’s just not worth the risk

The risks of unsecured/uninsured trading are real. They exist on a daily basis, and the more you trade without insurance, the greater those risks become. Why would you spend years building a successful business while offering credit to customers without protecting that debt and removing the risk of non-payment?

You could be the best manager in the world, running an efficient and thriving business, but you cannot control your customers’ operations. There is no certainty or guaranteed payment, but you can seek to minimise such risk by engaging a specialist broker like Credit Risk Brokers to provide support on a credit insurance policy. Simply put, Credit Insurance protects against the risk of nonpayment of invoices issued on credit terms.

For more information or to seek advice on credit insurance, call Credit Risk Brokers on 01 4916007 or visit www.creditriskbrokers.com.

This Business Support article featured in the March/April 2018 edition of The Hardware Journal.