km Entrepreneur Day 2013
On June 10, 2013, for the second time, km credit consulting gmbh invited guests to the “km Entrepreneur Day” at Gut Mydlinghoven near Dusseldorf. The event was initiated in order to discuss current topics relevant to the credit management industry with interested business partners.
The agenda of this year’s event included the following three topics:
- How do I protect myself against payment contestations
within the scope of bankruptcy proceedings
- Europe in the debt crisis – opportunities and risks
for commercial credit insurers
- Factoring – the different types of receivables and purchasing financing
As guest speakers, we were able to organize both Dr. Christian Wolf, offices of Görg attorneys-at-law, who spoke on the topic of “How do I protect myself against payment contestations within the scope of bankruptcy proceedings,” as well as Mr. Thomas Farrant, manager of Receivable Financing at HSBC Trinkaus & Burkhardt AG, who led a discussion on the topic of “Factoring – the different types of receivables and purchasing financing.”
Beyond this, within the scope of a podium discussion on the topic of “Europe in the debt crisis – opportunities and risks for the commercial credit insurers”, km credit consulting was also able to bring together Mr. Ulrich Nöthel, Board of Director at Euler Hermes Deutschland AG, Dr. Thomas Langen, General Representative of Atradius Germany, and Mr. Norbert Langenbach, Information & Claims Director at Coface Germany, all well-known representatives of leading commercial credit insurers and make them available to field the audience’s questions.
Speech by Dr. Christian Wolf
The topic of payment contestations prior to the opening of bankruptcy proceedings through the insolvency trustee is forcing many companies to face growing problems, since payments can be appealed for many years after the insolvency proceedings have been opened and, at the same time, the efforts of the credit management employees responsible for retroactively preventing bad debt loss can make a mockery of this process.
Dr. Wolf, Partner of the Görg attorneys-at-law, one of the most renowned German law offices in bankruptcy law, led the plenary session in a well-founded and focused manner by touching on the special issues of German bankruptcy law and the standard grounds for contesting.
For this purpose, Dr. Wolf first explained the goals of the contesting law, which is founded in the equal treatment of creditors. The main points of his speech were:
- Contesting grounds
- Congruent coverage
- Incongruent coverage
- Exception: Cash-based transactions
- Willful disadvantage
- Preference claim
- Related parties
- Legal consequences of the contesting
- Offsetting during bankruptcy
- Sample situations from the group of participants
- Means of protection in case of the debtors’ payment problems
With his speech, Dr. Wolf gave the participants of the km Entrepreneur Day comprehensive insight into the area of bankruptcy contestation. His practical information, in terms of avoidable errors as well as special dangers for creditor’s of debtors with payment problems were thankfully accepted by the audience.
Podium discussion with Mr. Ulrich Nöthel, Dr. Thomas Langen
and Mr. Norbert Langenbach
Especially in times of economic downturn, the significance of the credit insurers becomes more important to companies. They act as risk carrier for a significant part of the assets, the trade receivables.
The more stringent banking regulations and distortions in meaningful export markets of German companies prove that the demand in supplier loans continues to increase and through this also the demands of the credit insurers to provide coverage capacities.
Within the course of podium discussion, km credit consulting has been able to motivate the representatives of the three most significant credit insurers to take a closer look at the challenges faced by their companies within the course of the European crisis and in the process to answer the odd unpopular question related to the behavior of the credit insurers during the financial market crisis 2007/2008.
Markus Moritz, Managing Director of km credit consulting, moderated the podium discussion and led the participants through the questions collected from the plenary session.
The questions posed to the credit insurers were slotted into the following three subsections:
- Assessments and forecasts in individual markets
- Risk loss provisions and communications
- Possible innovations in credit insurance
Assessments and forecasts in individual markets
The assessments and forecasts for the European countries are generally viewed critically by the insurance providers. All three insurance providers expect double-digit growth rates in company bankruptcies in the southern European countries. That will also negatively impact the neighboring countries, since a large part of the export business is transacted with neighboring countries.
Eastern Europe is also facing an increasing number of company bankruptcies in the future. However, this is opposed by an enormous growth potential, so that the challenges in the market will remain to differentiate the financially sound companies from the financially insecure companies through a good procurement of information.
All three insurance providers emphasized that the risks should be viewed in a differentiated manner and that the assessment – in addition to the country assessment – should include the segment of industry in which a risk resides.
Industries that the insurance providers currently view critically are the steel industry, the construction industry, and the solar industry. Based on the slowdown in sales volumes, the focus is also on the automotive industry. However, here it is differentiated between companies that have a strong presence in the European market or that have a global approach, since these companies can often compensate slow business in Europe through higher sales in Asia or South America. Often times the companies’ individual strengths and weaknesses are also included in the risk assessment.
Risk loss provisions and communications
The second topic of focus was also related to the conclusions drawn by the commercial credit insurers in the wake of the 2008 global financial crisis. In general, it can be noted that the insurance providers are counting on having a cooperative relationship with the customers and that the individual customer communication is at the focus. In particular the transparency of the credit decision and the reaction times of the policy owner towards reduction or cancellation of individual credit decisions both were expanded significantly.
Possible innovations in credit insurance
The third area of focus “Credit insurance and innovation” was related to the question regarding new products of the credit insurers, especially pertaining to the background of a possible collaboration of two first insurers in relation to the same portfolio to be insured. In principle the insurance providers are willing – in individual cases – to review this type of collaboration if, for example, one insurer would no longer alone be in position to carry the limit requirement on a certain risk. However, in general all company representatives emphasize that it remains their own standard to, if possible, cover the policy holder’s entire needs. Markus Moritz was critical of the noticeably “outdated practices” in the credit insurance industry; these could massively impede the common goals of both the suppliers and insurance providers.
In conclusion it can be noted that all three insurance providers are convinced of the credit insurance model and its business capacity, and all of them view their companies as a reliable partner for the respective policy holder – a partner who has the ability and the resources to support the insured in case of a claim. For their part, the insurance providers are convinced that they have drawn the right conclusions from the 2008 financial crisis and will be able to overcome a similar future crisis, since the current information of the companies has been significantly expanded.
In the end, only a new crisis will show if these changes are sufficient in ensuring a substantially better support of the companies.
Since the credit insurance solution is mainly based on a close and good communication between the partners, the km Entrepreneur Day most certainly supported the companies in reaching this goal.
Speech by Thomas Farrant, HSBC Trinkaus & Burkhardt
The day was concluded by Mr. Thomas Farrant from HSBC Trinkhaus & Burkhard with his speech on “Factoring – the different types of receivables and purchasing financing,” with the following contents:
- Historical development & current significance
- Development of the factoring market in Germany
- Prerequisites for factoring
- Product and process description of factoring models
- Implementation of a factoring structure
What kind of image does factoring have today? Aside from others, this question was discussed between Mr. Farrant and the plenary session. The overall tone made clear that many companies view the financing of receivables as a meaningful and low-cost source of financing.
In the discussion with the participants, Mr. Farrant provided the participants with a general overview of the German factoring market, which is the fourth largest in Europe and accounts for a market volume of €157 billion (2012).
Within the scope of the depiction of the various types of factoring, Mr. Farrant highlighted the form of purchasing financing, typically known as reverse factoring.
In particular, with this type of financing, in which the recipient pre-finances the payables he has due to his suppliers, results in interesting added benefits for the parties involved.
Not only does the recipient of the goods, who structures the financing, benefit from the longer payment terms, but his suppliers do as well. Through the timely availability of the liquidity, the supplier's cash flow management is improved and his financing costs are usually lowered, because he uses the recipient's good credit rating. In addition, the purchasing company forges a significantly stronger link to the supplier, which in individual industries is a significant competitive factor.
The next km Entrepreneur Day will be held in 2014
The large number of participants (who after last year’s inaugural km Entrepreneur Day once again joined us at the second km Entrepreneur Day), the high quality of the discussions and speeches, and the active exchange of ideas and experiences amongst the participants positively reinforced the decision made by the Managing Directors Markus Moritz and Jörg P. Kowalewski to repeat the event.
Based on the positive feedback received from the participants, in 2014 the third km Entrepreneur Day will take place and the content will again be coordinated and developed in close cooperation with the participants in the lead-up to the event.
For questions and more detailed information, please contact us. We look forward to hearing from you. Please use any of the contact methods listed in the right-hand column.