km Entrepreneur Day 2015

DKV Euro Service belongs to the leading service providers for in-transit supply of commercial goods and passenger transportation by road. DKV offers numerous services for cost optimization and for the administration of fueling and toll-road access for the vehicle and truck fleets of DKV customers.

Under consideration of the broad range of products and services and the European presence with its existing local regulations, DKV Euro Service is faced with an extraordinary challenge in the risk-optimized management of the credit management processes.

During the course of their presentation, both speakers (Dr. Werner Grünewald and Matthias Rauh) provided an exemplary presentation of the relevant factors of a successful credit management system through the use of comprehensive modular credit management software, as well as the necessary communication between the departments involved in the process and functions/tasks within the company. As an important technical requirement for a functioning risk management system, Dr. Grünewald and Mr. Rauh touched on the use of workflow-oriented risk management software. In the credit management tool employed by DKV – apart from the credit policies of the company – all processes ranging from customer acquisition, the credit decision, and the provision of collateral, which include any potential legal processes, are depicted and processed in the system. Through the exploitation of various external and internal information sources, the system determines a credit rating, which creates the well-founded basis for both the decisions and for the generation of a to do list.

Aside from the technical processing, both speakers expounded on the success factors of a successful credit management and, in doing so, highlighted the importance of the interface to the sales department:

• Common values and strategies
• Balanced and aligned risk portfolio
• Optimized risk costs
• Close cooperation
• Well-coordinated objectives
• Close proximity
• High level of transparency

It is essential to achieve a high degree of acceptance in the sales department through transparency, active inclusion and sustainable communication for the credit management. This acceptance was achieved on the basis of the transparent representation of the default risks by the credit management software. In addition, it is also attained by the influence of risk metrics in the sales employees’ bonus payment model, thereby using monetary incentives to ensure a balanced sales-to-risk ratio. In this manner, the sales staff’s performance is not just measured on the sales volume, but also on the resulting default rate – and therefore their performance is measured in the specific provisions for bad debt (EWB).

The company’s consistently lower EWB ratio, which is not only due to the current positive economic situation, illustrates that DKV has been able to alleviate the strain in the conflict area between the credit management and sales departments. This was achieved through a close cooperation between both units, the implementation of a combined sales- and risk-oriented system, and a broadly based, process-integrated CAM tool.

Brief, discussion-stimulating presentations held by the top managers representing the three large credit insurers: Atradius, Coface, and Euler Hermes

With his presentation, Dr. Thomas Langen tackles a topic that was hotly debated during the previous year – a topic in which participants expressed the desire to receive more information on the inclusion of insurers on the topic of “crisis management”. Dr. Langen made it clear that in the case of a significant downgrade of the loan recipient’s credit worthiness, an intense period of customer consulting and the development of a counter-strategy in cooperation with an insurance company would be extremely important. Credit insurers ensure the provision of competent support during this “crisis management” through special teams in so-called “Special Risk Management Areas”. The main functions of the related special areas lie in the possibility of advising both sides affected (supplier as well as the “defaulted” purchaser) in communication processes with all parties involved, in reorganization processes, or in bankruptcy processes. The portfolio of services ranges from the early identification of at-risk purchasers to the monitoring of non-payment cases, as well as the accompaniment of reorganization and restructuring efforts of “in crisis” companies. The understanding of international customs and practices and a global decision-making ability enable the credit insurers to strengthen their clients’ creditor position through the safeguarding of their interests, by ensuring the most optimal utilization of collateral, and by generating a maximum return.

Furthermore, Dr. Langen also took position on the current topic of insolvency appeal, under which the bankruptcy administrator is allowed – under certain prerequisites – to contest payments made by the purchaser to its suppliers. This can be done retroactively for a period of up to ten years. For many companies, this signifies a difficult-to-assess risk, since over the course of this long period the insolvency administrator would be able to reclaim significant amounts. Beyond this, in this regard Dr. Langen makes reference to the possibilities of protection provided by an insolvency contestable insurance policy.

In his presentation, Thomas Krings describes special solutions provided by the credit insurers for the international project business. These special solutions are particularly suitable for terms of up to 72 months and, therefore, particular periods of risk. Using the example of a complete process chain related to the supply of a tools machine – from the negotiation phase to the guarantee period – he shows the ensuing risks relevant to both the purchaser as well as the contractor throughout the entire process. He describes the services offered on behalf of the credit insurer for each individual step of the project in order to satisfactorily eliminate any potential arising risk. In international business, the necessity of having a corresponding form of protection for suppliers often results from the collateral requirements that are made by the foreign-based purchaser.

“Where is the ‘caravan of economic growth’ heading now? After Asia, is the next destination Africa?” Dr. Thomas Götting presents results from a current Coface study regarding the largely positive economic and political development of the African states and the existing potential of these nations as the “new emerging markets” of the future. That these “new emerging markets” could potentially replace the BRICS states in their significance is feasible, believes Dr. Götting. As an example he describes the nations of Kenya, Zambia, Nigeria, Ethiopia, and Tanzania as the reasons for the positive development, and he cites the existing democratic structures and the prescribed target definition of a certain per capita income as decisive factors for growth. The risks of a high level of government debt and often very significant ethnic differences are, however, still the greatest challenges being faced by these nations. In conclusion, Dr. Götting mentions the fact that the success for a long-term positive development in the weak exporting nations is based on the nations’ ability to integrate an international value added chain into their domestic manufacturing processes. The introductory question cannot be conclusively answered. However, today initial developments can be recognized that show that the economic significance of the entire African continent will grow.

Exchange of expertise knowledge on current topics between the senior management of the three leading German credit insurance companies and industry representatives

The credit insurers were represented by:

• Dr. Thomas Langen, Senior Regional Director Germany, Central & Eastern Europe of Atradius N.V.
• Thomas Krings, Member of the Board of Management at Euler Hermes AG
• Dr. Thomas Götting, Regional Commercial Director of Coface S.A.

In this year, the roles were reversed during the Q&A session. “Insurance companies ask questions, the industry answers.” This was the slogan under which the three representatives of the credit insurance industry were able to pose questions intended to collect information for the further development and improvement of the services and products offered. Within the scope of a constructive exchange of opinions, the representatives of the credit insurance industry as well as company representatives discussed topics related to both the quality and the scope of the credit insurance products and the role that credit insurers will play in future.

The following topics were touched on during the lively back-and-forth discussion:

• Which requirements/demands of credit management exist today and in future? Which changes are recognizable? Which possibilities exist in order to adapt to these changes?
• From a company perspective, which demands are required of credit insurance so that the processes can be optimally integrated in the credit management systems?
• How is the current service quality of the credit insurers being evaluated in terms of offer and service? What improvements do the client companies want to see made?
• Which new markets and regions are important for the expansion plans of the companies? Which form of support is required from the financial partners?
• Bankruptcy protector versus risk management partner: Which role should credit insurers play in future?

ConSource AG is a management and human resource consulting firm that operates across all industries. The company’s area of specialization is the provision of working capital management for their clients. ConSource AG is committed to the goal of optimizing the competitiveness of its clients through the provisioning of content and personnel solutions for the financial area. In doing so, ConSource AG can fall back on numerous corporate references, in particular in the area of working capital management.

Oliver Kuschel states that current studies confirm that “needlessly” bound capital totals almost €90 bn in the working capital of German SMEs. Many SMEs are therefore facing the challenge of actively managing their working capital and optimizing the capital expenditures. This quickly leads to questions pertaining to the hidden liquidity potentials in one’s own company and the use of financial levers for managing the selected key corporate ratios. For a large number of companies, this is best handled through the optimization of the working capital for achieving a better rating and therefore an improved creditworthiness.

Based on diverse consulting projects, Oliver Kuschel presented the “Working Capital Explorer®”. The web-based application – developed by ConSource AG – helps analyze and manage a company’s overall capital commitment. This tool enables companies to get real-time analyses of their supplier and debtor transaction data in order to increase the hidden optimization potential in the centralized working capital processes (billing, receivables management, approval of terms and conditions in purchasing and sales, etc.). The increased level of transparency resulting from the use of the online tool leads to a permanent release of previously bound liquidity and an improvement in the company’s key ratios and the company’s rating.

In particular, phases of low interest rates or phases of high liquidity levels in the market provide the perfect requirements in order to come to terms on measures for the sustainable increase of the company’s working capital ratios.

The agenda for the 5th km Entrepreneur Day in 2016 will also be developed in close cooperation with the group of participants.

If you have questions or would like more detailed information, please do not hesitate to contact us. Please contact us through one of the channels listed on the right-hand side of the screen.