Credit managers are still in a defensive mode. Trends expected to continue for at least 12 to 18 months based on a BIIA survey of credit managers.
When the ‘credit freeze’ hit trade credit the emphasis switched quickly from credit granting to risk mitigation and liquidity management. Within this context BIIA asked credit managers six pertinent questions.
Question 1: Does this trend continue and if so for how long? Sixty-one percent of respondents stated that the trend is expected to continue for at least 12 to 18 months.
Question 2: Which specific credit management tools were used to manage this crisis? To manage credit during the heat of the crisis companies invoked shorter credit terms, reduced lines of credit and engaged in active workout on the due date. This trend still continues.
Question 3: What are the implications on credit management going forward? The implications of the current crisis for credit management are that credit managers will continue to be defensive for some time, as they are the custodians of a valuable asset: trade receivables. Some credit managers see the necessity to automate lower risk assessment in order to focus on higher value added activities.
Question 4: Which specific credit information tools were used by credit management during the crisis? To manage the crisis, credit management relied, as in the past, on a range of external information tools, such as credit reports, alert services, credit ratings, supplier information, financial statements and industry credit groups. External information services were used in greater intervals and its contents analyzed more diligently than previously practiced.
Question 5: Were credit information tools sufficient to manage the crisis? The answers were YES and NO, almost equally divided. Perhaps it can be concluded that the latter camp (the ones who voted NO), were credit insurance underwriters and trade credit managers who rely heavily on financial statements. This segment of credit managers voiced strong opinions that traditional credit reporting did not perform adequately as information suppliers played catch-up to events unfolding in the economy.
Question 6: In retrospect what are the implications for credit information moving forward? Given the severity of the credit freeze and speed in which it happened exposed the current inertia in keeping credit information up to date. In this volatile environment the reliability and freshness of information is more important than ever. The real and perceive time lag has become a sensitive issue and needs to be addressed by the industry.
The above is an abbreviated version of the survey report. To read the full story go to: BIIA Member News
Source: FCIB, ICASA Members and BIIA interviews
