International Insurance

Session 8 – ‘R’ for ‘Reduce’+ Hands on session Business Case

HEPL 2023-2024
Export Risk Management
A 4-wheel vehicle, and only wheel #4 considers
insurance 1. No Market
Risk

2. Country
Risk
7. Financial
Risk
i n Pr
a o j ec
st
Contract
Terms

Su t
Offer Deliver
1
3. Adverse
6. Currency Terms of Business Risk

ss
Payment DeliveryT
I nsu

Risk Terms Trade erms

Asse
2
Settle Accept
re

3
Payment
5. Production/ 4 Methods 4. Buyer Risk
Transport Risk
Reduce

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Risk Management -Wheel #4:The PARIS model

P roject: intention/move → plan

A ssess : opportunities/risks → balance

R educe : controls/mitigators → prevent

I nsure : cover/cost → protect

S ustain : volume/leverage → deliver

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Your business case = let us apply PARIS
model

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‘R’ for ‘Reduce’ – Risk Control + Risk mitigation
Likelihood * Impact = you need to act on both factors : prevention & mitigation
1. RISK CONTROL – Reduce the probability/frequency of risk occurrence
◦ Adopting risk Control measures will help you to prevent for an identified risk to materialise
◦ You will here reduce its ‘likelihood’ = act before risk happens
→ e.g. : avoid exporting to too a risky country, monitor your buyer payment flow/pattern
2. RISK MITIGATION – Reduce the severity of risk impact if finally occurs
◦ Adopting Risk Mitigation measures will help you to decrease the consequences once risk event has occurred
◦ You will here reduce/ring-fence the ‘impact’ = act once risk has materialised
← e.g. : actively chase/collect payment due if invoices left unpaid + stop new deliveries
3. PRIOR RISK ASSESSMENT IS KEY – Your risk assessment will guide your Risk Reduction strategy
◦ You cannot efficiently manage (and certainly not ‘control’) risks that you have not priorily identified
◦ As for the ‘assess’ part, your own risk immunity + appetite will here also navigate your ‘reduce’ strategy
◦ Risk reduction potential will also determine your further route to accept/refuse or/and insure subject risk

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Hands on Session # 2: Your business Case
Getting Down to the Experts - Let us ‘Project/Assess/Reduce’
Our Business Case for the day: Exporting Belgian chocolates to Italy
WE ALL ARE PART OF AN EXPERTS GROUP
◦ 1 ‘Chocolate sector’ Group of experts
◦ 1 ‘Export Challenges’ Group
◦ 2 ‘Atradius Expertise’ Groups
◦ 1 ‘Local Experts’ Group
WE USE/SHARE OUR EXPERTISE TO PROJECT/ASSESS/REDUCE OPPORTUNITIES & RISKS FOR OUR BC
◦ Each Group of Experts analyses a specific information source on subject case
◦ The experts community is a resource on its own that groups need to use when/where required
◦ End Product for each group = risk assessment grid with 3 items assessed and rated accordingly
◦ Material provided during session also available on Virtual school

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Recap - Trade Risk types- a first insight
What risks in concrete? Mitigators/Insurance

1. No Market A: No market for your product/target M: Your Assets/Info/Support

Risk I: N/A
A: Country decision/event/dynamic prevents M: Info/Support/TOT
2. Country you from completing a transaction/getting paid I: Political Risk/Contract Frustrat°
Risk
A: Compromising your company vs. M: Know your custs/Partners/staff
3. Adverse societal/social/governance/sanctioned parties I: NO ESCAPE
Business Risk
A: Buyer default to pay/pay timely a due invoice M: Identify/Verify/Establish/Review
I: Credit Insurance
4. Buyer Risk
A: Default/Damage/Loss prevents from M: Specify/Document/Confirm
5. Product/ delivery/acceptance: transaction incomplete I: Cargo Insurance
Transport Risk A: Unpredictable gains or losses due to changes M: Minimise uncertainty factors
in the value of one currency vs. other one(s) I: FOREX Insurance/Options
6. Currency
Risk A: Lack of/No capacity to sustain the financial M: Realistic Plan/Terms of Trade
impacts of all/part of the export process I: Financing solutions
7. Financial
Risk

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Hands on Session # 2: Your business Case

Risk Weighting
Table Template

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3. Test: Follow our Paris Model

◦ Per risk feature/opportunity, your risk management approach:

1. Assess: which are the opportunities/risks + their relevance?
2. Reduce: what measures can you take to reduce probability/severity?
3. Insure: what strategy do you select to protect against impact?
4. Sustain: how do you make sure you can replicate same approach?

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