In a recent webinar, Coface, a leading global trade credit insurer, shared insights on how businesses can leverage data to navigate risks and seize opportunities. The session featured a panel of experts including Andrew Share, BI Director for the UK and Ireland, Andre van Niekerk, Head of Data for the UK and Ireland, and Jonathan Steenberg, Economist for the UK, Ireland, Nordics and Construction. They presented recent global economic data, and discussed Coface's strategies and the importance of data in decision-making.
Current economic landscape and challenges
There are key economic concerns impacting businesses today, such as geopolitical tensions, commodity price volatility, and inflation. Disruptions in global supply chains and rising energy costs are creating challenges across sectors, notably in transport and manufacturing.
Geopolitical risks, like trade tensions and regional conflicts, are affecting different sectors. For instance, current issues in the Middle East have led to rerouted shipping routes, increasing costs and delays, which in turn impact global supply chains.
The use of reliable data is essential in understanding and navigating the complex risks and opportunities in today's global economy. Coface's structured approach to data-driven decision-making provides a robust framework for businesses looking to mitigate risk and capitalise on emerging opportunities.
Interest rates, inflation, and other economic factors influence global risk assessments and sector evaluations. A key point is the impact of a potential 5 basis point drop in interest rates over the next year on buyers, suppliers, and debt structures. The updated global country risk map shows recent upgrades for Spain, Portugal, Bahrain, and Cape Verde, and a downgrade for Ecuador due to factors like tourism increases and oil production declines.
Key updates from Coface’s Country Risk Assessments*:
- Spain and Portugal: upgraded due to rising tourism, easing inflation, increased EU funds, and growing investment.
- Ecuador: downgraded due to reduced oil production and agricultural challenges from El Niño.
At a sector level, the following is also observed in Coface’s assessments :
- Chemicals in the Middle East: downgraded due to struggles in the sector.
- Energy: upgraded as oil prices rise and OPEC considers increasing capacity.
- Information and Communications Technology (ICT) in North America: improved due to favourable conditions.
Focusing on the UK outlook, the following sector changes are observed:
- Transport: upgraded due to improvements in aviation and road transport.
- Wood: Downgraded due to high price volatility and strain from the construction sector.
In terms of commodity price trends, what we expect to see is:
- Oil: expected to rise due to increased demand and geopolitical risks.
- Metals: divergent trends expected; copper and nickel prices are anticipated to increase, while iron may not see strong growth.
Jonathan Steenberg reported: “Global commodity prices – oil, gas, metals to name a few – are responding to a volatile economic environment, with a Chinese economy finding its footing, and worries around the American economy raising questions around global demand at the same time as regional conflicts persists, and shipping is strained. All this is knowingly or unknowingly affecting businesses’ day-to-day operations as it affects their costs and stock”
What are the best strategies to manage trade risk?
- Understand your supply chain and potential vulnerabilities.
- Diversify suppliers to avoid over-reliance on single sources.
- Use Coface’s risk scores to monitor and adjust supply chain strategies.
Coface’s Business Information solutions
Coface uses a range of classical and alternative data sources, including unpaid ratios, default ratios, and financial data, to assess risk. Emerging data sources like shipping data, social media behaviour, and funding rounds are increasingly integrated.
We deploy AI and fuzzy matching as part of our analysis journey, and are always exploring ways to work smarter in the use and effectiveness of data in our decisioning.
Coface's 3 pillars of data utilisation
1. Data-Enhanced Analysis: Coface uses comprehensive data collection, including local and global insights, to understand and underwrite risks effectively. This includes monitoring payment incidents and financial data from clients, which helps in predicting defaults and setting risk levels.
2. Risk Governance and Underwriting: the second pillar focuses on rigorous risk governance. By analysing the data collected, Coface's risk analysts determine the appetite for risk and set underwriting guidelines to protect against potential losses.
3. Recovery and Support: the third pillar involves having robust debt recovery processes in place. Coface's global presence allows them to support clients in various regions, ensuring that recoveries are handled efficiently.
“Here at Coface we’re committed to helping our clients manage credit risk. We continue to invest in alternative data and smarter technology as part of an evolution in decision science” - explains Andrew Share – “We use advanced data analysis techniques to stay ahead of changes and to continually improve our risk evaluation capabilities so that our clients can be more than one step ahead in building their supplier or credit strategies.”
Are you interested in business insights to anticipate risk, optimise credit and help you make data-driven decisions? Book a demo with one of our experts.
