Monday, June 1

The Importance of Export Credit Insurance for Australian Businesses

More and more Australian businesses are venturing into the export trade and this has created the need for companies to invest in export trade credit insurance. Companies that take this insurance are generally shielded from risks such as defaulting clients as well as various other risks that are unique to the markets in which they are operating.  With the credit insurance company, Niche Trade Credit, it is possible for Australian companies to get a variety of credit insurance services that will serve the unique requirements of their markets. Companies that take trade credit insurance will get the necessary backing they require when operating in foreign markets.

Why credit insurance is important

In the current global trade landscape, there is increasing economic globalization. This has opened new growth opportunities for companies as well as the Australian financial institutions that are operating in the global markets. The services offered by the credit insurance company, Niche Trade Credit are a useful asset for promoting exports as well as trade relations. Trade credit insurance serves the important task of giving confidence to suppliers, buyers as well as the banks that finance the export trade.

Exports are very crucial to the Australian economy. A significant portion of the Australian GDP is generated from exports and not just from the mining and other extractive industries. The most important export transactions between Australian companies and various global distributors occur because of credit insurance by companies such as Niche Trade Credit. This kind of insurance coverage is especially important for long-term export transactions which generally involve a significant risk level.

Trade credit insurance is generally required because the imports-exports business is generally a very risky business. The reason is obvious. Operating in an unfamiliar environment anywhere always involves a high level of risk. This is normally the case in business transactions where there are long payment terms or where the country or even the debtor could be unreliable and thus pose significant risk to the Australian company.

Australian companies could be exposed to various kinds of commercial, legal and political risks for which they will require professional advice and coverage by the credit insurance company, Niche Trade Credit. Some of the common commercial risks that these businesses could face include failure to receive payment due to an arbitrary decision by a buyer or a bankruptcy. The kinds of commercial risks that Australian businesses face could be made worse by a less stable economic, political, financial or even legal landscape.

Apart from the economic risks that Australian exporters could face, there are also the political risks. These political risks are generally a common feature in the emerging markets. They can range from the adverse such as coups to the less adverse such as unpredictable government decision-making.  Political risks could also be caused by external factors such as currency devaluation, banking crises or excessive foreign debt owed by the country which will in turn lead to various kinds of economic risks.

Protect yourself

To avoid the pitfalls of both political and economic risks when you are entering a foreign market, you can arm yourself by taking up trade credit insurance to protect yourself during transactions with foreign partners, suppliers and customers.