credit management think tank 2015 the future of credit management credit insurance at a crossroad...

Credit Management Think Tank

2015

The Future of Credit Management

Credit Insurance at a crossroad “Code of Conduct”

16 February 2011

Facilitated by:

The Future of Credit Management“Code of Conduct”

Welcome !

Jean-Louis CoppersCEO CRiON

2

Facilitated by:

Who is CRiON ?

Specialised credit insurance broker

Marketleader in Belgium (30% of the market) Premium: € 30 million Insured shipments: € 20 billion Q*For - Quality Label Member of Aon Group

500 offices in 120 Countries59.000 employees

Credit management audit & consultancy

Credit management software

CRiON helps you to master your credit risks

3

The Future of Credit ManagementCredit Insurance at a Crossroad:

“The Code of Conduct”

11u05 -11u30

“Credit insurance after the October Revolution of 2008”

- Elsje Verdoodt, Group Credit Manager, Umicore

- Frederic Wittemans, Senior Director EU credit, Ingram Micro

- Peter Van Den Broecke, CFO, Daikin

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11u30

Results of the “Credit Management Thinktank 2015 – 2020”


- Rudy Aernoudt, Prof. European Economics

- Paul Becue, author “Credit Insurance, The Invisible Bank”

- Jean-Louis Coppers, CEO, CRiON

12u15 Questions & answers

12u30 Small Lunch

5

UmicoreExperience with credit insurance during the economic crisis 2008-2010

Elsje Verdoodt, Group Credit Manager, February 16th 2011

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Brussels, February 16th 2010 7

Introduction to Umicore

· We are a global materials technology company with activities centered around 4 business areas : Catalysis, Energy Materials, Performance Materials and Recycling

· Our mission is to make “materials for a better life”

· The majority of our growth comes from clean technologies:

· technologies that are specifically designed to optimize the use of natural resources and to reduce environmental impact

· We are listed on NYSE / Euronext Brussels with a market capitalization of some €4.5 billion


Global presence: 14,400 people in 80 industrial sites

Figures include associated companies as of end 2010

North America

• 744 people

• 12 industrial sites

South America

• 1,097 people


Africa

• 1,512 people


Asia/Pacific

• 3,025 people


Europe

• 7,342 people



Umicore in figures

2010

Turnover € 9,7 bn

Revenues € 2,0 bn

REBIT € 342 m

REBITDA € 469 m

ROCE 17,5%

EPS € 2,33 / share

Dividend € 0,8 / share

Market cap. € 4.5 bn*

Geographic spread of sales

62%

10%

6%

17%

6%

Europe North America

South America Asia Pacific

Africa

* At February 10 2011


Credit insurance @ Umicore

Umicore has a track record of credit insurance of more than 25 years.

Since 2007, a worldwide credit insurance contract insures risks related to sales for most Business Units.

We expect from our credit insurer :-Information on the financial health of customers : prevention of claims by setting the right credit limits / no surprises in P&L-Stability of cover or at least mutually agreeing on exit scenario’s-Financial partner, being ready to understand our business and risks.-Collection service for unpaid invoices


How did we know there was a crisis ?

1. Increased credit risks demonstrated by :- Increased requests from customers to reschedule payments- Increased level of contract repudiation by customers- Increased level of bad debts

2. More difficult collaboration with credit insurer:- Unilateral changes to the contract (obligation to report overdues / waves of

‘mass’ decisions)- High level of credit limit reductions and cancellations- Very low acceptance rate on new requests- Frustrating way of working :

- Hard to reach usual interlocutors or anybody- Negotiated decisions being regularly overruled by computer decisions


Reaction by Umicore

Identify problem cases :· After a period of high metals prices (2007) and combined with a period of low

ordering, our credit limits were high. “Only” 10% of the reductions or cancellations were instantly problematic.

· Of these, respecting the lower or 0 limit gave many times rise to breach of contract / contingency losses

· 80% of newly requested limits were not fully approved

Discuss problem cases with the insurer.

For remaining cases, asses if a “Umicore” limit (no cover) can be set-up· Financial /commercial situation of customer· Trade and payment experience· Contribution to Umicore result /contingency risks

Approval by Umicore Management in function of authorisation.

KNOW YOUR CUSTOMER

“Credit insurance facilitates your business…we agree, in normal economic circumstances. During the crisis, it has

also been a complication of our business approach”

100906_14Confidential and proprietary information of Ingram Micro Inc. — Do not distribute or duplicate without Ingram Micro's express written permission.

Ingram Micro Europe

Frederic WittemansSr Director European Credit

February 15, 2011

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No. 67 on 2009 Fortune 500 list

Ingram Micro

A Fortune 2009 "Most Admired

Company"

Ingram Micro: A World Leader In IT

With 30 years experience in IT Distribution

* All information as of fiscal year 2008 unless indicated

The world's largest provider of technology products and services

2009 annual revenues: $30 billion Customers in more than 150 countries Present in 11 European countries 90.000 + customers in Europe About 120 persons in credit

departments in Europe


IM EMEA is credit insured since 1999

We are with same partner since 2006

Our focus is on Partnership !

Credit Insurance is one of the pieces in our credit management process

Credit Insurance in Ingram Micro


Experience during crisis

IT distribution sector was hit just as many other sectors.– we saw the first signs

in Dec 07 and prepared ourselves accordingly.

– As such our credit organisation saw this as the big test to see how robust our set up and tools are.


Credit Insurance relationship – Tested !

20% + reduction of cover


3 Types of Reductions

Bulk Cancellatio

ns

In Agreement

Don’t understand

Reductions made by insurer


Ingram Micro’s reaction

Create right environment for

Controlled risk taking

Realigned internal procedures towards risk approvals

Proactively adjust limits to risk environment

Adjust – Improve – Train Community&

Tools

Give feed-back to credit insurer on

our disagreements

Decision to support our SMB customers

by injecting more credit in a controlled

way


Our Expectations for Credit Insurer:a real partnership

Open communication about customer

risks.

Share information (both sides)

Open management

communication when

customers are affected and learn from

mistakes made.

Avoid brutal decisions and work together

on exiting risks.

Have open mind and listen

to our arguments and

needs.

Heating

Air Conditioning

Applied Systems

Refrigeration

°

All Seasons

CLIMATE COMFORT

Daikin Europe N.V.

22

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All Seasons CLIMATE COMFORT

°

Daikin Industries Ltd.

(In)direct expansion88.7%

Chemicals8.4%

EMEA27%

America9%

Japan36%

Other28%

Sales per business unit R09

AC Sales Result per

Region R09

Company Name:

Head Office:

Chairman & CEO:

Incorporated:

Cons.Turnover:

Cons.Operating profit:

# Employees:

Corporate Profile (as of March 31, 2010)

Daikin Industries, Ltd.

Osaka (Japan)

Mr. Inoue

February 11, 1934

7,817 Mio € FY2009

336 Mio € FY2009

>39,000

Other2.9%

ORGANISATION

3.6934.037

4.7035.115

5.885

8.318 8.350

288 310

393433

522

825

426

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

FY02 FY03 FY04 FY05 FY06 FY07 FY080

100

200

300

400

500

600

700

800

900

1.000

Sales Operating Profit

(€ mio)

F09: 131 JPY / EUR

7.817

336

FY09

39.132 worldwide

12.000

17.000

22.000

27.000

32.000

37.000

42.000

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°

• 100% subsidiary of Daikin Industries Ltd.

• Core activities: Sales and manufacturing of air conditioning, refrigeration and heat pump equipment. Europe’s number 1 player on the Air conditioning market

• Powerful sales network in more than 50 countries, throughout Europe, Africa and Middle East

• Production plants in Belgium and Czech Republic, GermanyOther European factories: McQuay Italy and McQuay UK

Continues prominent growth figures during the last years. Comparedto the beginning of the millennium, the sales amount tripled.

Daikin Europe N.V.

Company Name:

Head Office:

President:

Incorporated:

Cons. Turnover:

Cons. Operating profit:

# Employees:

Daikin Europe N.V.

Ostend (BE)

Mr. Minaka

1973

1,614.8 Mio € FY2009

162 Mio € FY2009

4,265

Corporate Profile (as of March 31, 2010)

ORGANISATION

0

500

1000

1500

2000

2500

FY03 FY04 FY05 FY06 FY07 F08

Turnover (x1000)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000Manpower

turnover

operating profit

manpower

F09

25


°

HEATINGAIR

CONDITIONING

APPLIEDSYSTEMS

REFRIGERATION

Pillars of growth

PRODUCTS

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°

Daikin Europe’s Presence

Daikin Europe’s Sales Presence

ORGANISATION

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Credit insurance Daikin ( ° 1981 )

1. Move towards more centrally negotiated policies

2. Diverse risks : 1. distributors / end customers / installers / wholesellers 2. Europe / Africa / Middle East

3. Japanese culture on credit ( insurance )1. credit insurance is not widely spread or even unknow 2. “zero risk” approach

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°

Daikin experience 2008 - 2009

1. Turnover decrease2. Limited increase DSO & Bad debt ratio3. Premium rate rather stable 4. Reduction or cancellation of limits :

1. no real reason related to customer2. no time to take countermeasures

OK but …….FRUSTRATION :

cfr Japanese image : loss of trust ( take away umbrella ) very limited transparency on evolution of limits no diversification ( e.g. country approach )

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°

Daikin Europe actionplan :

1. Professionalisation own credit management :1. credit control manual2. intense follow up and coaching affiliated companies3. evaluationsysteem credit management

2. Internal rapporting ( EMEA level ) was increased :1. evolution own risk2. KPI and target setting ( DSO, overdue, bad debt )

3. Introduction collection & dispute software

4. More intense communication with insurers ( exchange available information )

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°

Expectations towards insurers :

1. Improve communication

Anticipate problems / solutions

More transparancy about limits

(new, cancellation, reduction )

2. Diversification premium / limits

( based on quality of credit management )

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°

Our success depends on your continuous support.

Thank You

Code of Conduct

Credit Management Think Tank

2015

Facilitated by:



The rationale for, and principles of a code of conduct

Impact on six different aspects:

- Enhance competition

- Stimulate transparency

- Minimize fraud

- Change perception

- Reduce “air”

- Increase sustainability

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Facilitated by:



The basic principles of the code of conduct:

- Openness and accurate information exchange

- A win-win for all parties

- Mutual trust and dialogue

- Maximum use of IT possibilities

- Discretion and professionalism

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Facilitated by:



Contracting parties of the code of conduct

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Characteristics of the code of conduct

- Gentlemen’s agreement

- Every policy

- Yearly report

- Belgian - European

- Widely announced

- Brokers

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Facilitated by:



Commitments of the credit insured companies

Support credit inquiry

Build a healthy credit managementCertification?

Deliver risks and payment behavior

Inform insurer use of credit lines

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Facilitated by:



Commitments of the credit insurance companies

Inform insured of insured creditCustomer friendly databases accessible to the credit insured

Communicate rating + motivation

Explain clear business strategy, objective criteria

Transparent price setting procedures

Develop products in order to avoid systematic and abrupt volatility

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Facilitated by:



Commitments of the brokers

Promote use of Code of Conduct

European Code of Conduct

Coordinate yearly report on the respect or non respect of the Code

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Facilitated by:



Common commitments

IT facilitate transmission of information

Promote added value (preventive role of credit insurer !)of credit insurance through:

- federations- SME organizations- schools, educational programs, academic networks

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Facilitated by:



Summary table

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Facilitated by:


Questions ?

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Conclusions

Jean-Louis CoppersCEO CRiON

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Facilitated by:

credit management think tank 2015 the future of credit management credit insurance at a crossroad...

Documents

right credit

credit insurer

credit risks3 slide

author credit insurance

credit management thinktank

group credit manager

credit management think

senior director eu credit