What is export credit insurance? Export credit insurance is a financial tool that enables companies to maintain their competitive edge by providing open terms, which can be more advantageous than relying solely on letters of credit or prepayment. According to the World Trade Organization, foreign buyers tend to increase their purchases by an average of 40 percent when offered open terms. This type of insurance safeguards your sales against political risks, such as changes in import/export regulations and interference from foreign governments. Many companies find it challenging to compete effectively without offering credit to their customers. For exporters, commerce credit insurance creates a more equitable global marketplace. Engaging with new countries introduces diverse cultures and opportunities to tap into new markets and clientele, necessitating a solid understanding of the credit risks involved in exporting goods or services.

What is credit management? Credit management refers to the strategic approach employed by a company to mitigate the risks associated with late payments or defaults from its customers. A robust credit management strategy involves a continuous and proactive assessment of potential risks, evaluating their likelihood of resulting in financial loss, and implementing measures to safeguard against the inherent dangers of extending credit. Establishing a credit management plan is essential for protecting the cash flow of your business, enhancing operational performance, and minimizing the risk of defaults negatively affecting your organization. Given that each business is unique, it is crucial to develop a credit management plan that is specifically tailored to the distinct needs, industry characteristics, and customer profiles of your business. Experts concur that effective risk management practices should encompass the optimization of contract management and accounts receivable processes, thorough identification and analysis of the risks posed by new clients potentially defaulting on payments, and the formulation of a proactive strategy for mitigating credit risks.