Trade wars and Brexit: the incentives to create solutions in supply chain finance

Martin van der Hoek, Independent Consultant and Tutor in Trade Credit Insurance, talks about trade wars and Brexit and their impact on supply chain finance industry.

No supplier or buyer is happy about the political measures that diminish the chances of profitability. When and where will trade wars have an influence on business?

No democrat can be happy about the outcome of a referendum about remain in the European Union or leave, when the result is almost 50-50, as we saw more than 3,5 years ago in the UK. The repeating postponement of the departure was an inconsequence to be ashamed of. Writing these words before the scheduled election in the UK makes it impossible to describe the effects of a possible Brexit, but suppliers and buyers should prepare at least two scenarios. In case of a Brexit: what will change and influence the result of new transactions? In case of no Brexit: will it still be “business as usual’? These questions need answers from all parties involved in business with companies in the UK.

Where a problem arises, solutions are most welcome. One of the solutions is the cover of political risks. At any time after the acceptance of an order or after delivery or shipment of goods the credit insurance industry offers products that protect suppliers of goods and services against the disappointing financial consequences of political decisions, such as the start of a trade war or a possible Brexit. Supported by sufficient reinsurance, the volume and the spread of insured risks and many years of experience the credit insurers facilitate trade and offer products that may serve as collateral for financing the trade.

Trade wars and Brexit are challenges to continue business relations in spite of the possible imminent risks. Trade credit insurance is ready to accept the challenges.

The conditions for cover of political risks depend on many factors, stipulated in credit insurance policies. The economy of a country is one of them. Trade wars or Brexit are not mentioned as exclusion for cover. But they are factors that may influence the premium rate and the capacity to cover political risks. That is why credit insurers monitor the development of countries in order to be prepared for changes reflected in their rating.

The coming months will give many opportunities to anticipate and to react on trade wars and Brexit and their influence on supply chain finance.

Martin van der Hoek will speak at BCR’s Supply Chain Finance Summit which will take place on 30-31 January 2020 in Amsterdam.