Nordkorea, Ukraine-Konflikt, der bevorstehende Brexit, ein drohender Handelskrieg zwischen den USA und China oder der Protektionismus der Trump-Administration - die Entscheidungen der politischen Entscheidungsträger sind maßgeblich für den globalen Wirtschaftskreislauf. Doch was bedeutet dies für die Kreditversicherer? VWheute hat exklusiv mit Coface-CEO Xavier Durand gesprochen.
VWheute: Global politics are characterized by international conflict and new protectionist measures. How do you assess this global situation in general and do you see impacts on credit insurance in particular?
Xavier Durand: Coface constantly monitors risk – economic as well as political and conflict risk. We actually developed a new indicator last year that looks at the number of armed conflicts and terrorist attacks happening in the world, and which gives us a good feel for the level of political risk in a given country. What we’ve seen recently are better economic indicators globally, but a trend of increasing political risk and uncertainty.
It’s natural that, as credit insurers, we are impacted by this evolution: after all, our business is all about trade. Rising protectionism and political risk are part of what we have to monitor. However, our job is not to predict outcomes but to leverage our finely meshed international network to monitor debtor and other risks (under a close to the risk model) in order to help companies everywhere they operate - our clients - to be ready for a number of different scenarios.
We want to act in partnership with our clients so they can better protect their businesses and build successful, growing dynamic enterprises whatever may happen in 200 countries around the world. Coface‘s ambition is to be the most agile global credit insurer in the industry; and so adapting to the changing geopolitical and sectorial risk landscape is simply what we must do.
VWheute: Russia: Relationships between Russia and western countries are anything but conflict-free. How do sanctions affect businesses/companies in western countries, especially in the EU and how are credit insurers affected?
Xavier Durand: Sanctions affect companies‘ ability to trade – so when a company or a country is subject to sanctions, businesses are directly affected; there is disruption and pain. The best most and most recent example is the tension in the aluminium sector following the US‘s imposition of 10% tariffs on aluminium (+25% on steel).
We are obviously affected by sanctions around the world, including those imposed on Russia, or those imposed on the EU or the US by Russia. Russia is expected to take retaliation measures on US exports to the US, but the impact of counter-sanctions by Russia is likely to be limited.
These could be in software, agricultural goods, medicine, tobacco and alcohol. Since some large companies in the energy (Gazprom Burenie) and metal sectors (the aluminum giant Rusal for instance) have been targeted, sanctions could also have an impact on US companies‘ clients in the construction and automotive sectors.
But as I say, our job as credit insurers is to adjust our risk appetite according to how events develop.
VWheute: Ukraine: This conflict is not currently in the headlines anymore but still is an important topic in international politics. How does this conflict affect your business?
Xavier Durand: We see Ukraine as very weak on our country risk assessment scale; at C. The country’s conflict with Russia and Russian-speaking populations in the east, with the inherent threat to the country’s territorial integrity, is one of the factors that weighs negatively on the country’s financial and economic outlook. Our business climate assessment is also at C - that’s to say, difficult.
Ukraine is still indirectly in the news, however, given that one of the arguments used by the US administration only a few weeks ago to justify imposing sanctions on Russian companies included accusations that the Russian elite and their companies support the Russian government’s actions, including in Ukraine.
While I personally deplore the current situation, Coface has little or no exposure to Ukraine: we took action to reduce our risk exposure in what has been a difficult – and increasingly conflict-ridden economy –some years ago now.
VWheute: Soccer World Championships in Russia: Those events are an important business opportunity for companies and particularly the sponsors. Is there any effect for credit insurer´s business? What is your opinion on the debate about such an event in the context of political sanctions?
Xavier Durand: While I think that Russia’s hosting of the Soccer World Cup is important symbolically and locally, on a global scale, the weight of this event in economic terms is limited, notwithstanding its significance for certain broadcasters and advertisers. It’s not Coface’s place to articulate any political viewpoint on the question: what we need is to do is our job as credit insurers, and to prepare for events that arise, helping companies better understand both risks and opportunities for growth.
VWheute: Europe: The EU is in one the biggest crises in its history. Will Europe be a safe haven for exporters in the future?
Xavier Durand: Europe has taken 70 years to build, and is stronger now than it was decades ago, despite the myriad challenges it faces today. We must not forget that Europe remains one of the strongest economic regions in the world, and is a significant market. Europe will naturally try to protect its trade agreements with the US, with Asia, and to continue its development. Remember, trade has been increasing steadily decade after decade for as long as we can remember, despite political risk. At Coface we believe that trade is a force for good in the world, leading to stability, wealth and well-being. That’s why we recently changed our tagline – to the assertive statement: Coface for trade – which reflects our purpose to support trade worldwide.
While Brexit will almost certainly be one of the biggest tests in the history of construction of the EU, we would not qualify this period as a crisis. It hasn’t yet weighed on the development of European companies. They continue to benefit from a number of favourable factors: a very expansionary monetary policy resulting in a gradual recovery of credit to the private sector, continued relatively low oil prices helping to maintain corporate margins, and strong household consumption.
The construction and automotive sectors are continuing to see positive trends. Insolvencies are expected to continue to decline in 2018 in Europe, although at a slower pace than last year. Despite the fact that we see companies gradually subject to supply constraints – both here in Germany and in France – does not mean we see Europe as being in any danger of losing its status as a major and attractive export market.
VWheute: What do you expect to happen under Brexit? What are the consequences for companies and for Coface as a credit insurer?
Xavier Durand: As a credit insurer, Coface has been monitoring Brexit risk for some time now – well before the referendum in 2016. It will be hard to assess the knock-on effect of Brexit until we know what the final deal is. Right now, we see the impact of the uncertainties: gradual deterioration in UK economic growth, slower household consumption, the resurgence of inflation, and certain sectors are feeling the pain: we downgraded our sector risk assessment for the UK construction sector UK to very high risk, for instance, following our last quarterly review of country and sector risk. Another is the automotive sector.
But let’s not forget that Brexit also represents an opportunity for core European Union countries to work together, and to consolidate what remains a globally strong regional economy and major market. The EU is the UK’s main trading partner but EU countries have limited exposure to the UK, with the exception of Ireland, despite some cases of strong intra-trade links.
VWheute: Protectionism: America first is the maxim of D. Trump. On the one hand is fear of new protectionism on the other hand we heard praise for tax reforms. At the same time US-foreign policy seems to be incalculable (see North Korea). Are credit insurers affected by this international affairs and do you see more chances or more risks?
Xavier Durand: The protectionist fever that has swept the globe since the election of Donald Trump and the spectre of a global trade war may partly explain an erosion of business confidence in Europe & the US. Coface expects President Trump to continue to announce protectionist measures ahead of the mid-term elections in November 2018. In the short term, recent measures imposing tariffs on some Chinese products will have no significant impact on the dynamics of world trade (forecast of + 3.7 percent by Coface in 2018).
In the longer term, however, an open trade war between China and the United States could intensify in some sectors. It's worth noting that the EU‘s temporary exemption from the US imposition of 25 percent tariffs on steel and 10% on aluminum domestic imports is very fragile – total exemption is actually on President Macron’s agenda during his state visit to the USA this week.
As a credit insurer, Coface is by definition dealing with these kinds of risks day in, day out. We work at the heart of the global economy, and have been doing so for over 70 years, taking 10,000 credit risk decisions a day, on 2.7 million companies, and we have around 520 billion euro in exposure.
I think these times of political uncertainty and market volatility prove only that the job of the credit insurer is more relevant than ever: the more risk there is, the more reason our business has to exist to manage and guide companies in navigating uncertainty in order to take the best decisions they can for their businesses.
VWheute: Let's take a look at Asia: many experts are currently worried about a trade war between the US and China.
Xavier Durand: A trade war is possible, but far from certain. The fact is that trade between China and the US continues to be fairly strong; the two economies are intertwined. Our own client portfolio shows that trade is happening between these two economies every day. The current tension in the geopolitical relationship between the two countries doesn’t mean trade will decline significantly over the long term, though certain sectors such as metal might be affected short-term by US actions to raise tariffs, for example. Coface is here to anticipate this type of event, and help our clients navigate challenging situations - if and as they arise.
VWheute: Back to Europe: France has a new president in Emmanuel Macron, who wants to engage a number of political and economic reforms. How do you rate his ambitions?
Xavier Durand: Prior to becoming President Emmanuel Macron was clear about his overriding ambition to drive through significant structural reform in France – in the economic sphere, of course, but in other areas too, such as education. Today he is working to implement the programme and policies that won him the election: I see consistency between what he said he would do, and what he is actually doing, and this is a positive for the country and the economy.
VWheute: Outlook: How do you see the future of credit insurance? Need for a new business model? Other challenges? Do credit insurers have to act “closer to the risk”? How do you see the future of trade financing in general?
Xavier Durand: I don’t have a crystal ball but I can tell you that the future will see growth, trade, risks. So the future of credit insurance looks bright.
The question is how we will perform in managing or balancing these factors. How can we provide a service that best meets the needs of companies of all sizes and sectors? The industry has been historically good at serving large companies, but no doubt less efficient at providing a service that really meets the needs of medium- and small-sized companies: services that are readily accessible and easy to manage.
Under our Three-year strategic plan launched in 2016, Fit to Win, Coface is making targeted investments to adapt quickly to the challenges digitalisation poses: we’re adapting our processes, systems and tools to make the most of new digital evolutions and looking at ways we can harness artificial intelligence, big data to do our job faster and better… all in the interests of improving the quality of our client service.
A client who in a digital and ever-changing world needs shorter response lead times, high-quality information, state-of-the-art service: who demands agility, in short. And of course, we firmly believe that being close to the risk is critical: Coface is the most international of the three global credit insurers, with direct or indirect presence in 100 countries across the world, and we intend to leverage that our unique, finely meshed network, to continue to serve companies whatever their size and wherever they operate.
Die Fragen stellte VWheute-Redakteur Tobias Daniel.
Bild: Xavier Durand ist Vorstandsvorsitzender des Kreditversicherers Coface. (Quelle: td)