Lisbeth Lorenz, GrECo expert for credit insurance, in conversation with Rainer Kubicki and Gerhard Weinhofer, Managing Directors of Creditreform in Austria, about credit risk management in times of crisis.
Lorenz: In its 140-year history, Creditreform has expanded its range of services from classic business information reports to credit and receivables management and insolvency representation. In 2020, there were around 40 % fewer insolvencies than in 2019. What development do you expect in 2021?
Weinhofer: Insolvency activity as a seismograph for overall economic development has decoupled from the real state of Austrian companies. Despite the biggest economic crisis since the Second World War and a massive economic downturn in the wake of the pandemic, the number of corporate insolvencies has fallen to just over 3,000 proceedings. The last time there were so few insolvencies was 30 years ago. The paradox of sharply declining corporate insolvencies in an unprecedented economic crisis can only be explained by the serious interventions of politics.
What can we expect for 2021? Creditreform has analysed its balance sheet database with around 150,000 companies subject to filing requirements. Taking into account the current economic development with an estimated GDP decline of at least 7%, this results in around 50,000 companies at risk of insolvency. They could and can only continue to survive because of the low interest rates and the current aid measures.
Lorenz: When will the insolvency surge come?
Weinhofer: That will probably be the case at the latest when state regulations ─ however well-founded they may be ─ are scaled back and the free play of market forces is allowed again. This development will largely depend on how quickly the pandemic is brought under control through vaccination and confidence in the economy returns. What is clear, however, is that payday will come, both for companies and for all taxpayers.
Lorenz: Creditworthiness and payment behavior are known to have an impact on the results of a company’s business. Which aspects of risk and accounts receivable management do you have to pay special attention to now?
Weinhofer: What is new is that in 2020 it was not management errors that were the main cause of bad debt losses and insolvencies, but the lack of capital. Insolvency liabilities have risen to over EUR 2.3 billion despite the decline in corporate insolvencies. The federal government also calculates that of the current EUR 11 billion in loan liabilities, around EUR 2.5 billion will fall due. The economic buzzword of the crisis is therefore securing liquidity. Only sufficient liquidity protects against one’s own insolvency.
Kubicki: Risk and accounts receivable management is even more important in times of crisis than in normal times. In general, there is a confusing volatility in the markets. The saying “trust, look, whom” should therefore be the guiding principle in business relationships. In concrete terms, it is a matter of constantly keeping an eye on the solvency of one’s customers and evaluating it on an ongoing basis. It is often neglected that suppliers should also be increasingly in focus. Just think of the effects on one’s own production chain if an important supplier fails.
Lorenz: What useful tips and advice do you have for companies?
Kubicki: Especially in times of crisis, even customer relationships that have been free of friction for years can quickly become a credit risk. It is all the more important now to also subject these credit exposures to a credit check. This is exactly where we come in. With our monitoring services, our clients can check their entire client base daily for current developments and react immediately to changes in creditworthiness, etc. A portfolio analysis also offers the possibility to get a general overview for a risk assessment.
Special attention should also be paid to accounts receivable management. A tight, professional dunning system reduces the risk of bad debt losses. Our team of experts, who can distinguish legitimate debtor interests from possible tricks of individuals, provides support in pre-court debt collection. Since every crisis also holds the opportunity to win new customers, we offer credit-checked marketing data to find new potential in a precise and targeted manner.
Lorenz: One more personal question in conclusion. How has the pandemic affected your life?
Kubicki: I was initially sceptical about the regular home office and had to learn how to deal with the new situation. But our IT department worked highly professionally, and so the changeover went smoothly at all locations within a very short time. The commitment and dedication of our employees impressed me and our entire management team. We also took measures at an early stage and communicated comprehensively from the beginning, e.g. with our own explanatory video. Since autumn, we have been almost completely home office. Personally, however, I am looking forward to meetings and customer appointments being possible on site again.
Weinhofer: I have gained new experience on how to lead a team from the home office and motivate it ─ especially in uncertain times. It was and is important to maintain social contacts in addition to my professional life in order to find a balance ─ even if it is only virtual.
Thank you for the interview!
Managing Partner Creditreform Wirtschaftsauskunftei
T +43 218 62 20 101
While still studying economics in Cologne and Wuppertal, Rainer Kubicki trained as a managing director at Creditreform Düsseldorf and Neuss. Since 1982 he has been managing partner of Creditreform Wirtschaftsauskunftei Kubicki KG. Rainer Kubicki is also President of the Austrian Creditreform Association (ÖVC), Chairman of the Professional Group Committee of Debt Collectors in the Austrian Federal Economic Chamber, member of the Professional Group Committee of Credit Reference Agencies in the Austrian Federal Economic Chamber, board member of the Austrian Debt Collectors Association (IVÖ) and member of the Regional Advisory Board of AMS Esteplatz, 1030 Vienna
Mag. Gerhard M. Weinhofer
Managing Director Österreichischer Verband Creditreform
T +43 218 62 20 551
Gerhard Weinhofer studied law at the University of Vienna and then worked as a legal intern at the Vienna Higher Regional Court and as an intern at the European Parliament in Brussels. In 2005, he moved from the Federation of Austrian Industries to Creditreform Wirtschaftsauskunftei Kubicki KG as an authorised signatory. Since 2011 he has been Managing Director of Creditreform.
Creditreform is Europe’s most important creditor protection organisation and has been active in Austria since 1889. 4,200 employees in 167 offices in 22 European countries and in China provide professional services for 157,000 clients: from marketing databases to risk and receivables management, business reports and company ratings. In Austria, Creditreform also represents creditors in insolvency proceedings before the insolvency courts.
In view of the current developments in Ukraine and the unforeseeable consequences, the private credit insurers are not providing any new or additional cover on Russian and Ukrainian buyers for the time being.
Group Practice Leader Credit & Political Risk
T +43 5 04 04 280