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An update from LCI & LCI Services on COVID-19

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Dear partners and colleagues,

We hope you are safe and healthy.

As the global pandemic, COVID-19, continues to spread, sending countries and businesses into a state of panic, we realize that we do not have a frame of reference, to help us navigate. When we look back at previous economic crises and compare them to the current situation, we find that we are operating in a period of complete uncertainty.

Whilst we cannot provision for what is to come, we can act fast, as individuals and businesses, to contain the spread of the disease and the exponential impact it is having on our respective companies.   

As insurers, identifying market risks and working on strategies to mitigate them, is built into our DNA. Global transformations have exposed our companies to risks throughout the years. But this is the first time, as insurers, partners, reinsurers and clients, that we are all working to navigate through the same type of crisis on a global scale.

In this regard, we would like to share with you what we have done as a company, to safeguard our teams and business and our diverse client portfolio. We hope this action plan may provide you with valuable insights, and make you feel that we are all operating as one, at this stage.

On a company level

To ensure the safety and health of our teams, we have been operating remotely for the past 2 weeks. Our team members have been empowered and counseled to be able to work effectively from their homes. This move contributes to the containment of the disease, and protects the potential spread of the virus.

However, seeing that we are in a client servicing industry, we put into place stringent business continuity plans and optimized lines of communication, to continue to carry our business as usual. All meetings have been shifted to online platforms and our team is on high alert, to respond to any requests, queries and provide support to clients, partners and reinsurers.

As a result of these two actions, as well as the shared crisis, we find that the team synergy has greatly increased, and each team member understands the vital role each of them plays, to keep the company afloat and delivering on its responsibilities.

On a national level

LCI as a trade credit insurance company and LCI Services as an expert servicing arm in credit management, have a national responsibility. In this regard, we have taken it upon ourselves, in coordination with the Lebanese government and Association des Compagnies d’Assurances au Liban (ACAL), to contribute to combating the spread of COVID-19, by donating to a relief fund. The funds that have been pooled in by various insurance companies, will ensure that COVID-19 testing is covered and the respiratory care needed for urgent cases is provided to all.

Adapt, showcase agility

In these trying times, we are here to support you. Our teams are continually exploring ideas on how to become more agile and adapt our business models to overcome the current crisis, as we believe the world will certainly not be the same after this global crisis. The sharing of information, best practices and tools to help us all overcome difficult period, is a shared responsibility and we look forward to hearing about your experiences.

On this note, we hope that you stay safe and healthy.

Sincerely,

Karim Nasrallah

General Manager, LCI

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What can businesses do to navigate in crisis mode?

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lci lebanese credit insurer coronavirus crisis economic crisis

The global impact of COVID-19 is unfolding at an exponential pace, which is greatly impacting the economy. In addition, business activity across all sectors has slowed, and trade has come to a standstill in many markets.

From a business perspective, there are many implications resulting from the spread and panic around COVID-19, which include:

  • A drop in sales and business activity, with planned targets for Q1, and potentially Q2, being missed by wide margins
  • Companies are enacting their disaster recovery and business continuity plans, due to forced closure of companies to decrease the potential spread of the virus
  • Supply chains are being disrupted, especially impacting retail businesses. Servicing and software companies have been able to implement business continuity plans more effectively, to minimize disruptions.
  • Clients and buyers might not be able to pay on time, which will result in a spike in bad debt that will require extensive debt collection efforts.
  • Business travel has stopped, and only necessary meetings are being held in small groups, or through virtual conferencing solutions.

Companies are now faced with a growing challenge, which entails maintaining business activity, while managing the impact of the spread of COVID-19. Businesses are taking precautions to safeguard the livelihood of their teams, yet attempt to carry out business as normal, by allowing team members to work remotely.

So what can businesses do in such times?

Companies that are unable to adapt to the growing challenges, will likely not survive the crisis. Therefore, it is integral for companies to act fast and adopt new strategies, to be able to navigate through the current and imminent challenging period.

LCI recommends the following steps:

  • Move urgent meetings and meetings that required travel, online, or reschedule them for a date in the near future (given the travel bans are lifted).
  • Maintain close relations with partners and suppliers, to not create further disruptions.  Supply chain disruptions are expected, especially for e-commerce / online businesses that have experienced a surge in demand due to the current COVID-19 crisis. Keep both partners and suppliers informed of the latest updates and negotiate better terms where needed.
  • Implement contingency plans to ensure business disruptions are kept at bay. Whether corporate decisions are taken to close offices and have teams work remotely, or whether they are imposed by government officials, it is important for team members to understand their responsibilities. Immediately put in place clear channels of communication, reporting procedures and ensure all employees can connect to their emails / server. Ongoing internal communication is advised.
  • Review your company’s cash flow and provision for different scenarios, as the repercussions of the crisis, as well as the climate of uncertainty, are expected to linger. Cutting expenses is important, provided that it does not harm the business.Companies will need to align all aspects of their business, including their operating models, workforce and systems, in order to become more agile. Companies that are the fastest to adapt to the current situation will have a higher chance of survival.
  • Strategize, work on internal processes and strengthen your online presence. Now is the time to turn inwards and invest time to improve your company, products and services. Review and corporate materials that need revisions. Enhance the SEO ranking of your website and your business listings.
  • Tailor sales and marketing plans, to adapt to the current situation. Both sales and customer acquisition in such times, are likely to be difficult to achieve. It is recommended that companies firstly provision for a drop in sales, in the forecasts, and work on a detailed plan, to acquire new customers. Understand the psychology of customers during such times and tailor your efforts to cater to them. You could simply send a friendly reminder that you are operational and there to support them.
  • Identify potential partnerships to scale. Scaling up in uncertain times can be a big challenge. However, partnering with existent innovative companies and tech startups might be the solution. Research the local ecosystem and find any companies that are aligned with your business activities. Then seek to partner with startups that can innovate and test products or services, in collaboration with you.
  • Lastly, depending on how long the impact of COVID-19 on the economy will prevail, drastic measures pertaining to restructuring might be necessary.

How is COVID-19 impacting trade?

Global shipping has been greatly impacted, and the sector is losing millions of dollars per week, due to forced measures to halt activity and the movement of goods. Trade has exponentially slowed and in some cases come to a halt.

What is the impact of COVID-19 on insurers?

Insurance companies, and particularly, trade credit insurers are feeling the impact of the pandemic outbreak. Global insurers foresee a spike in claims, due to forced cancellations of travel, movement of goods, capital and people, as well as events and orders.

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IFRS 9: How will the approach to credit risk change?

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Risks associated with trade credit have taken on a different angle, with the introduction of new standards under IFRS 9.

Various geopolitical, economic and financial risks have prompted international bodies to approach risk appetite and mitigation in a different way. A recent introduction by the International Accounting Standards Board (IASB) pertaining to the International Financial Reporting Standards (IFRS 9), will change the way companies and credit insurers manage credit risk, and how they provision for it.

The key addition is the Expected Credit Loss (ECL) principle, added to ensure that companies and credit insurers integrate vital processes to comply with the ‘expected credit loss impairment principles’.

The key points in IFRS 9

Financial and non-financial organizations take note

  • A multitude of businesses will be impacted, with regards to the compilation of credit information. Companies will need to enhance credit information systems and procedures to collect data, as part of IFRS 9.
  • Companies will be required to provision for potential losses based on information and forecasted data. The loss ratios pertain to receivables that are not yet deemed overdue.
  • Under IFRS 9, additional requirements have been added, to include in the periodical financial statements.
  • Credit management systems within companies, as well as accounting policies will need to be changed to adapt to the new standards.

Credit risk management will be approached in a different way, in order to safeguard the health of the financial industry. However, a key criticism to IFRS 9 remains the various interpretations of the principles, as stipulated under the standards.

How can credit insurance help?

Credit insurance can help companies waive the impact of provisions under IFRS9 for their receivables.

To learn more how LCI can ensure your company’s trade receivables, support you in shifting to new standards and preparing your company to integrate IFRS 9 standards, do get in touch with our team on: info@lci.com.lb or visit our website: www.lci.com.lb

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How SMEs can scale up their businesses

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6 tips to help companies scale up and grow

Small and medium sized enterprises (SMEs) can work on various levels to scale up their businesses, both domestically and in international markets. As SME experts, LCI’s team gathers daily insights, from monitoring over 16,000 companies, and continually identifies key areas of focus, to aid businesses to scale up.

Here are 6 tips to help companies to scale up:

Adopt the digital trends

Every company needs a strong online presence, being the first place customers research a product or service. Developing a user-friendly and attractive website helps to position your company in a positive light. Websites and social media channels can be effectively used to update clients on the latest developments and widen your audience globally through targeting. To effectively use digital mediums, ensure they are up to date and position your brand in a unified manner.

Focus on your strengths

Identify your unique selling proposition and capitalize on it. What strengths does your company have, that others do not? Focus on that in your communication efforts, both online and offline.

Costumer service translates into loyalty

Ensure your customers are well taken care of, from when they are deciding which product or service to purchase, until after transactions are made. By creating a two-way flow of communication, along with add-on services, customers will feel closer to the company and likely repeat purchases.

Identify new opportunities and markets

Whilst expanding into new markets is integral for companies to scale up faster, it comes with many challenges. Before venturing into new markets, research local competition, risks and the market appetite for your product or service. Is there strong demand for what you are offering? Are there cultural norms that you need to adapt to? Know the market well before expanding.

Standardize your processes

When scaling up a business, systems and processes that are standardized will ensure a more seamless experience internally. From financial elements, credit management, to paperwork, systems and delivery processes – develop a system that is followed across all markets, to create a unified experience.

Manage trade receivables and cashflows

Whether selling domestically or internationally, managing your trade receivables and cashflows are integral to scale up. Provisioning for upcoming expenses, whether investments in human resources, marketing or business development, if you have a clear forecast of your receivables, it can ensure a healthier cashflow.

Learn more about how LCI can help you expand to new markets and increase your exports here.

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LCI hosts 9th Annual Partners & Reinsurers Meeting

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LCI held its 9th Annual Partners & Reinsurers Meeting in Beirut, on June 20 and 21, in the presence of local, regional and international guests. The meeting shed light on the strategic developments at LCI over the past year, and the plans for growth for the coming years.

Corporate reviews on LCI and LCI Services opened the meetings, followed by a series of presentations from partners, experts and new reinsurers, taking place throughout both days.

As an acting driving force of trade facilitation globally, LCI and its partner network continue to increase the spread of credit insurance on an international level, through joint efforts.

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Strengthening partnerships in Egypt

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LCI’s General Manager discusses innovation in trade receivables management

LCI took part in the official conference hosted by GIG Egypt and the Ministry of Trade and Industry in March, 2019. The aim of the conference is to strengthen investment and collaboration opportunities between Egypt and Syria. LCI’s General Manager, Karim Nasrallah, shed light on the innovation in trade receivables management, to drive trade globally.

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Digitization will impact the trade industry

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Every day, fleets of huge ships dock in ports over the world and every hour, a plane carrying cargo lands, in one country or another. With every docking and landing, a stack of paperwork will need to be processed. Whilst this practice has been the standard process adopted by governments and countries for decades, the cost of processing trade documents still remains high.

Based on figures released by the World Economic Forum, the cost of processing the paperwork for shipped goods, can reach as much as one fifth of the cost of shipping the actual goods. Many institutions, including banks and technology companies, are trying to streamline this process, as the benefits are numerous. Experts indicate that simplifying the administrative procedures can actually lead to notable growth in international trade.

Apps, technological innovation & block chain solutions are simplifying procedures of shipping goods.

In comes digitization, which is already underway in the trade sector. Apps, projects, technological innovation and even block chain solutions are simplifying the once complex administrative procedures of shipping goods. Electronic-based documentation lowers costs, simplifies workflow, and takes up less time in terms of analysis and storing. Depending on the electronic documents along with the use of standardized ID numbers for transactions, traders can benefit from a smoother process, expand to new markets and deal with new clients, with less requirements when it comes to due diligence, collecting and tracking credit, performance and commercial dispute data.

The advantages of digitizing the trade sector are clear, but will governments and private institutions move fast enough?

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LCI continues expansion in Africa, launching credit insurance program with ASKIA Assurances

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LCI Services officially launches credit insurance program with ASKIA Assurances in Senegal
LCI Services, the Lebanese Credit Insurer’s (LCI) servicing arm, has completed the implementation of tailored trade credit insurance products and services for companies in Africa, together with ASKIA Assurances in Senegal. The official launch brought together over 200 people and took place in Dakar, Senegal. The agreement entails the establishment of a partner operation in 7 African countries, to develop local markets and assist ASKIA Assurances in extending trade credit insurance coverage. It will also help protect businesses from growing commercial and political risks and in increase exports, to aid in the growth of the Senegalese private sector.

“As the first independent specialized trade credit insurer in the MENA region, we wanted to share our expertise and develop other regions when it comes to trade credit insurance,” said Karim Nasrallah, General Manager of LCI. “Trade credit insurance, credit information, debt collection and business development are vital elements to support local businesses in scaling up and expanding into new markets. We are confident that this move will boost the development of small and medium-sized enterprises in Senegal,” he added.

LCI Services offers comprehensive outsourcing solutions that include access to reinsurance, risk and commercial underwriting, debt collection, credit information, business development and IT support. These services will be offered to the 7 African countries, which include: Senegal, Ivory Coast, Niger, Burkina Faso, Guinea Bissau, Togo and Benin.

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LCI launches TAJER supporting SMEs, the main drivers of the MENA region’s economy

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TAJER: The simplified trade credit insurance policy helps support SMEs in their growth and expansion strategies

The Lebanese Credit Insurer (LCI) has launched TAJER, an innovative, simple and efficient credit insurance policy for Small and Medium-sized Enterprises (SMEs) operating across the MENA region, providing cover for their trade receivables. Utilizing LCI’s expansive market intelligence, including the active monitoring of 16,000 companies focusing on their payment behaviors, TAJER will aid SMEs in growing their businesses and ensuring they get paid for the goods and services they supply. 

“SMEs make up a major part of the MENA region’s economy, and in Lebanon, they comprise an estimated 80% of companies. Yet, only a small percentage of them are covered against the risks of non-payment,” said Karim Nasrallah, General Manager of LCI. “As such, we want to support them in their expansion into new markets and in growing their client portfolios. TAJER gives SMEs the confidence to look at new opportunities in their local markets and abroad, and focus on their growth,” he added.

The Middle East and North Africa (MENA) region has undergone a series of transformations in recent years, impacting the way businesses operate. LCI’s Risk Department market analysis shows that the risk of payment defaults is increasing, impacting the trade receivables of companies across the region. The highest risks in the market are impacting SMEs, rather than by bigger corporations, especially as they expand their market coverage and export to the different parts of the world – a move needed to optimize revenues and generate profits.

SMEs in Lebanon, as well as in most markets globally, employ the majority of the workforce, and play a major role in creating job opportunities. They are the institutions that fuel the economy. Lebanon is known to have one of the biggest densities of established business owners, not only in the MENA region, but even globally, based on official figures.

Seeing that there is a scarcity of available information (financial and other), the only way for credit insurers to underwrite risk is to conduct research via on-ground visits to companies, to understand, based on their sector experience, what is the potential opportunity and credit worthiness of each entity. Monitoring is also segmented by sector, trade size, company size and country location.

With TAJER, the straightforward and flexible insurance policy covering a company’s biggest asset, its trade receivables, many benefits will be offered which include:

  • Increase sales, by extending credit limits to existing clients and reconciling between the sales and risk departments
  • Manage risks, by accessing a large database of information and intelligence on thousands of companies
  • Be more competitive, by extending payment terms for new and existing clients
  • Protects against bad debt, by securing cash flow and optimizing financial planning
  • Achieve better borrowing from banks, turning trade receivables into good quality collaterals, allowing companies to negotiate better borrowing terms

 

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LCI takes part in the Berne Union AGM in Paris

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LCI took part in the Berne Union’s Annual General Meeting, held in Paris in October 2018. Karim Nasrallah, LCI’s General Manager, delivered a presentation on the topic of factoring, covering a case study on fraud detection and prevention.

Over 300 senior executives from the global export credit and investment insurance industry today gathered in Paris, for the 2018 (75th) Berne Union Annual General Meeting, hosted by French export credit agency and Berne Union member – Bpifrance.

Berne Union Members released their 2018 H1 Business Data
Half-year results show stable business for credit and investment insurers, despite the uncertain environment for international trade and investment.
• US$ 1,640 bn aggregate credit limits issued in support of cross border trade
• US$ 88 bn of new medium / long-term export credits insured
• US$ 18.6 bn cover provided for foreign investments

For more: www.berneunion.org

 

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