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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 Expands its Debt Collection Services to 11 New Markets in Africa

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The servicing arm of the Lebanese Credit Insurer (LCI), LCI Services, has expanded its Debt Collection Services to cover 11 new African markets, which include Mauritania, Senegal, Gambia, Guinea Bissau, Guinea, Liberia, Ivory Cost, Ghana, Togo, Benin, Nigeria, Cameroon, Gabon, Congo, Democratic Republic of the Congo, Angola, Madagascar, Tanzania, Kenya and Sudan, in addition to existing markets which it covers.

“Businesses operating in the Middle East and Africa face recurrent difficulties in securing payments for the goods and services they supply. It is widely known that these regions achieve inadequate rankings when it comes to debt collection, and many businesses are suffering when writing off bad debt,” shared Karim Nasrallah, General Manager of LCI.  “With our expanded reach of debt collection services, we are supporting clients in their regional growth, and protecting their biggest asset – their trade receivables. The addition of these new markets will allow LCI to extend credit insurance cover in these markets in Africa,” he added.

Delays in payments are mainly due to lack of a proper payment behavior framework and a lenient payment culture in these markets, which leads to buyers defaulting and extending supplier credit limits for over 180 days. Debt collection is key for companies to recover outstanding balances. The Debt Collection Services offered include: recovery management, verbal negotiations, dunning letters, final demands, solicitor’s letters, drawing up repayment plans and legal action.

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Berne Union hosts Annual General Meeting in Belgrade

The Berne Union hosted its 2017 Annual General Meeting (AGM) in Belgrade in October, gathering 260 participants representing 70 of the 82 Berne Union member organisations, inclucing external guests. The Meeting was hosted by Serbian Export Credit Agency (ECA), AOFI.

Members reported strong growth in new business across all committees, and although claims remain high, and the global risk environment challenging, most are optimistic about the coming months and into 2018.

Short Term Trade Credit Insurance (ST)
Members of the ST Committee have collectively issued credit limits of USD 1,188 billion at the mid-point of the year. This is 18% higher than the situation at year end 2016, where they stood at USD 1,007 billion. Two thirds (67%) of members surveyed expect further increases in business volumes over the coming 12 months, and the majority of the remainder (27%) anticipate a stable continuation of the current state.

Growth is expected across developed markets generally, especially North America and the European Union, where economies are benefitting from improving fundamentals, relaxed lending conditions and increasing domestic demand. Any changes to interest rates are likely to have a significant impact on this situation.

There is some caution with respect to the impact of fluctuating oil prices – with the potential to adversely affect both oil exporters or net importers, depending on the direction of travel.

For those countries reliant upon commodities exports more generally, there are also concerns, especially in Sub-Saharan Africa, where levels of national indebtedness are also high.

Members are keeping an eye on the banking sector in Asia, while in OECD countries traditional retail brings greater concern, due to competition coming from online sales. Notwithstanding the challenges highlighted, 94% of ST members express optimism overall with respect to prospects for global economic growth in 2018.

Business Focus and Challenges

In most areas, members of the Berne Union report competitive pressures presenting a challenge for their business. In short term business, 26% cited the soft market as a concern, while 30% focused on digitisation of processes and 19% on better provision for SMEs.

INV members cite concern about soft market pricing as well, but also see a challenge in distribution. In some areas a lack of demand, which may be overcome by improvements in marketing awareness of products to potential clients.

According to Secretary General, Vinco David, “The market for commercial credit insurance has seen a number of new well-capitalised entrants offering credit insurance at competitive rates. Due to the current low interest rates, capital markets parties are seeking higher returns and credit insurance may offer this. However, when interest rates begin to rise, this situation will reverse. As supply and demand establish a new balance, we would expect to
see higher premium rates as a consequence”.

For more information, visit www.berneunion.org

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ExCred 27 Conference takes place in London

The ExCred 27 Conference took place in London from February 28 to March 1, 2017, in the presence of over 300 senior representatives from ECAs, insurers, banks and corporate exporters. The ExCred conferences tackle the global export credit and political risk industry, bringing together experts from the world over, to discuss various topics and share insights on issues of importance.
Karim Nasrallah, GM of LCI, took part in a panel entitled ‘How Middle East Governments Can Foster Growth Through Trade and Innovation. Joining him on the panel, was Dr. Andreas Klasen, Professor at the University of Offenburg, Germany, CEO of ITFC Hani Sunbol, ICIEC’s CEO Oussama Kaissi and chaired by Diana Margaret Smallridge.
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Prague Club elects HBOR’s Ante Alić as ‘Rotating Member’ on the Berne Union Management Committee

The Prague Club has announced the election of HBOR, represented by Mr. Ante Alić as the first ‘Rotating Member’ on the Berne Union Management Committee. Mr. Alić of HBOR was elected by the Prague Club members, and will be taking part in the next Management Committee meeting in London in February, followed by the Prague Club Plenary Spring Meeting in Botswana.
Congratulations to HBOR and Mr. Alić for this new role.
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ICIEC CEO visits LCI

Mr. Oussama A. Kaissi, CEO of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), visited LCI on January 14, 2016.

Several discussions were held with regards to further development and cooperation between ICIEC and LCI in the region, both strategically and technically. Furthermore, the upcoming Aman Union Annual meeting, which will be held in Beirut during November 2016, was discussed and planned.

About ICIEC

The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) is a member of the Islamic Development (IDB) Group. ICIEC was established on August 1, 1004 as an international institution.

The idea for the establishment of an entity to provide investment and export credit insurance for Islamic Countries originated from the Agreement for the Promotion, Protection and Guarantee of Investment among Member Countries of the Organization of the Islamic Cooperation (OIC).

This Agreement provided that the OIC, through the Islamic Development Bank, establishes an Islamic Insurance Company operating under Shariah principles, to provide insurance products for investments and export credits. The driving ambition behind the Agreement as a whole, and the creation of ICIEC, was to strengthen the economic relations between member countries of the OIC on the basis of Islamic Shariah.

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