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

October 3, 2019 , No comments

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

November 7, 2018 No comments


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

October 18, 2018 No comments

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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