Coface looks strong despite global uncertainties

Richard Burton, general manager, Greater China for the Coface Group, discusses new initiatives to ease the burden of the Asian trade process.

Your core business is dependent on global trade flows. How has it been affected by the present general uncertainties and specifically the terrorist attacks on the US?

As for the general uncertainties, we have been affected in several ways. Firstly in an uncertain economic environment, as a credit insurer we see non-payment experience, or our policyholders declare over-due accounts to us. These transform into increased claims and payouts on our side. We've already seen this in a number of countries and quite dramatically in the UK, Germany and in the US - even before the attacks. We're starting to see the secondary impact of the collapse in demand from the US and UK start to impact companies in the Asian economies û especially Taiwan.

The second way we are affected as a credit insurer is that if there's a decline in trade then our revenues can decline. Because of the way we invoice, our income is based on the income of our customers. If our customers' income is fragile, so ours can become fragile as well. But in the current situation we are not overly concerned. Our mid year results show a healthy growth of 15% in turnover for the six months over the same six months last year. So we are hoping to produce something not dissimilar in the second half.

In uncertain times, people and business become more risk averse. Therefore should there not be an increase in demand for your products?

There is that impact on the positive side for us. In a downturn, people do turn to credit insurers. We have had an increase in demand in the past 12 months, not only as a result of our own marketing but also because companies are becoming more sensitive to what is a large asset on their balance sheet which is essentially at risk.

Is your business counter cyclical or does it follow the traditional economic cycles?

We are not a counter cyclical business. Our business is about making business-to-business trade easier and so over the long term we grow very steadily in all times. As a business generally we get revenues from not just the risk side, but also from helping businesses find other trading partners and to trade with them more.

One of those initiatives is @Rating, which was launched last year. How has the market taken to that and what feedback have you received?

It's well on the way to achieving what we wished, which was for @Rating to become a worldwide standard. We have something like 161 business partnership agreements signed and another 300 or so in negotiation in 47 countries. These are with banks and companies such as Tradecard. We recently signed here in Hong Kong with the Trade Development Council. Tradelink is another of our partners. Things have gone very well with the acceptance by the Asian business community of @Rating.

An example of how this fits in with trade and trade finance is our agreement with Bank Sinopac from Taiwan. A client of the bank û an exporter say û can check online the credit rating of his potential trading partner overseas and then submit a potential transaction to Bank Sinopac for financing, with our protection behind that. All that can now be done online. These things are happening and the take up we are seeing of this in Taiwan has been tremendous.

Another side of your business is your own proprietary credit information business. You bought Frontline [a credit information company] in Hong Kong last year. How has the integration of that business gone?

That side of our business is growing very well. As far as Frontline is concerned we are very satisfied. In Hong Kong we now have the ability to provide a full range of credit management services in the business-to-business field. We are not yet physically together with Frontline but we have a common message and common product offering.

It seems that with all these initiatives, your goal is to make trade more transparent in Asia.

That is what we want to do. We facilitate trade worldwide and we are very much about cutting out the complexity of global trade. We try to make it easier for businesses to trade together, through understanding who each other are and by giving them access to the oil in the wheels such as financing and credit protection.

What does the future hold for Coface in Asia?

We see growth in the obvious markets of India and China. In China we see very good growth opportunities although initially there will be problems in providing credit protection directly. So we may have to find other solutions there. But talking to interested parties in China, they see a very great need to bring their credit management standards up to the level of credit management in the west and so services such as @Rating or credit information, are going to be very much in demand.

We are also in the process of developing a Kompass Directory for China. This is a marketing information directory, which lists and classifies companies by product and by business sector. It is well known in Europe and North America. It helps companies find and locate businesses that will be interested in their products or in becoming a supplier to them. This service fits very naturally in with what we are doing in terms of credit and credit protection. It gives us further upstream ability to identify possible trading partners. Then companies will be able to identify their potential trading partners, check their credit, trade with them, finance that trade and insure that finance all through Coface and all done online.