Sudden default:
When the unthinkable happens
No company is too big to fail
What are sudden defaults and should my company be worried?
Sudden defaults are defaults that are improbable, unpredictable and unimaginable.
They are characterised by their size, value and speed of default and the circumstances for the default. Often, the triggers for these sudden defaults are a combination of events. A metaphor for a sudden default is the "black swan".
Even the most experienced credit manager can be caught off guard, having not foreseen it coming. Yet It is how we respond and interact in such cases, that can make the difference to your business when faced with this situation.
In a volatile economy, sudden defaults are increasing
Across business sectors, defaults are on the rise. Today, the global average for insolvencies is twice what it was a year ago.
- We expect insolvencies to increase globally in 2023, driven by continued normalisation after the pandemic and the bankruptcy of zombie firms
- In 2023, we expect sharply rising business failures in South Korea (154%), Italy (90%), Hong Kong (83%), New Zealand (82%), the Netherlands (79%) and the United States (74%)
- In 2024, we forecast relatively high insolvency increases in New Zealand (62%), South Korea (35%) and Singapore (30%)
Threats to your customers are also threats to you
Thanks to high inflation and interest rates, high energy costs and subdued customer demand, many businesses that might have been considered secure just two or three years ago are now in danger of being caught by the unexpected.
The triggers for these defaults are a combination of events showing that no company is too big to fail and that even the most experienced credit manager can be caught by an unexpected insolvency.
Ripples can spread far and wide. In the case of a sudden default, suppliers risk payment deferrals and, sometimes, not being paid at all.
As a supplier, how do you prepare for an improbable event? How do you predict the unpredictable?
Our approach to protecting your business
In this environment, it’s essential that suppliers take risk management seriously. Credit insurance provides cover against the risk of customers not being able to pay their debts. Our specialists have an expert ear to the ground can often pick up on the early signs of corporate distress before defaults happen
When the circumstances of an extraordinary case requires additional expertise, special attention and tailor made solutions, Atradius is the right partner.
Our Special Risk Management (SRM) unit is a team of international experts in underwriting, legal affairs, claims and recoveries, that come into action to support and help you recover outstanding debts as soon as one of your customers gets in a situation that begins to deteriorate - or worse.
It is how we respond and interact in such cases that makes the difference to your business.
The benefits to you
- We protect you, the supplier, from (further) non-payments
- We help restructure the debt of your customer, the buyer, in a way that, if possible, trade can continue or, if not possible, by supporting you with the most optimal exit-strategy
- We save time and achieve cost efficiencies for you in the proceedings and negotiations
- You can benefit from our cultural, lingual and legal know-how in more than 50 countries
- Alignment of our services with your business strategy regarding your customers
- We support you in creating a strong(er) creditor position
- We maximise your recoveries