PARTNERSHIP IS AN OFTEN OVER-USED WORD IN BUSINESS, AND YET IT PERFECTLY CAPTURES THE RELATIONSHIP BETWEEN ACER, THE GLOBAL IT GIANT, AND EULER HERMES, THE WORLD’S LARGEST TRADE CREDIT INSURER.
For it is a collaborative approach to risk management, and the sharing of essential knowledge, information and experience that is at the heart of their mutual respect and understanding, and ultimately their continuing success in the field of risk management.
Acer began working with Euler Hermes more than eight years ago. Because of its size and international dimension, it was introduced to the Euler Hermes World Agency
, a team specifically tasked with devising innovative credit insurance programs for multinationals with annual sales in excess of $500 million.
Christian Greisberger, the Global Credit Risk Director for Acer, says that from the outset, the Euler Hermes team has invested significant time in understanding our business: “An insurer could just analyze our customers’ financials and decide that knowledge of our customers can simply be expressed by a credit limit,” he explains, “but Euler Hermes does much more than that."
“Its teams honestly and genuinely take the time to get to know our business, to talk to our senior executives and to visit our buyers not just so that they can understand the risk, but also so that they can understand our specific position and business model.”
Acer has built a reputation over the years for the quality and reliability of its PC and service-centric portfolio offering that includes notebook and desktop PCs, servers and storage devices, LCD monitors and projectors, smartphones and tablets. Its products are sold through all relevant distribution channels in every country around the world, either directly or through distribution.
To put the scale of its risk management task into perspective, Acer currently enjoys significant support through its insurer, which is reflected by Euler Hermes providing over $3.5B of credit lines for Acer’s customers.
Within the IT industry, businesses typically follow one of two risk management models: they either use credit insurance, or they adopt an in-house insurance strategy via a captive. Christian says that Acer is different: “We use a hybrid model,” he continues, “where we effectively share the risk
with Euler Hermes.
“This ‘risk participation’ approach gives us even greater flexibility and control over the risks that we take on, and especially enables us to look at higher levels of risk where we believe the business opportunity is justified.”
Such a hybrid approach is indeed different, although almost everything about Acer challenges conventional thinking. Christian understands that the company’s accounts receivable is its greatest asset, and needs to be protected. He also recognizes how the sensible and prudent management of credit risk
ultimately supports sales and profitable growth. He takes, therefore, both a proactive and reactive approach to his role: proactively, he is constantly analyzing risk when taking on new business and projecting those risks against a potential future default; reactively, he is responsible for the company’s collections operation, following up on invoices that are raised and acting swiftly to resolve any disputes that may occur.
And he is succeeding: some 98% of all invoices generated are collected on time and only 2% are ever disputed. Of these, nearly all are resolved, and within a very short timeframe of about three weeks. His DSO figure (net after transportation) is the envy of the industry, and a reflection of the high regard in which the credit team is held within the Acer organization.
Acer also has another powerful risk management ‘tool’ – the Acer Risk Category. ARC is Acer’s own risk scoring process that brings together a blend of intelligence from a variety of different sources. ARC serves to forecast, i.e. predict credit risks (potential customer defaults).
The company uses this information and the ARC ‘score’ to set the internal limits that the business is willing to provide, and to compare and contrast directly with Euler Hermes’ own Grading model: “Euler Hermes respects ARC and is always prepared to listen to what we have to say as well,” Christian continues.
“If, for whatever reason, a limit is initially declined or not at a sufficient level, we can analyze it using our own risk analysis and discuss it before a final decision is taken. Again, it is about having an honest and open relationship, where the Euler Hermes team
is seen very much as part of our own team, operating with a shared mission. There is constant dialogue
Part of this ‘constant dialogue’ includes ensuring flexibility in his global credit insurance agreement: “Our policy is probably one of the most complex in the industry.” Christian says, “This is due to our hybrid model regarding risk participation.
“As Euler Hermes understands how our needs are constantly developing, they are very flexible in adapting parts of the agreement to accommodate these needs, and find the appropriate words and language that the legal teams, Acer’s Credit Dept., the insurers and the re-insurers are happy with.”
Acer’s inclusive style and open book relationship with its insurer is in many ways an example of best practice in both the IT and the credit insurance industries.
Claims have been very low – yet another example of how the proactive part of Christian’s role is clearly delivering: “Credit insurance is an essential part of our risk management strategy,” Christian concludes, “but Euler Hermes does not try and dictate our future. They work with us to enjoy mutual success.”
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