But what if the risk is not fire, but trade? What if your biggest customer goes bust before they can pay you? Could your business survive such a hit?

When it comes to business insurance it is important to look beyond capital assets. Account receivables are often the biggest asset a company has. Despite this, they are often left uninsured.

Thankfully there are several ways to mitigate trading risks. Here the insurance experts PT Asuransi Sinar Mas (ASM) explain the different options.

Trade Credit Insurance (TCI) is the best way to mitigate the risk of B2B non-payment, offering good value for money and robust cover. Although individual policies vary in cost according to the level of risk a portfolio may represent, they are often the most affordable option.

Trade Credit Insurance pays out when your customer fails to settle your invoice. But businesses don’t just use it for peace of mind. Policyholders have access to a wealth of market intelligence, giving insight into risks and opportunities throughout the world that can help strategic decisions.

At ASM, we combine our own market knowledge with that of our reinsurance partner, Atradius, which has access to information on more than 200 million businesses worldwide. This also means that instead of spending resources on checking customers and prospects, policyholders can access intelligence at a click of a button. For companies that trade internationally, it is one of the most accepted ways of doing business.

A common alternative to Trade Credit Insurance is a letter of credit. This is a guarantee from your customer’s bank that they will honour the debt. Some businesses like to use letters of credit for occasional transactions. However, if you want to mitigate risk for the majority of your turnover, Trade Credit Insurance will be more efficient as you will only need one policy, unlike letters of credit where you will need a new one for each individual invoice.

Some businesses use bank guarantees. This is a promise from your customer’s bank that the bank will pay you if your customer does not. Businesses are often able to offer bank guarantees when they have a substantial cash deposit with their bank, or some other collateral the bank can access if needed.

Bank guarantees are great if your customer has enough collateral to satisfy their bank’s needs. The only drawback is not all businesses are in a position to do this.

Many businesses opt for self-insurance, where they accept the risk and hope their savings can cover any large losses. However, when companies self-insure, a disaster could happen if a loss is too big for them to bear.

For some businesses in Indonesia this is the only respected approach. Afterall, the trust you build with your customer, often over many years, is to be truly valued.

However, as ASM notes, Trade Credit Insurance can enhance trust. Unlike letters of credit or bank guarantees where a customer needs to buy security from their bank, a Trade Credit Insurance policy covers most of your turnover without making your customer organise the security (or pay for it).

Many businesses actually prefer to have a credit limit assigned by a Trade Credit Insurer. They see this as a respected way of showing all business partners that they are independently regarded as financially secure.

While in common use already throughout the world, Trade Credit Insurance is not only preferred by export companies but is also popular among businesses focusing on domestic trade looking to enhance and strengthen their internal credit management processes and achieve strategic growth.

ASM has been protecting businesses and families in Indonesia since 1985. Learn more about their trade credit insurance or ask for a free quotation: http://www.sinarmas.co.id/produk/asuransi-kredit-perdagangan-proteksi-piutang-dagang

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