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Credit Risk Management

Credit Risk Management Process Supports Business Growth

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.

Industry:

Technology

Challenge:

Credit risk management

Policy Benefit:

Proactive credit risk management approach

Challenge

As a multinational corporation with global operations and annual revenues of more than $200 billion, Acer Inc. requires a unique approach to credit risk management to maintain an appropriate level of growth and risk. Acer’s PC and service-centric portfolio includes notebook and desktop PCs, servers and storage devices, LCD monitors and projectors, smartphones and tablets that are sold through all relevant distribution channels in every country around the world.

To achieve this, Acer relies on a unique hybrid approach that combines risk retention through a captive insurance company with risk transfer via credit insurance.

“This ‘risk participation’ approach gives us greater flexibility and control over risks so that we can take on higher levels of risk where we believe the business opportunity is justified,” said Christian Greisberger, Acer’s Global Credit Risk Director. “Our policy is probably one of the most complex in the industry.”

Solution

By working with the Euler Hermes credit insurance program for multinational organizations, Acer not only has access to $3.5 billion in available credit lines for its customers but it has also found a partner that is willing to invest significant time in understanding its 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 takes the time to get to know our business, to talk to our senior executives and to visit our buyers.”

Acer leverages Euler Hermes’ credit risk grading model to supplement its own risk scoring process, Acer Risk Category (ARC) that uses a blend of intelligence to forecast credit risks and potential customer defaults. The company can use its own ARC “score” for each customer to set internal credit limits, then rely on Euler Hermes data to supplement and compare that insight when making credit decisions.

“Euler Hermes respects ARC and is always prepared to listen to what we have to say,” said Greisberger. “This requires an honest and open relationship with constant dialogue where the Euler Hermes team is seen very much as part of our own team operating with a shared mission.”

Results

After many years, this partnership between Acer and Euler Hermes continues to thrive, helped along by Acer’s low claims rate and proactive credit risk management approach. The company collects 98% of its invoices on time. Of the 2% of invoices disputed, most are resolved within about three weeks. Acer’s days sales outstanding (DSO) figure (net after transportation) makes the company a leader in the industry and Greisberger’s credit team highly regarded within the organization.

Acer’s proactive credit risk management approach nurtures an inclusive and open book relationship with Euler Hermes. “Euler Hermes understands how our needs are constantly developing and they are very flexible in adapting parts of the agreement to accommodate these needs,” said Greisberger. “Euler Hermes does not try and dictate our future; they work with us to enjoy mutual success.”

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Credit Risk Management