.jpg)
Global economic conditions are growing more volatile by the day, and, according to trade credit insurer Atradius, global corporate insolvencies are expected to increase by 2% over the next year.
The situation is slightly less bleak in New Zealand, which has the advantage of being relatively insulated from heightened global tensions. Insolvencies in New Zealand are predicted to fall by 1% in 2019 – however, as a country whose economy relies quite heavily on exports, it’s important for businesses to be aware of the risks posed by global macroeconomic conditions.
According to Atradius managing director, Oceania, Mark Hoppe, issues such as Brexit or a trade war proliferation between the US and China could well impact New Zealand exports, and businesses need to be increasingly aware of the risks of non-payment.
“New Zealand is probably one of the more stable economies in the world, although banks and other agencies have had a slightly tougher time over the past six months,” Hoppe told Insurance Business.
“But because it relies on exports so much, it can potentially be really affected by what’s happening in other parts of the world. The cost of doing business in New Zealand seems to be rising, and it also takes longer to pass on those costs – all of which seems to have some effect on business confidence.”
“There are opportunities for New Zealand businesses, and with all of these opportunities come risks,” he explained. “Businesses will be entering into new markets and dealing with new buyers, and even long-term customers such as the UK have been affected by issues like Brexit – so local businesses need to keep on top of what’s happening in that customer’s home market. They can really get hurt if they don’t do their homework and don’t understand what that particular market is going through.”
Hoppe says that developments such as Brexit may also pose an opportunity to New Zealand businesses, but they still need to remain mindful of the impact it could have on some of the markets it exports to, and the ability of those markets to pay on time. He says businesses should be paying increasing attention to their due diligence, and should take out appropriate cover where necessary.
“If there is a drop off in export activity, that’ll have a follow-on effect on the domestic economy,” he explained. “That’s where there are opportunities for people to take a look at something like trade credit insurance, and to understand some of the risks that they’re dealing with.”
