Insurance company protects forwarder against risky clients

WHILE FREIGHT forwarders need to offer a high level of service to customers in order to survive in the present international economic environment, they should take caution against sacrificing basic management principles for the sake of new accounts, says Leon Notelovitz, finance manager at Clover Cargo International.
At the same time, he says, it is essential that forwarders should cover themselves by aligning with a solid company offering credit insurance.
Some of our clients are in the IT industry, says Notelovitz. Given the short life span of IT products, this demanding market requires a time-sensitive, dependable service. Yet the freight forwarding industry operates at exceptionally low margins which allows no room for error, as a result of which a large bad debt could seriously influence cash flow.
South Africa's exposure to the global economy has prompted more people to start businesses and has made credit insurance critical, he says.
The traditional view of the insurance industry has been that close corporations or new companies are too high risk to be insured. Yet, at every turn, one hears that South Africa's economic success is dependent on small to medium-sized businesses.
Clover Cargo recently formed a business partnership in this respect with Credit Underwriting Agency Ltd (CUAL) who serve them with credit vetting, risk assessing and risk management services.
A major risk facing exporters as a whole is that companies often finance their short term operations by relying on freight forwarders to extend credit to them, says Thane Duffin, CUAL risk manager.
Due to the competitive nature of the industry, freight forwarders maintain that if they had to demand substantial security from clients in order to cover the exposure, they could lose the account.
Here Notelovitz contends that while this large unsecured exposure makes credit insurance a practical and comforting solution, his company requires more than a basic insurance policy.
Being at the forefront of international trade, we want the kind of value-added information on prospective clients which CUAL provides, he says.