Concentration risk occurs when a significant portion of a company’s revenue comes from a small number of customers. If one of these key customers defaults on payment or experiences financial difficulties, it can have a devastating impact on the business.
Trade credit insurance can be a valuable tool in mitigating concentration risk. Here's how:
Trade credit insurance may protect your business against the risk of non-payment by your customers. By insuring your accounts receivable, you can potentially:
Reduce the risk of non-payment: Trade credit insurance can cover a significant portion of the value of your outstanding invoices, giving you peace of mind and protecting your cash flow.
Diversify your risk: By insuring your accounts receivable, you can reduce your reliance on individual customers and spread the risk across a larger portfolio.
Improve cash flow: With trade credit insurance, you can accelerate your cash flow by factoring in the insured value of your outstanding invoices.
Enhance business relationships: Trade credit insurance can also help you build stronger relationships with your customers, as you can offer more competitive payment terms and pricing.
Trade credit insurance can be a valuable tool in mitigating concentration risk. By insuring your accounts receivable, you can reduce the risk of non-payment, diversify your risk, improve cash flow, and enhance business relationships. If your company has high concentration risk, consider exploring trade credit insurance options to protect your business and drive growth.
Disclaimer: The information provided in this blog is for general informational purposes only and should not be construed as professional advice.
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