Risk and premiums
For each guarantee application, EKN makes an assessment of the risk of non-payment in the associated transaction. The premium for EKN's guarantees is linked to this risk assessment.
EKN's risk assessment is made up of two main components – assessment of political risk (country risk assessment) and assessment of commercial risk.
In the present situation, with convertible currencies and deregulation in most places, economic problems at country level can give rise to currency and interest volatility which has negative impacts on companies. This is why credit risk assessment is conducted by a credit assessor in close cooperation with a country risk assessor.
About assessment of commercial risk
EKN conducts a credit analysis of the buying company and the group of which it is a member. The aim is to assess the conditions for the buyer's future operations. How do we think the company will develop, how will it manage its payment commitments and how great is the risk of the company filing for bankruptcy?
EKN assesses the buyer's repayment ability and financial strength. The risk assessment determines whether EKN can guarantee the transaction, how high or low the premium will be, the level of EKN's percentage coverage and what security may be necessary.
Our starting point is the buyer's country and sector. We then analyse the buyer's business, looking at ownership structure, market position and financial position, as well as the value of any provided security.
A good understanding of the sector in which the company is active and an analysis of the financial position of the company/group are also important. It may also be necessary to look at budget figures and forecasts. It is therefore both useful and important for the exporter to provide as detailed information as possible about the buyer.
However, the assessment does not cover the transaction contract. The guarantee holder is responsible for ensuring the contract is valid and drawn up in such a way as to correspond with the guarantee conditions.