One-third of Taiwanese companies miss opportunities to trade with foreign partners because of an inability to assess risks involved, according to a survey by Euler Hermes, an international trade credit insurer.
The past five years have seen a significant shift in trade focus from traditional markets such as the US and Europe toward Asian countries — particularly China, Euler Hermes said.
The shift has enabled the nation’s exporters to seize opportunities generated by the growing environment, but has also created new challenges that they had not experienced in the past, said Edmond Lee (李一民), general manager of Euler Hermes in Hong Kong, Taiwan and Korea.
“The tremendous increase in Asian regional trade means that many companies are now doing business with partners they have never traded with before,” Lee said.
An inability to assess potential business partners from overseas has meant that more than one-third of Taiwanese firms have missed out on business opportunities, Lee said, citing a survey of 300 domestic firms.
When asked what their greatest challenge was, 22 percent cited cash flow management and 13 percent identified collection of account receivables, the survey showed.
The findings show the importance of liquidity if buyers are unable to pay, Lee said, adding that nonpayment of invoices weakens a business and reduces its investment capacity. This is a particularly frequent issue when venturing into new markets or accepting new buyers, Lee added.
Trade credit insurance is an effective protection against nonpayment that can account for 40 percent or more of a company’s assets, Lee said.
Insurance can also increase a company’s confidence in extending credit to new customers, making the company more competitive, said Lee whose company set up an office in Taiwan on Wednesday last week.
Policyholders often benefit from access to bank funding at lower interest rates due to their protected cash flow, he said.
Three-quarters of Taiwanese exports are traded within the region, with China topping the list at 41 percent, the survey indicated, while developed markets like Europe and the US account for a combined 25 percent share of total exports.
Euler Hermes is present in more than 50 countries and keeps a global network of 1,500 risk experts and economists to monitor the financial health of exporters’ customers domestically and across multiple countries and sectors.
“Reducing the risk of nonpayment begins with gathering relevant and up-to-date information,” Lee said.
Euler Hermes’ worldwide risk information database tracks companies active in markets representing 92 percent of global GDP.
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