All eyes are firmly fixed on 29 March 2019. This is the date that the UK is expected to leave the EU after triggering Article 50 on 29 March this year (2017). One certainty we have is that complete uncertainty pervades the air around Brexit! The ramifications of Brexit will flow through direct channels, with varying degrees of severity depending on import-export relations with the UK, and through indirect channels, with changes in inflation and consumer confidence. A second certainty we have is that there will be a Brexit impact!

While the risk space for businesses across the EU is multifaceted, credit risk exposure should be prominent in the minds of all management layers. Direct credit risk exposure will come through the more difficult trade environment in a post-Brexit scenario with greater barriers from bilateral trade agreements, greater levels of business insolvencies in the UK and across the EU, and the need for businesses to expand operations into new markets. On the trade environment, some major global economies have already expressed a lack of appetite to negotiate separate deals with the UK, while there is a growing recognition that the UK simply does not have the capacity to negotiate a host of bilateral trade deals; hence, the UK pushing a “cut-and-paste” approach that will draw on current EU trade deal architecture. On the insolvency front, some commentators project insolvencies in the UK to rise by up to 10% by 2018. Increases in insolvencies are also expected in the countries most exposed to the UK (Ireland, the Netherlands and Belgium), but also more broadly across the EU. On the issue of new markets, the ‘Global Britain’ strategy to compensate for lost economic activity with the EU will require UK businesses to expand into new markets. This lost economic activity though is double-sided and EU businesses will likewise need to expand, in some cases within the EU, but in others outside of the EU.

All of these dimensions to the Brexit debacle will increase the credit exposure of businesses incalculably, both inside and outside of the UK. Credit risk management will no longer be just an operational activity, conducted by corporate treasurers and risk managers, but will be a core factor in business strategy and decision making at senior management and director level. Among the myriad of credit risk management tools available, trade credit insurance (TCI) will become an ever more important solution for businesses. TCI will allow businesses to navigate through this trade uncertainty, manage inevitable defaults, and exploit new markets. TCI will also be central to encouraging banking institutions to extend trade finance, particularly in new market contexts. Businesses will have to face up to their fiduciary duties and prove that prudent steps have been taken to manage the fallout from Brexit.

Brexit represents a regime shift into a world of unknown unknowns. TCI brokers and carriers alike will need to be agile and adapt accordingly, respectively designing and providing the level of risk coverage required by business. TCI penetration rates will need to increase across the board, demanding tailor-made solutions to manage new forms of credit risk. Specialist credit insurance brokers offer a competitive edge in this regard, allowing for the optimal design of credit insurance programmes that will facilitate businesses wishing to scale up their TCI coverage and work for new entrants wishing to institute TCI coverage. A third certainty we have is that the Brexit uncertainty can be managed!