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Credit Risk

In today's rapidly changing business landscape, credit risk has emerged as a critical factor that can significantly impact businesses’ financial health and stability.
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In today's rapidly changing business landscape, credit risk has emerged as a critical factor that can significantly impact businesses’ financial health and stability. Businesses should seek to understand the evolving credit landscape and take proactive measures to mitigate potential risks.

That is ever more important as the global credit risk landscape undergoes a significant shift. With the highest speculative-grade global default rates in a decade (excluding late 2020/early 2021) and the likely end of an era of historically low default rates, businesses must be prepared for the possibility of increased credit defaults and take steps to safeguard their financial positions.

Certain sectors are particularly vulnerable to insolvency risks in 2024, including media, telecommunications, discretionary sectors, and transportation. These sectors face several challenges, such as:

  • Volatility in input costs and demand: Elevated material and labor costs, currency exchange rate pressures, and market dynamics can impact profitability and cash flow.
  • Supply chain disruptions and climate-related risks: Disruptions caused by geopolitical tensions, natural disasters, or regulatory changes can disrupt supply chains and impact business continuity.

In line with constrained economic conditions, the credit insurance market is experiencing a rise in claims. Financial institutions filed 19% more claims notifications in the first quarter of 2024 compared to the fourth quarter of 2023.

Organisations must adopt a proactive approach to identify, manage, and monitor these risks. This may include developing contingency plans, diversifying suppliers, implementing robust risk assessment frameworks, and incorporating sustainability practices into their operations.

In this challenging credit risk landscape, building resilience through liquidity is key. By proactively managing their liquidity positions, businesses can enhance their ability to weather potential credit shocks and seize growth opportunities.

Structured Credit

In a volatile and unpredictable economic environment, financial institutions are required to carefully manage their balance sheets and credit exposures. We can help structure and coordinate your credit and political risk strategies and build regulatory compliant global insurance programs.

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Robert Perry

Robert Perry

Global Head, Political Risk and Structured Credit, Marsh