A Swiss exporter is normally confronted with certain risks i.e. political risk and/or the credit risk of the buyer. Any such risks can be mitigated through a Private Risk Insurer (PRI) or a state-owned Export Credit Agency (ECA), or Trade Finance Instruments such as Letters of Credit, Letters of Guarantees, Documentary Collections etc. handled by the banks of the seller and the buyer. However, there are certain key criteria to be eligible for a specific risk coverage accordingly. Besides export risks it is also possible to mitigate supplier risks, the cover of goods and services, pre-and post-shipment risks etc.
The Swiss Export Credit Agency (SERV) is an institution under the public law that is owned by the Swiss Confederation. It has the aim to help Swiss exporters to compete internationally and create as well as maintain jobs in Switzerland. Many banks offer Trade Finance Services in order to secure the payment from the buyer. Certain Trade Finance products will also cover the political / country risk.
Often bids for mid to large projects in China or related Belt and Road infrastructure projects, even outside China, it is a competitive advantage for a Swiss exporter to provide in the early bidding phase a financing solution (buyers credit), if it is not a bidding criteria already. Thus, with a credit risk insurance from SERV, a Private Risk Insurer or a Guarantee from a Bank, it is possible to transfer the credit risk to an institution with a better rating than the buyer is himself. Hence a cheaper and customized financing through a 3rd party financial institution (i.e. banks) can be provided accordingly.
Provided by Denis Ecknauer, Advisory Board Member SCCC and Simone Wirz, ZKB