Ontario-based Weston Forest Products is no stranger to market fluctuations. As a leading full-service distributor and re-manufacturer of industrial lumber company serving customers throughout North America, the company needs to maintain a proactive approach to risk management, particularly when it comes to the growing credit risks among its client base. The company’s management team understands that even the most routine credit decisions have a material impact on the company’s financial health. The challenge then is to manage those risks effectively while also maximizing opportunities to add new customers and grow into new markets.
Industry:
Lumber
Challenge:
Protect existing customer base
Policy Benefit:
Proprietary knowledge to steer business
Challenge
Solution
Credit insurance is the foundation of a credit risk management approach that focuses on capitalizing on opportunities while comfortably mitigating risk—something that is often easier said than done. While credit insurance is a critical tool for accurately monitoring and understanding customers’ financial health and protecting the business against bad debt, Weston Forest Products has also incorporated credit insurance into its business strategy.
Quite simply, the company has long relied on the unique business intelligence in Allianz Trade’ credit information database to evaluate the sales potential of current and potential customers. With this insight, Weston Forest Products has been able to balance growing the profitability of its customer accounts with maintaining an appropriate level of credit risk. This balance has been particularly important during the years when the company expanded its sales and operations.
“One of the major reasons Allianz Trade is a great partner is that they know our industry,” said Rick Ekstein, Weston Forest Products President and CEO. “They make it very quick and easy for us to get an opinion on whether we should be pursuing that business. And when you’re in the position of extending credit to a new customer, your decision can’t wait.”
This credit insight also help the company to sustain its long-term customer relationships by helping it to manage the sensitive negotiations involved when payment issues arise. An aggressive collections approach can offend a buyer who may emerge from a temporary lull as a loyal, long-term customer. Yet, being too passive about collections can intensify a receivables loss. “There are times where there is a cash flow problem with a new or existing account or they might not be able to pay on the agreed terms,” said Ekstein. "Allianz Trade has always been able to help work down accounts that are in trouble and get out of uncomfortable scenarios. It is better for us and the customer.”
Results
With Allianz Trade actively monitoring customers and providing advance warning of potential problems, credit insurance has provided Weston Forest Products with valuable financial benefits. “Credit insurance allows us to do more business with more customers than we would if were were absorbing the risk ourselves,” said Ekstein. “There is no question credit insurance has allowed us to grow our business and sell more to certain customers at that high end. With credit insurance in place, the company’s sales force knows they are selling to worthwhile customers, suppliers provide a growing list of more credit and banks that are more willing to lend. “Credit insurance provides comfort to all of our stakeholders,” said Ekstein. “Allianz Trade also has made our risk management policies better. It’s given us more structure, more accountability, and made us a better company.