Page 82 - Export and Trade

overseasjurisdictions.Exporterscaughtupinlitigationare they arise.
subjecttoforeignlegalsystemsandthesocialattitudes As consumers become increasingly demanding and
of local populations toward compensation for claimants. litigious, product liability has become a growing risk for
Furthermore, lawyers in other countries are likely to exporters. Use the help around you in the form of your
FKDUJH VLJQL¿FDQW IHHV WR DFW RQ D 1HZ =HDODQG H[SRUWHUV¶ broker and insurance company to make sure that you have
behalf.Forthesereasons,Product Liabilityinsuranceisof as much information as possible around your risks, so that
paramountimportanceinyourriskplanningasacompany, you can manage them accordingly.
because litigation and potential compensation payments
couldhaveadevastatingimpactonthebalancesheetof 3. Trade Credit Insurance
commercial operations in New Zealand. Trade Credit insurance protects traders from commercial
bad debts that arise when selling goods and services on
Risk management credit terms to other businesses within New Zealand and
Insurance and risk management are the two main ways overseas. With Trade Credit insurance, the policyholder is
businesses can protect themselves against the hazards of insulated against the commercial and political risks inherent
litigation and other dangers. Insurance is required for those in both national and international trade.
unforeseencircumstanceswhichgiverisetoaclaim,as Media publicity on recent business failures highlights
well as those claims which are outside the capacity of the the possibility that debtors may not always be able to pay
business to self-insure for. Meanwhile, risk management their bills and this can have far-reaching effects. Businesses
is a preventative measure that allows business managers can fail for many reasons, some of which include poor
to understand the risks inherent in their business management decisions, decline in demand, decline in price,
transactions, and provide guidance on standards, labelling, EDG GHEWV LQDGHTXDWH FXVWRPHU UHWHQWLRQ DQG LQVXI¿FLHQW
warnings and instructions, which will help protect the FDVKÀRZ ,Q WKH *OREDO )LQDQFLDO &ULVLV HYHU\ VHFWRU ERWK
business from claims. nationally and internationally, was affected by the fallout.
Brokers are generally well versed in the ever-changing A couple of years later, most businesses were only just
legal environment of New Zealand’s main export starting to recoup their losses.
destinations and therefore should be able to provide you The likelihood of being paid when a business collapses
with some information on risk management. Alternatively, is ‘hit and miss’. On average, 40 percent of your assets are
a liability loss control specialist can advise on the best contained in the debtors’ ledger, which is used as security in
ways to implement a sound risk management program, RUGHU WR DFTXLUH ¿QDQFH 8QVHFXUHG FUHGLWRUV ZLOO DOZD\V EH
by anticipating problems and mitigating them as much as paid last in liquidation, often behind a long line of secured
possible through good business practice. creditors. This also means that the collapse of one business
Liabilityinsurersarealsoavaluablesourceofinformation can undermine many others because if a business does
and can advise exporters on how to avoid claims similar not get paid it may not be able to pay its suppliers, and a
to thosealreadysettledbythem.Giventhatdefendinga domino effect can result. Furthermore, even if a supplier
liability claim can leave a business severely out-of-pocket to a collapsed business does get paid, it is often a time-
after paying for additional expenses (i.e. travel costs consuming and drawn-out process.
DQGWLPHDZD\ \RXZDQW WRHQVXUH\RXKDYHWKHPRVW Even with sound credit control practices in place,
comprehensive risk management strategy and liability businesses cannot totally avoid the risk of a buyer defaulting
insurance cover possible. on payment. A business could lose working capital, and then
spend substantial time and money trying to generate new
Whatto lookforinyourinsurance sales in today’s competitive environment. With Trade Credit
The key policy features to look for are: insurance, in the event of a debtor becoming insolvent you
• Protectioninallcountriesinwhichyoutrade,including ZLOO EH SDLG RQ FRQ¿UPDWLRQ RI GHEW
judgements awarded against you by courts in those
countries and in the currencies of those countries. The purpose of Trade Credit insurance
•Yourcoveris aggregatedperpolicyyearforproductclaims. Trade Credit insurance offers a solution to managing the
•Coverforinjuryordamagearisingoutoftheproduct commercial and political risks of national and international
design,advicesuppliedwiththeproductinrespectof trade. Some of the key features are to:
use, installation and safety. ‡ 3URWHFW WKH LQVXUHG¶V OLTXLGLW\ DQG FDVKÀRZ
‡ (QVXUH \RXU LQVXUDQFH FRPSDQ\ LV D ¿QDQFLDOO\ VWURQJ • Allow the insured to consider alternatives to seeking
organisation that will be there to pay your claims, should ‘Letter of Credit’ terms.

80 NZ Export & Trade Handbook 2018