Coface unveils its BusinessEnviroment@rating system, founded on its experience in worldwide companies and established for 155 countries

International credit insurer Coface, forecasts slower world growth in 2008 but still above three percent, announced at its international credit conference in Paris .

A credit crunch as severe as in 2001 seems unlikely at this juncture, the company says. Among the major risks that will bear watching, Coface points to a spreading of the US slowdown to the United Kingdom, Spain, and Ireland and warns that the good performance of emerging countries should not obscure risks or business environment weaknesses.

A crisis in 2008 shall be less severe than in 2001

Drawing on its experience with corporate payments in its countries of presence, Coface underlines the differences between the current situation and the crisis in 2001 where payment defaults jumped 30% just before the bubble burst, and world growth was under 2% at the time.

In 2007 and 2008 households rather than companies are the victims of overindebtedness. Companies are not central to the crisis. But an economic shock and more difficult access to financing could nonetheless affect them.

And even with much slower world growth emerging countries should hold up well. They are much stronger today with their growth increasingly driven by domestic demand and with their financial situations generally healthy. Their contribution to world GDP is much larger today increasing from 24% in 2001 to 34% in 2008. The United States , in sharp contrast, saw its contribution decline from 32% of world GDP in 2001 to just 26% today.

A new business environment rating

Have the risks associated with emerging countries nonetheless disappeared, Coface questions. Their excellent financial health cannot be allowed to mask recurring deficiencies in the business framework that stoke credit risk on companies.

In line with this, Coface is making public for the first time a specific system for rating the business environment in 155 countries. Complementing its Country@ratings, the new rating reflects business environment quality by country.

Coface has created this rating to improve the approach to credit risk on companies. “In assessing credit risks it is equally important to know whether a company’s accounts faithfully reflect its actual financial situation and whether the legal system can provide fair and efficient recourse in the case of payment default,” says Coface South Africa CEO Garth de Klerk.

“Coface has drawn on its experience with risk underwriting, business information, and receivables management gained through its worldwide network of local operations to develop the BusinessEnvironment@rating system. Like Country@ratings, the new ratings fall on a scale with seven levels in increasing order of risk, A1, A2, A3, A4, B, C, and D, where A1 represents least risk.

The so-called BRIC countries — Brazil , Russia , India , and China — provide a good case in point. The Country@rating for China in particular is A3 reflecting an acceptable level of corporate default probability. The BusinessEnvironment@rating for China is, however, only B, a mediocre rating two levels below its overall country rating.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

A new business environment rating

Have the risks associated with emerging countries nonetheless disappeared, Coface questions. Their excellent financial health cannot be allowed to mask recurring deficiencies in the business framework that stoke credit risk on companies.

In line with this, Coface is making public for the first time a specific system for rating the business environment in 155 countries. Complementing its Country@ratings, the new rating reflects business environment quality by country.

Coface has created this rating to improve the approach to credit risk on companies. “In assessing credit risks it is equally important to know whether a company’s accounts faithfully reflect its actual financial situation and whether the legal system can provide fair and efficient recourse in the case of payment default,” says Coface South Africa CEO Garth de Klerk.

“Coface has drawn on its experience with risk underwriting, business information, and receivables management gained through its worldwide network of local operations to develop the BusinessEnvironment@rating system. Like Country@ratings, the new ratings fall on a scale with seven levels in increasing order of risk, A1, A2, A3, A4, B, C, and D, where A1 represents least risk.

The so-called BRIC countries — Brazil , Russia , India , and China — provide a good case in point. The Country@rating for China in particular is A3 reflecting an acceptable level of corporate default probability. The BusinessEnvironment@rating for China is, however, only B, a mediocre rating two levels below its overall country rating.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

A credit crunch as severe as in 2001 seems unlikely at this juncture, the company says. Among the major risks that will bear watching, Coface points to a spreading of the US slowdown to the United Kingdom, Spain, and Ireland and warns that the good performance of emerging countries should not obscure risks or business environment weaknesses.

A crisis in 2008 shall be less severe than in 2001

Drawing on its experience with corporate payments in its countries of presence, Coface underlines the differences between the current situation and the crisis in 2001 where payment defaults jumped 30% just before the bubble burst, and world growth was under 2% at the time.

In 2007 and 2008 households rather than companies are the victims of overindebtedness. Companies are not central to the crisis. But an economic shock and more difficult access to financing could nonetheless affect them.

And even with much slower world growth emerging countries should hold up well. They are much stronger today with their growth increasingly driven by domestic demand and with their financial situations generally healthy. Their contribution to world GDP is much larger today increasing from 24% in 2001 to 34% in 2008. The United States , in sharp contrast, saw its contribution decline from 32% of world GDP in 2001 to just 26% today.

A new business environment rating

Have the risks associated with emerging countries nonetheless disappeared, Coface questions. Their excellent financial health cannot be allowed to mask recurring deficiencies in the business framework that stoke credit risk on companies.

In line with this, Coface is making public for the first time a specific system for rating the business environment in 155 countries. Complementing its Country@ratings, the new rating reflects business environment quality by country.

Coface has created this rating to improve the approach to credit risk on companies. “In assessing credit risks it is equally important to know whether a company’s accounts faithfully reflect its actual financial situation and whether the legal system can provide fair and efficient recourse in the case of payment default,” says Coface South Africa CEO Garth de Klerk.

“Coface has drawn on its experience with risk underwriting, business information, and receivables management gained through its worldwide network of local operations to develop the BusinessEnvironment@rating system. Like Country@ratings, the new ratings fall on a scale with seven levels in increasing order of risk, A1, A2, A3, A4, B, C, and D, where A1 represents least risk.

The so-called BRIC countries — Brazil , Russia , India , and China — provide a good case in point. The Country@rating for China in particular is A3 reflecting an acceptable level of corporate default probability. The BusinessEnvironment@rating for China is, however, only B, a mediocre rating two levels below its overall country rating.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

A new business environment rating

Have the risks associated with emerging countries nonetheless disappeared, Coface questions. Their excellent financial health cannot be allowed to mask recurring deficiencies in the business framework that stoke credit risk on companies.

In line with this, Coface is making public for the first time a specific system for rating the business environment in 155 countries. Complementing its Country@ratings, the new rating reflects business environment quality by country.

Coface has created this rating to improve the approach to credit risk on companies. “In assessing credit risks it is equally important to know whether a company’s accounts faithfully reflect its actual financial situation and whether the legal system can provide fair and efficient recourse in the case of payment default,” says Coface South Africa CEO Garth de Klerk.

“Coface has drawn on its experience with risk underwriting, business information, and receivables management gained through its worldwide network of local operations to develop the BusinessEnvironment@rating system. Like Country@ratings, the new ratings fall on a scale with seven levels in increasing order of risk, A1, A2, A3, A4, B, C, and D, where A1 represents least risk.

The so-called BRIC countries — Brazil , Russia , India , and China — provide a good case in point. The Country@rating for China in particular is A3 reflecting an acceptable level of corporate default probability. The BusinessEnvironment@rating for China is, however, only B, a mediocre rating two levels below its overall country rating.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.

“The business environment is naturally included among the parameters that determine overall country ratings,” explains Yves Zlotowski, Coface Chief Economist. “We can thus imagine that with a better business environment, China ’s country risk rating could reach the level of certain developed countries”.