Management Consulting

In 2018, the UK retail and wholesale sectors faced significant challenges, particularly in the food and drink industry, with a reported 27% increase in credit insurance claims from these companies compared to the previous year. This surge in claims, which saw the total value more than double, highlighted the urgent need for businesses to understand their customers' financial health to avoid the devastating consequences of insolvencies. Notable failures, such as the collapse of groceries wholesaler Palmer & Harvey, which had debts of approximately £700 million, underscored the risks involved in the sector. To address these niche issues, Aon’s Credit Solutions team emphasized the importance of a proactive approach to managing receivables risk. They advocated for a shift from relying solely on annual credit agency reports to a more dynamic understanding of customer financials. Aon proposed leveraging credit insurance as a strategic tool, which not only protects against bad debts but also facilitates growth by allowing businesses to extend credit terms to new customers based on real-time financial assessments. Aon implemented a tailored solution that included a receivables health check for food and drink businesses, regardless of whether they were existing clients. This health check provided a detailed grading system for customers, categorizing them as green, amber, or red, along with a numerical rating. This initiative aimed to equip businesses with a clearer understanding of their credit risks, enabling them to make informed decisions about extending credit and managing their customer relationships. The results of this approach were significant. By utilizing Aon's credit insurance and the receivables health check, businesses could better navigate the turbulent economic landscape, mitigate potential losses from customer insolvencies, and strategically position themselves for growth. This proactive risk management strategy not only safeguarded their financial interests but also enhanced their operational resilience in a challenging market environment.