What are CESCE's main activities, and how have these changed over the years?
CESCE was founded by a law published on July 7, 1970. We began operating in 1971. The main objective of the company remains the same, which is to cover the risks of Spanish companies exporting or investing overseas. However, CESCE has become over the years bigger and more complex. Originally, we only subscribed insurance policies on behalf of the state. We later started to also work as a private insurer covering domestic and export credit risk and, in this private part of our business, we compete like any other private company. As part of this private business, we acquired INFORMA, the leading commercial information company in Spain, Portugal and Colombia, integrating it into the CESCE Group and into the Dun & Bradstreet network. We expanded our geographical presence throughout Latin America, where we have now seven subsidiaries and we also opened subsidaries in France and Portugal. Additionally, CESCE has been on a digital transformation plan, which is to optimize through digital capacities its operating model and achieve a high level of automatization through the intensive use of advanced analytics. Through this we have achieved more than 95% of our credit risk decisions and 80% of the claims decisions to be fully automated. We have also developed new digital products and services based on a flexible subscription model. Finally, we are working on creating a more digital culture, which is agile, lean and innovative, developing an open innovation ecosystem in collaboration with startups and high tech companies.
Who are your public and private clients?
CESCE operates through two accounts: the state account and the private account. CESCE is the Spanish Export Credit Agency (ECA), we manage on behalf of the state its credit insurance activity. With regards to this activity, CESCE it is well known in the market for being the insurer of large Spanish engineering projects abroad, such as the Panama Canal, the AVE high speed train which covers Medina to Mecca, and other major projects. Those who use CESCE the most in terms of risk volume are large global Spanish companies, especially in the industrial and construction sector. But keep in mind that we subscribe 1,800 policies per year on behalf of the state, and 1,700 correspond to small operations. Our main clients with regards to the number of operations are Spanish exporting SMEs, for which we insure tens of thousands of euros in short-term credit. Within the private sector account, we insure the payment of commercial credits, for Spanish business; our clients are mainly SMES: 57% of these commercial credits are for debtors located in Spain, and 43% are located overseas. Our private insurance business is highly competitive: for this business we cover up to 95% of the commercial credit, which is the highest rate in the sector, and we normally indemnify in 60 day, which is the fastest in the sector.
Against what risks do you protect SMEs, and what is your advice to those seeking to export?
CESCE is not a general insurer; it only insures the commercial credit risk for non-payment of invoices, we do this for both the state and private business. In the case of the state account, we insure political and extraordinary risks, insuring non-payment due to acts of Gods, for example, earthquakes, floods and also we cover catastrophic risks like revolution, war or other risks that the client cannot control and finally commercial risks that are non-marketable, normally in emerging markets. Our main recommendation for SMEs is that they need to manage correctly their commercial risk, be it on their own utilizing professionals with the right skills and company information of their debtors or they can transfer this risk to a specialist which is a credit insurance company like CESCE. For us our competitors are not the other credit insurance companies in the market, but the use of self-insurance by the companies. Only 30-35% of commercial invoices are insured. The rest is not insured, which is not advisable unless the companies have the necessary resources, which is not usually the case especially for SMEs. Therefore, our recommendation is to transfer the risks to a specialized company, even more nowadays that risks are growing, making insurance costs affordable. One of the challenges we have in CESCE is for our brand and production services to be better known in the market, for both areas of our business, the state and the private sector.
Do you have a strategy to overcome this and make yourselves known?
We are developing a strong marketing plan to make known our value proposition to the market. With the current economic slowdown the risk of non-payment increases, hence the need to transfer to a specialist at a competitive cost. What makes our value proposition unique is its flexibility, we offer several layers of service. The first layer is information, through our risk management service. Companies tell us what risks they want to monitor and we connect them to all of CESCE risk management assets, information, analytics and risk specialists. Our statistical risk models are updated more than 13,000 times a day. CESCE has access not only to the best information in Spain and Portugal through INFORMA, we also have access to company information for more than two hundred and fifty million companies through our partnership with Dun & Bradstreet. All of this company information together with all the information CESCE has of its client's payments behavior is processed by CESCE statistical algorithms and offered to our clients as a service. The second layer is insurance, where clients can transfer all of their risks either globally, at a fixed price, which is our Full Cover product, or they can transfer their risk on a one by one basis, depending on their risk appetite, this is our Pay Per Cover Product, the only flexible credit policy in the market worldwide. The third layer is our collection services: in the case that our client decides not to transfer a specific risk of one of his debtors and a non-payment occurs, we offer him all of our capacity worldwide to try to recuperate this nonpayment. The fourth and final layer is financing: here we offer invoice discount services to our clients, either by offering guarantees to banks so they may finance these invoices having CESCE as the guarantor if a nonpayment occurs or directly with CESCE, through a Fund that we created five years ago. This fund has become the second largest source of short-term, non-bank finance in Spain. I believe that CESCE offers a comprehensive, flexible and adaptable service. But irrespective of whether or not an SMEs uses our products he should manage professionally its credit risks.
What is the main objective of CESCE for 2020?
Our strategic plan lays down several objectives for 2020. We want to be a client-driven company. We do not want to impose a certain solution to our clients; we want to listen to their problems and find the right solution for every situation. We also have to become a highly technological company. Insurance is nowadays a digital business and it is going to be even more so in the future. We must also be a multinational company, with branches and subsidiaries in the main markets for which Spanish companies export or have activity. We must offer global solutions to our clients. We must also be an employee center company. We want to retain talent and we want our talent to be happy and proud to work in CESCE. We must be a family-responsible company. We have an unblemished policy of equality. We are a mainly a female company, with 60% of the workforce being female. And finally we also have to be a socially responsible company, with sensible policies regarding ecology and social responsibility. In fact, we are, and want to be even more, a leading company in the sector, not in terms of profitability, but in terms of products, policies and services. CESCE is highly innovative. No one has flexible insurance policies, no one does financing like we do, and no one does recovery services to unsecured bills. Summing up, we want CESCE to lead the way in satisfying globally our clients, employees and stakeholders.