An Investigation into Alternative Indicators of Risk Exposure: A Case Study at the Export Credits Guarantee Department (U.K.)

Abstract

The Export Credits Guarantee Department (ECGD) is a government organisation in the United Kingdom that provides insurance and guarantees to U.K. exporters against the risk of non-payment by overseas buyers. This report analyses the assets/provisions ratio as an indicator of financial performance of ECGD. This ratio indicates the depth of the reserves available to absorb losses over and above an amount of time which is provided. The major deliverable from this report is that this ratio seems to play a significant role in ECGD’s political portfolio. It seems that if the assets are set at a comfortable level above the provisions, the potential solvency problem will be reduced for ECGD. Another conclusion from this analysis was that the factor “concentration of exposure” should not be a worrying issue for ECGD. The factor which plays a protagonist role for ECGD’s solvency is the “probabilities pf default” assigned to each country that ECGD has business with. An unstable future environment or even a future crisis which will result in an increase of these probabilities will have a detrimental effect for ECGD.