How important is trust for credit management?

In the Federal Chancellor election on 6 May 2020, there were so many dissenters among the government parties who did not vote for Mr March that he failed in the first round of voting. Although this was then corrected in the second ballot, there is talk of a loss of confidence at the start of the new government. This was also reflected in the collapse of the DAX immediately after the first round of voting. Why is the result of the first round of voting still holding up?

We are all aware that something needs to change in the economic framework conditions in Germany if we want to remain competitive as a business location and provide companies with an environment that enables them to compete internationally. This requires a wide range of measures in areas such as the labour market, taxes and subsidies, infrastructure, energy policy and regulatory density, which may well be unpopular with some stakeholders. If the first election does not work out, many are asking themselves how these changes are to be implemented or whether we will end up being governed with the familiar ‘business as usual’. A lack of trust leads to a lack of new beginnings, investments are postponed until we can really see that changes are taking place.

This behaviour currently applies not only to German politics. The behaviour of the EU must also be scrutinised. What further laws and regulations can be expected here that will ultimately result in costs and restrictions for companies?

Added to this is the international customs competition initiated by the USA, which makes medium-term planning and therefore investments in new technologies, capacities or locations unpredictable.

The military conflict areas should also be mentioned. Ukraine, Gaza - now also with the interference of the Houthis controlled by Iran - and, most recently, the conflict between Pakistan and India. This not only makes it more difficult to supply sales markets and procure materials and semi-finished products due to embargoes. In some cases, there are structural disruptions, supply chains are interrupted or at least called into question. Trust is also being lost here.

Global crises and credit management: how companies need to react

These are all aspects that influence the economic situation of affected companies and therefore also affect credit management. It is not only important to check who is in a position to get through an economic dry spell with sufficient liquidity reserves or appropriate capital. Some companies also utilise these situations as an opportunity. Is it possible to open up new sales markets, adapt quickly to protectionist changes, establish new supply chains, possibly even reintegrate upstream product stages or forge new networks? This also needs to be assessed and goes beyond the actual financial situation.

The activities to adapt to the new environment and the associated agility must be assessed. This is an opportunity, especially for SMEs with few hierarchical levels and short decision-making paths, because speed naturally counts when making well-considered decisions.

Future prospects in credit management: agility, technology and trust

This is also the case when investing in new technologies or new software. Will the technology fulfil the expected performance parameters or will the software provider be able to implement the project as planned? Here too, trust is important. Only then will you do it.

I am hopeful for the German economy. We are not bad technologically in many areas. Our engineering achievements have nothing to hide worldwide. In the field of AI, for example, which is currently being hyped, we have little to offer in terms of basic technologies. We are very competitive when it comes to industrial applications. AI-supported predictive diagnostics for machines, robotics or control systems and solutions for decision support are evidence of how competitive we still are. It is now up to the framework conditions to ensure that this remains the case.

And I am certain that we will also be able to master the particularly high demands currently being placed on credit management with the tools and information available.