Experts for

Credit Risk Management

in Russia, Baltic States and CIS

Credit information Trade Credit Insurance Debt collection

© 2011 IGK Group IGK – Specialist for credit risk management

1991 – 2011

1991 First IGK company was registered in Germany

1992 First companies of IGK Group were registered in Russia and Baltic States

1993 IGK Holding was registered in Germany. SCRL (Coface) and Intercredit Holding became members of IGK Holding.

1994 Expansion in Lithuania, Latvia, Estonia, Ukraine, Russia 1998

2007 Separation from Coface

2007 Cooperation with leading Trade Credit Insurance 2011 companies: Euler Hermes, Atradius, Ducroire, Sinosure, Ksure, Mapfre, Ingosstrakh-ONDD and other.

® 2 IGK – Specialist for credit risk management

IGK has 20 years experience in credit risk management services:

Credit reports

Monitoring

Debt collection

Trade Credit Insurance

Factoring

Consulting

Financing

® 3 IGK – Specialist for credit risk management

IGK AG Bonn, Germany

IGK Credit Management IGK Service Latvia Moscow

IGK Service Lithuania IGK Credit Management Nizhnij Novgorod

IGK Service Estonia IGK Credit Management Samara

IGK Broker Baltic IGK Credit Management Chelyabinsk

Balt Risk Baltics IGK Insurance Broker Russia

IGK Services Rus Risk Ukraine Tambov Production office

IGK Services Ukraine

® 4 IGK – Specialist for credit risk management

Red –IGK office Blue/Green –IGK network

® 5 IGK – Specialist for credit risk management

Payment terms = trade credits

Debt - management

Supplier Client

Payment obligations ???

® 6 IGK – Specialist for credit risk management

Structure of balance sheet from your company

Assets Equity & Liabilities

Fixed assets Capital & Reserves - Tangible % - Share capital %

- Intangebile % - Additional paid in capital %

- Financial % - Fair value and other reserves %

- Retained earning carried forward %

Current assets Liabilities - Stock % - Bank loans % - Trade receivables % - Payables to suppliers %

- Other receivables % - Advance from trade debtors %

- Cash % - Other current liabilities %

® 7 IGK – Specialist for credit risk management

Analysis of clients – information gathering

IGK reports are approved by all OGRN-INN-KPP main European Trade Credit Legal address Insurers for risk evaluation Administrative Real address Data Share capital Articles of incorporation Power of attorney Annual reports from Bank details last 3 years Financial Data Key ratios Plan for the next years Employees – •Top management •Qualification •Fluctuation Management Products Technology Sales strategy Own payment experience Finance Experiences from 3rd parties Vendors (business partners, information Payment Sector agencies, trade credit insurer) experience Economy Action for payments Bankruptcy procedures

® 8 IGK – Specialist for credit risk management

Analysis of clients – information sources

• www • Financials • Mass media • Management • Journals • Transparency • Scientific publications • Trust

Public Company sources

Professional Official information sources gatherer • Information agencies • Register • Rating Agencies • Statistik • Trade Credit Insurer • Court

® 9 IGK – Specialist for credit risk management

Russian challenges

• Limited transparency of Russian management

• Tax optimized financial reports • Limited profit • Limited turnover • Limited equity • Limited credit history

• Group structures – without official connections

• Using from off-shore entities

• Gry schemes

® 10 IGK – Specialist for credit risk management

Analysis of clients

Evaluation

Mathematical systems •Trade Credit Insurer •IGK Scoring systems •Information agencies

Expert opinion •Risk Committee of company

® 11 IGK – Specialist for credit risk management

Analysis of clients

Evaluation

IGK principles Rating Probability of default within next 12 month Range Turnover in k € A++ Lowest risk. Excellent business. High credit term 0,09% R1 1 - 50 A+ Lower risk. Old established, stable company 0,47% R2 51 - 150 A Low risk. Secured business on uptrend 1,07% R3 151 - 500 B++ Risk below normal. Reliable business 2,18% R4 501 - 1.500 B+ Normal risk. Business on uptrend 4,46% R5 1.501 - 5.000 B Normal risk 13,36% R6 5.001 - 20.000 C Risk above normal. Short term only 31,83% R7 20.001 - 70.000 C- High risk. Full security only 61,70% R8 70.001 - 200.000 D Higher risk. No credit term to be granted 84,15% R9 200.001 - 500.000 F Highest risk. Company on the verge of bankruptcy 92,03% R10 500.001 -

® 12 IGK – Specialist for credit risk management

Securities

Physical Personal Insurance Factoring

Mortgage Guarantee from bank Trade Credit Insurance Non recourse

Pledge Recourse Surety legal entity

Deposit Surety from private person

… Letter of Credit

® 13 IGK – Specialist for credit risk management

Principals of Trade Credit Insurance

Alfa Client 1 Atradius Strakho Insured vanjie Client 2 IGK Coface Coface Insurance Insured Broker Client 3 Ingos ONDD strakh- ONDD Insured Client n

Euler ROSNO Hermes

Risk transfer to Trade Credit Insurer Portfolio of debts

Credit limit

Receivables

® 14 IGK – Specialist for credit risk management

Principals of Trade Credit Insurance

RUR.

Maximum liability

Credit line

Datum line

days Payment term Automatic cancellation Overdue notification Waiting period Indemnification

® 15 IGK – Specialist for credit risk management

Factoring + Trade Credit Insurance

Non–recourse + recourse factoring Customer 1

Customer 2 Factoring Client 1 Customer n

Customer 1

Credit Insurer Factoring Company Factoring Client 2 Customer 2 Customer n

Alfa Strakhovanjie Customer 1

Coface Factoring Client n Customer 2 Credit Insurer Customer 3 Ingostrakh-ONDD

Customer n ROSNO / Euler Hermes

® 16 IGK – Specialist for credit risk management

SWOT Analysis - Trade Credit Insurance

Strengths: Weaknesses: Risk mitigation Bureaucratic requirements Financial stability Risk policy of insurer not stable Risk can be calculated Cover depends not only from creditworthiness of debtor Collateral – worthy and tax optimized Strengthen debt management in company

Trade Credit Insurance

Opportunities: Conquer new markets with giving payment terms Threats: Strengthen own position in front of clients in case of Total following the risk policy of insurer by management disputes concerning payment delays Increase transparency and commercial goodness of market player

® 17 IGK – Specialist for credit risk management

Securities

Available Effort to create Expenses Worth

Mortgage

Pledge

Bank guarantee

Surety

Letter of Credit

Trade Credit Insurance Factoring

® 18 IGK – Specialist for credit risk management

Analysis of clients

Rating\Limit <10 <25 <50 <75 <100 <250 <500 <1000 <2500 <5000 >5000 A++

A+

A

B++

B+

B

C

C-

D

F

Risk category 1 Risk category 2 Risk category 3 Risk category 4

® 19 IGK – Specialist for credit risk management

Services of IGK group

Information

Legal

Securities Debt collection

® 20 IGK – Specialist for credit risk management

Benefits of cooperation with IGK-group

Alfa Insured Buyer 1 Why work with IGK? Strakhovanjie • 20 years experience in credit risk management in CIS and Baltics Coface Buyer 2 Insured IGK • Whole spectrum of services for Ingosstrakh- Insurance Buyer 3 professional credit risk management ONDD Broker • Information Insured ROSNO / • Trade credit insurance Euler Hermes Buyer 4 • Debt collection • Related services (IT, seminare,…) Client 1 Buyer 5 Non insured • Economic power by using the complexity of all market participants - Client n IGK Credit Buyer 6 Management suppliers, trade credit insurer, banks, Non insured factoring companies together with information agency and insurance Factor n Buyer 7 broker from IGK. This helps to strengthen the position of supplier Non insured Bank n Buyer n who works with IGK group.

2 1 ® 21 IGK – Specialist for credit risk management

Contact details:

OOO IGK Insurance Broker 1st licensed broker in Russia specialized on Trade Credit Insurance

Bolshaja Semenovskaja, d.40, bldg.. 1, office 609, Business Center “Agat” 107023 Moscow, Russian Federation

Andreas Steinborn Deputy General Director mobile: +7 495 22 63 930 email: [email protected]

Nataljia Pavlova Key account manager commercial email: [email protected]

Ekaterina Bolabko Key account manager risk email: [email protected]

tel.: +7 495 287 47 60

web: www.igk-group.com

® 22 IGK – Specialist for credit risk management

Andreas Steinborn

Status Director of IGK AG, Bonn since September 2010 Deputy General Director of OOO IGK Insurance Broker Member of the board of the Association of Professional Insurance Broker in Russian Federation

Consultancy Credit Risk Management in Russia

information, trade credit insurance, debt collection, factoring

Bolshaja Semenovskaja, Career Study Economy: Hochschule für Ökonomie, 1984–1990; d.40, bldg. 1, office 609, Business Center "Agat" Hermes Kreditversicherungs-AG, since 01.01.1991; 107023 Moscow, Russia Sales representative - until Aug. 2005; Tel.: +7 495 287 47 60 Mobile: +7 495 22 63 930 Head of Representative Office Euler Hermes KV AG – from E-Mail: [email protected] 2005 until 2010; web: www.igk-group.com [email protected] CEO OOO Euler Hermes Credit Management, Moscow – 2009 – 2010

Languages German, Russian, English

® 23 IGK – Specialist for credit risk management

IGK Group ®

One stop shop for credit risk management

Credit information Trade Credit Insurance Debt collection ® 24