Risk and Reward in Business
Most people get into business for good reasons. Characteristics of those in business typically include curiosity, entrepreneurial spirit, risk tolerance, and personal interest in whatever sector they’re involved in. Ultimately, most people want to be able to make a decent living and put food on their table – and ideally they’ll get some personal satisfaction from doing that.
Despite these factors, and the best efforts of those involved, things don’t always work out. That’s the nature of business – with no risk, there’s no reward. According to an analysis of US data by e-commerce platform, Shopify, 20% of businesses between 2018 and 2023 failed in the first year of operations. That rate climbed to 50% by the fifth year.
Rising Insolvencies and Market Uncertainty Today
Insolvency rates for businesses have steadily increased following the pandemic in 2020. Allianz Trade research predicts a continuation of this trend into 2026 which would mark 5 consecutive years of increasing insolvencies. While some of this is down to a normalisation in markets following the conclusion of pandemic-related public support measures, this also reflects ongoing uncertainty in global trade.
There can be multiple reasons acting together for why businesses fail – some of these are internal to the business, and some external; some caused by micro-level factors, and others, macro-level. Changes in demand, disruptions in supply chains, failed investments, cash-flow issues, insolvencies of buyers, changing interest rates, increasing compliance costs, and so on.
Trust and Flexiblity – Trade Credit Key to Business Success
What is also clear is that for commerce to work, there has to be a certain amount of trust between trading partners: delivery of the goods is done by an agreed date, the goods are received in the condition expected, and payment is made by the buyer by the agreed date. Without these basic understandings and trust that counterparties will meet their end of the bargain, commerce would cease to function. Fundamentally, no honest person gets up in the morning to go into work just to say: I don’t think I’ll pay my invoices due today.
This is why there is an important distinction to be made between the desire to pay and the ability to pay. In an ideal world, these two principles are aligned. Everything works smoothly and everyone is happy. But we know that this isn’t always the case. And when we look at complex business environments such as today, where deep uncertainty abounds, that mismatch between the desire to pay and the ability to do so grows. Being able to manage these demands flexibly can therefore be an incredibly valuable tool for businesses of all sizes.
One of the most effective mechanisms that allows this trust to translate into real-world transactions is trade credit. By supplying goods or services now and agreeing to payment later, businesses enable their customers to keep trading, manage liquidity, and grow. For many sectors, this flexibility is not just a convenience—it is the grease that keeps the wheels of commerce turning. Without it, many firms, especially smaller ones, would struggle to compete or expand.
The Impact of Late Payment
But not all delays are equal. There is a crucial difference between long payment terms, which are contractually agreed; late payment, which is a failure to meet those terms; and non-payment, where a buyer defaults outright. These are often confused, but the differences matter. Flexibility can be a significant benefit, but it inevitably carries risk. A customer that pays late creates strain on the supplier’s cash flow, and if that customer defaults altogether, the supplier may face losses large enough to threaten its own survival.
Managing payments and debts has clear real world impacts on the survivability of businesses. Research from Atradius in July 2025 showed that late payment was impacting 44% of B2B credit sales in Asia. This was mainly caused by customer liquidity issues where an increase in bad debts of 5% was seen in the region. Allianz Trade’s ongoing research on Working Capital Requirements (WCR) and Day Sales Outstanding (DSO) also adds to this picture. In their most recent update, Allianz Trade notes that WCR increased by 2 days globally in 2024 reflecting the impact of greater uncertainty.
WCR is the measure of how long a company’s cash is tied up in operations — from the moment it pays suppliers (or invests in inventory) until it collects cash from customers. WCR globally now stands at 78 days, which according to Allianz Trade, is the highest level since 2008. The main contributing factor to this is DSO – which is the measure of how long after a credit sale payment is collected. According to Allianz Trade’s most recent update, DSO’s rose by 2 days globally in 2024, with particularly sharp rises in Europe. This demonstrates the stress seen in trade and commerce today around the world.
Trade Credit Insurance as a Safety Net
However, it is worth restating that late payment is not the same as non-payment. In most cases, delays are not deliberate. They reflect the reality that many businesses are themselves juggling receivables, waiting on their own customers to pay, or caught in administrative backlogs. This doesn’t make late payment acceptable—especially when it is systemic, as with some large corporates and governments, which remain among the worst offenders. In fact, government-to-business transactions are consistently the most delinquent of all sectors.
Improving payment behaviour must start here. Still, in practice, a late payment is far better than no payment: businesses can manage temporary strain; they cannot recover from the total loss of expected revenue. This is why flexibility in business is so important – being able to extend terms to good business partners, for example – and finding ways to secure that flexibility even more so.
This is where trade credit insurance (TCI) comes in. By protecting against the risk of non-payment (but not against normal late payment), it allows firms to extend credit without exposing themselves to potentially devastating losses. Crucially, this protection doesn’t just guard the downside; it gives businesses the confidence to pursue new customers, enter unfamiliar markets, or offer more competitive terms. Insurance, in this sense, becomes a tool that preserves and even enhances flexibility. It can also translate into better access to finance for smaller companies—providing much-needed capital to create breathing space, invest in growth, and meet the wider demands placed on businesses.
Building Resilience in an Uncertain World
Today’s global trade instability makes the issue of payment discipline even more urgent. Businesses are already navigating an era of greater fragmentation—where tariffs, export controls, localisation requirements, and shifting regulatory regimes increase costs and complexity. Supply chains are being reconfigured at speed, and the certainty that once came from relatively open global markets has weakened. In this environment, when companies must commit more capital up front to meet compliance demands or diversify suppliers, the risk posed by unreliable payment practices is magnified. Long or late payments can quickly choke off the ability of firms—especially SMEs—to remain competitive in reshaped global markets.
This is why the flexibility of trade credit, coupled with the protection of trade credit insurance, has become even more essential. Trade credit enables commerce to continue flowing despite increased friction, while credit insurance underpins confidence that suppliers will not be left fatally exposed if a counterparty fails. Together, they give businesses the breathing space to invest, adapt, and seize opportunities in a more uncertain and politically volatile global trade environment. But these mechanisms work best when reinforced by a culture of timely payment—starting with governments, whose own behaviour sets the tone for the rest of the economy.
When trade credit, insurance, and a pragmatic understanding of payment dynamics work together, they provide businesses with the flexibility to keep operating in the face of shocks. They allow commerce to flow even when uncertainty is high, and they give companies the tools to adapt rather than retreat. In an unpredictable world, that flexibility is not just a cushion—it is often the difference between resilience and failure.
