Mircom Overcomes Credit Risk | Euler Hermes in Canada

Industry:

Building Safety Solutions

Challenge:

Risk mitigation in unknown markets

Policy Benefit:

Expansion into new international markets

Challenge

On its way to becoming a global company with operations in 85 countries, the Mircom Group of Companies had to come to terms with several important business challenges, including credit risk. As the company expanded into new markets, it required new customers to pay cash in advance or obtain a letter of credit basis until it realized how cumbersome and growth-limiting this approach was to the business. No matter where they are located, reliable customers want credit terms that reflect the trust they have earned.

Vaughan, Ont.-based Mircom, which manufactures and distributes products and solutions that make buildings smarter, safer, and more livable, is loyal to its customer base. “We like to help small companies grow and credit is one component of that,” said CFO Ed Mattei. “But credit is not something Mircom wanted to take on from a risk perspective.”

As a result, something had to change. “The last thing we wanted to do was to limit our growth and our customers’ growth because of cash flow,” said Mark Falbo, Mircom’s president. “When we hit our stride internationally in the size and sophistication of the business we took on, risk became more prominent in our thinking.”

Solution

Mattei brought Euler Hermes to the table to discuss Mircom’s credit risk concerns. Mattei, who had worked with Euler Hermes to resolve a bad debt issue when working for another company earlier in his career and was impressed by its approach. “What stuck with me was how Euler Hermes understood that the issue needed to be resolved immediately,” he said. “A lot of insurance companies will drag things on, but Euler Hermes was right on top of it.”

As Mircom continued to do business with current customers and expanded geographically into new markets and channels, Euler Hermes helped the company not only by insuring credit risk but by helping Mircom manage market risks. This has given Mircom the confidence to pursue new domestic and overseas markets aggressively, which has resulted in greater speed to market and more growth. “Our current growth in export markets well exceeds normal GDP growth and it exceeds industry growth” said Falbo. “So we’re gaining share and profile in those markets through the partnership with Euler Hermes.”

Results

Since obtaining credit insurance, Mircom has strengthened its entire balance sheet. With financial partners at home willing to grant more credit, Mircom has acted on domestic opportunities—new markets, new clients, new channels—wherever they have appeared.

The partnership with Euler Hermes has been so thorough in vetting potential new clients and monitoring the financial status of current ones that Mircom has never had to file a bad-debt claim. “We provide information. We interact closely with their staff. We advise them on our business plans and growth and market results,” said Falbo. “On the occasions when we need special consideration or a little extra coverage, we’ve found Euler Hermes to be very responsive, proactive, and helpful in resolving the situation.”

This relationship has worked very well for Mircom throughout its growth. “Business is hard. It’s hard to create products, to gain market share, to execute sales,” said Falbo. “For a relatively small cost, you can engage a partner like Euler Hermes to minimize your risks, and create focus on the things that are important to your business—products, solutions, growth.”

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Expand into New Markets