“We don’t just check companies; we always look at the overall context.”
Sina Guffarth is a risk analysis expert and corporate analyst at SERV. In this interview, we join her for a look behind the scenes with the aid of an extraordinary example: analysing and insuring the production of the lavish Swiss series “Winter Palace”, which was exported to California and sold to Netflix.
“Winter Palace” sounds like an exciting project. How did SERV come to have a production company as a client?
SERV has a strong network in Switzerland. Corporate client advisors at banks are familiar with the products and services we offer. In this case – insurance for an audiovisual production – Banque Cantonale de Genève approached us.
Why was SERV brought on board?
The bank’s client, our current policyholder Point Productions SA, was working with Netflix for the first time. Netflix did not pay for the series upfront, instead agreeing to hand over the majority of the order value only once production and distribution had been successfully completed. As a result, the bank was looking for working capital insurance to cover the loan it provided to finance the production costs. We were also asked to insure the export being financed, to cover the possibility of Netflix not paying.
What does a risk path look like at SERV?
It’s relatively straightforward. Either the exporter contacts one of our client advisors directly with its requirements, or more often the exporter initially approaches the bank, which in turn gets in touch with a client advisor at SERV. The client advisor then contacts the exporter to arrange insurance in consultation with the bank and SERV’s underwriting team. At the same time, we collect and review all the relevant information.
Is it really that straightforward?
Almost. (laughs) In this case the challenging aspect was actually the timeframe. An extraordinarily speedy conclusion was vital for both the exporter and the bank to ensure they could continue to work with security in every respect.
What made your analysis easier in this case?
Risk analysis stands and falls by the quality of the information available to us. The advantage with this project was that my colleague in French-speaking Switzerland, Christian Hendriks, who handled this case, requested all the relevant data really quickly and sent it to us in a pack. The exporter was also extremely cooperative – we had an excellent relationship with them. This makes risk analysis much easier, or indeed possible at all. In this specific case, we were able to carry out a full risk analysis in three working days.
What do you check in a risk analysis?
In essence, there are three key elements that we take into account in a risk analysis: the macroeconomic environment, the sector and the parties involved in the transaction. For the first element, considerations such as inflation, the interest rate environment and any relevant currency issues play a major role. Each sector also has its own characteristics, and we incorporate current market trends in the relevant sector into our analysis. The core component is the actual corporate analysis, which is where we carry out checks on the parties involved. Our analysis is based primarily on the financial statements for the past three years, liquidity planning and – depending on the project – the business plan or financial model. We take all the factors into account in order to reach an overall verdict, which is expressed in the form of a credit rating.
What was special about this project?
It is the first time that SERV has worked in this sector and provided insurance for a film production. The exciting thing was getting to know a new industry. We also considered the overall context of the transaction as described above: the export country, the sector and the companies involved. As we were covering both a working capital loan and a supplier credit, both of the companies involved were relevant from a risk perspective. Credit ratings from leading rating agencies are available for Netflix, which allowed us to scale back our checks somewhat.
Do you also check the share of Swiss content in an export transaction?
This has already been checked before the risk analysis team gets involved. Swiss content of at least 20 per cent is a prerequisite for SERV insurance. In this case, the share of Swiss content was almost 100 per cent – the series was filmed in Switzerland and the production team comes from French-speaking Switzerland.
What is your conclusion from a risk perspective?
Information is the bedrock of our work. It’s therefore best if SERV is involved in an export transaction from an early stage. This also gives us, in our capacity as risk analysts, an early opportunity to sit down with the exporter and our underwriting team and identify the best solution quickly and efficiently.
My fairly unsurprising conclusion, therefore, is that shared progress is best achieved by focusing on good communication and cooperation.
One final question. It’s really clear that you enjoy your job. Why is that?
Is it that obvious? (laughs) Quite simply, my work is incredibly varied. We work in an environment where we encounter hugely diverse projects on a daily basis, from start-ups to large-scale project financing, and every transaction teaches you something new. When you can and indeed must remain curious in your job, and when every transaction you’re involved in also helps an exporter, then it’s simply a joy.
