Credit and Sector Downgrades: Stress Signals for the Real Economy
Published on Friday, June 27, 2025
In June, major credit insurers downgraded multiple sectors and countries, citing geopolitical frictions, trade wars, persistent cost inflation (transport, energy), and political uncertainty.
For businesses, consequences are immediate: tighter credit limits, higher factoring costs, demands for additional guarantees, and pressure on export sales. Sales teams face harder negotiations with buyers, while treasury must diversify banking partners and instruments (standby letters of credit, supplemental insurance) and shorten cash cycles. On supply chains, safety stock strategies are resurfacing for critical items, though they must be finely calibrated to avoid working capital strain. Strategically, firms are forced to balance margins against market share: not all geographies remain equally attractive, and selectivity is crucial. Boards of directors should prepare downside plans (scalable capex, variable costs, possible divestitures) and strengthen monitoring of leading risk indicators and signals (payment delays, cancellations, freight indices).
Depending on its business sector and the nature of its activities, your organization may be impacted, directly or indirectly, by this global risk over the coming years.
Whether you are a director, an executive or a manager, you may be wondering if your company is exposed to this global risk or other potential events. And if so, are you and your organization ready to face these challenges?
Should you need advice on the appropriate risk governance and enterprise risk management approach for your organization, please contact us.
Baldwin Global is an independent advisory group offering professional services, education and training in risk governance and enterprise risk management. We help our clients’ boards of directors and management teams attain their objectives by embedding sound risk oversight and management practices into their decision-making process to have a significant positive impact on their business.