Managing Credit Risk in Indonesia: Turning Volatility into Stronger Decisions
Key takeaways:
- Credit volatility is now structural in Indonesia: Late payment, liquidity pressure and insolvency risk are embedded features of the market.
- Better insight enables confident growth: Data‑driven credit insight and disciplined collections help protect cash flow and support sustainable APAC growth.
- Indemnity supports resilience and ambition: Credit insurance helps businesses share risk, support financing and pursue growth with confidence.
Credit risk is becoming a more defining factor for businesses operating in Indonesia. While growth opportunities remain, tighter liquidity, rising insolvencies and delayed payment are reshaping how organisations need to assess and manage counterparty risk.
In this environment, better information, disciplined collection and effective indemnity are no longer optional — they are central to confident decision‑making.
Information: From Relationship Based Decisions to Evidence Based Credit
Many Indonesian businesses have traditionally relied on long standing relationships and local knowledge when extending credit. While these strengths still matter, they are no longer sufficient on their own.
Today, finance and credit teams are asking more pointed questions:
- Who are we actually trading with and how is their financial position changing over time?
- How do they behave as payers – consistently, or only when prompted?
- What is happening in their sector, supply chain and funding environment that could affect their ability to pay?
Recent industry data underlines why these questions are now essential. Nearly half of B2B invoices in Indonesia are overdue, and average bad debts account for around eight percent of receivables. At the same time, many businesses expect insolvencies to increase. This makes late payment and default a far more likely operational reality.
Leading organisations are responding by investing in:
- Structured credit assessment - Combining internal payment data with external financial information, sector analysis and credit ratings
- Ongoing monitoring - Tracking changes in buyer performance and emerging warning signs, rather than relying on annual reviews
- Independent insight and tools - Using third party data and analytics to complement internal knowledge and reduce blind spots
The objective is not to remove risk completely (which could limit growth), but to move from implicit assumptions to explicit, evidence based decisions about where and how to take risk.
Collection: Turning Overdue Invoices into Managed Outcomes
Late payment is increasingly commonplace across many markets and sectors. For Indonesian businesses, this can quickly translate into pressure on cash flow, working capital and planned investment. The difference between manageable delay and problem debt often comes down to the quality and consistency of collection processes.
A disciplined approach typically includes:
- Clear terms from the outset - Standardised, well communicated credit terms and conditions, agreed before goods are shipped or services delivered.
- Structured follow up - Timetabled reminders, calls and escalation steps, supported by systems rather than ad hoc efforts or individual style.
- Defined triggers for escalation - Agreed thresholds. For example, days past due or exposure levels – at which cases move to senior management, external advisors, or specialist collection or legal support.
- Integrated use of technology - Using credit management tools and dashboards to track exposures, ageing and actions, ensuring items do not fall through the cracks.
Early structured engagement helps preserve commercial relationships by resolving issues before they become entrenched. When overdue accounts are left unmanaged, the cost can escalate quickly. Organisations may face significant time diverted to chasing payment, the need to engage legal counsel or third party collection agencies, and a greater risk that debts ultimately become irrecoverable.
Consistent collection discipline is a core element of risk governance and liquidity management.
Indemnity: Building Protection into Your Credit Strategy
Economic cycles, sector specific shocks and unforeseen events can all affect the ability of customers to pay. Indemnity – through trade credit insurance, guarantees and related solutions – can help organisations limit the financial impact of those events and support a more confident approach to growth. In practice, indemnity can:
- Protect cash flow and earnings - Insuring eligible receivables means when an insured customer becomes insolvent or fails to pay within defined timeframes, a significant portion of the loss can be recovered under the policy.
- Support safer expansion - By sharing risk with insurers, companies can consider entering new markets, onboarding new buyers or extending limits to existing customers where this aligns with their strategy and underwriting criteria.
- Enhance access to finance - Banks and other lenders may be more willing to provide or increase facilities when receivables are insured, as the underlying asset is more secure.
- Strengthen internal governance - Working within a credit insurance framework encourages discipline in credit management, documentation and reporting — reinforcing good practice across the organisation.
Indemnity is about recognising that not every outcome can be controlled, and that transferring part of that risk can create the space to focus on growth, capital allocation and long term planning.
Bringing It Together: A More Resilient Credit Risk Framework for Indonesia
For businesses in Indonesia, opportunity remains strong but volatility is now a constant. Navigating it requires a more connected, disciplined approach to credit risk.
Now is the time to strengthen how information, collection and indemnity work together. Doing so can protect liquidity, support growth and give leaders greater confidence to make decisions in an increasingly volatile environment.
Every organisation’s credit risk profile is different. Aon’s Credit Solutions team brings together data, analytics and market insight to help businesses understand their exposures, develop practical credit risk strategies, and make informed decisions.
Speak with us to explore how your organisation can strengthen resilience and pursue growth with greater confidence.
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