Performance bonds usually carry a risk: that of performing the awarded task as per the specifications of the employer. In case something goes wrong either because of commission or omission by the contractor/supplier, the employer will usually ask our bank to pay them the performance bond amount. That means that the performance guarantee crystallizes. This also means that the bank will directly debit our account with the full amount of the performance guarantee. Due to this fact, there is always a requirement of risk participation. We say that if you have nothing to loose in the transaction, you have nothing to protect. This cash margin serves as security on condition that we have done intensive evaluation and are comfortable with the contractor’s ability to perform, as well as ability to amass enough resources to discharge the performance obligation. The other balance of the performance bond amount is covered either through our portfolio cover, or an acceptable asset. We could also have a combination of cash margin, bonds and indemnity insurance and an asset or simply, cash margin and bonds and indemnity insurance.