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Supply
Chains of
Issue 276
the Future
n C
ovid-19 and the Building
Blocks for Business Resilience
n CEE’s Digital Treasury Revolution
CONTENTS
SPECIAL REPORT
New Europe Awakens Andrés Baltar, Head of Europe, Corporate Banking at Barclays and Daniela Eder,
18 Head of Payments & Cash Management Europe, Barclays, share up-to-the-
A Fresh look at Post-Brexit Treasury
minute insights on best practice treasury post Brexit.
COVER STORY INSIGHT
Supply Chains of the Future
8 Recovery-Proof Solutions 15 A Turning Tide for Trade
TMI speaks with Ebru Pakcan, Citi
The Covid-19 pandemic has highlighted the fragility of supply
chains across the globe. TMI speaks to five industry experts to 22 The SWIFT Way to Build a Treasury
understand how treasurers can help shore up supply chains right Function from Scratch
now, and examines how companies can finance them to prepare Thomas Papier, Fareva; Bernadette Durantin
for the economic recovery. and Corine Spier, BNP Paribas
FX Hedging: Is Your Strategy Fit for Purpose?
26 Toni Rami, Kantox
REGULARS Central & Eastern Europe’s Digital
30
Treasury Revolution
Leader Radek Havlin, Citi; Robert Vida, Corning;
2
Covid-19 and the Building Blocks and Zoltán Szigethy, Howmet
for Business Resilience
Dennis De-Weerdt, Deutsche Bank Corporate Bank Data-Driven Treasury
34 Daniela Eder, Barclays
My Life in Treasury
4 Paul Byrne, Group Treasurer, Crisis Restructuring/ Intra-Group Treasury Operations
38
Management, Strategic Adviser and Interim Executive Seen Through Tax Glasses
Krzysztof Łukosz and Martin Druga, EY Netherlands
49 People in Focus
Kamran Khan, Deutsche Bank and Dave Aldred, Citi
42 The Perfect Match
Adeline de Metz, UniCredit
Executive Interview
50
Reaching the Next Level of Treasury Digitisation 46 Optimising Treasury to Support the Business
Interview with Karen Braithwaite, Barclays Bettina Ludwig, S&T AG
TMI276
Editor CEO & Publisher Treasury Management International Ltd,
Supply Eleanor Hill Robin Page Waney Edge Barn, Foxhill Lane, Playhatch,
Chains of Reading RG4 9QF, UK Tel: +44 (0)118 947 8057
Issue 276
the Future Commissioning Editor Associate Publisher e-mail: tmi@treasury-management.com
& Operations Manager Sam Clarke Internet: www.treasury-management.com
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Design & Production EU Office: Treasury Management International Kft.
Copy Editor Glen Orford 2161 Csomád, Verebeshegy u. 11., Hungary
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Digital Design TMI TREASURY MANAGEMENT INTERNATIONAL ISSN 0967-523X is
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■ Covid-19 and the Building
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BRIEFING
It will be interesting to see whether
Covid-19 drives an increase in the use
James Binns,
Global Head of
Trade and Working
TMI
SUSTAINABILITY
of 3D printing in supply chains, with Capital, Barclays
more production being on-shored Supply
ACTIVITY
or localised as a means to improve Chains of the
business continuity. Future, P8
#
1
Remote
The twin forces of the Covid-19 pandemic and Brexit working for
are empowering treasurers to look for greater efficiencies all staff for
zero daily
in their operations and deploy digital tools to help future- travel
proof the department. That’s a rare mandate – and an
opportunity that should not be missed.
Andrés Baltar, Head of Europe, Corporate Banking, Barclays
New Europe Awakens, P18
#
2Paper
supplied
from
sustainable
Having a clear sources
understanding of Compared with
your treasury system other geographies, CEE
#
3
needs enables better remains cost-effective
communication with from a human resources
TMS vendors during perspective. We have
the selection replaced
process. Robert Vida, Finance Manager,
polywrap
EMEA Treasury Operations, Corning with paper
envelopes
Bettina Ludwig, Head of Financing, Central and Eastern
Treasury and Insurance, S&T AG Europe’s Digital
Optimising Treasury to Support
the Business, P46
Treasury
Revolution,
P30
#
4
Helping
to plant
1,000 trees
The treasury digitisation per year
Karen Braithwaite, Global
journey has been ongoing for Head of Transaction Banking,
some time, but it has received Corporate Banking, Barclays
an exponential push over the Reaching the Next Level of
TREE
past three months. Treasury Digitisation, P50 TREE AID
is a registered
All rights reserved. No paragraph or other part of this publication may be reproduced or transmitted in any form by any means, including photocopying
AID charity
no. 1135156
and recording, without the written permission of P4 Publishing Ltd or in accordance with the provisions of the Copyright Act 1988 (as amended). Such
written permission must also be obtained before any paragraph or other part of this publication is stored in a retrieval system of any kind.
LEADER
Covid-19 and the
Building Blocks for
Business Resilience
By Dennis De-Weerdt, Global Head of Service and Implementation,
Cash Management, Deutsche Bank Corporate Bank
T he speed and severity with which the Covid-19 pandemic has spread
around the globe has sent shock waves through the corporate world
– putting business resilience capabilities through their paces. Dennis
De-Weerdt, Global Head of Service and Implementation, Cash Management,
Deutsche Bank Corporate Bank, explores the considerations that make up an
effective and resilient response.
2 TMI | ISSUE 276
LEADER
In the wake of the peak of Covid-19, the One of the biggest challenges in
need for firm business continuity and exceptional times is fraud prevention
recovery measures quickly rose to the top and cybersecurity. Events on the scale
of the corporate agenda. While the lessons of Covid-19 create distractions, upon
learnt about business resilience post- which fraudsters and criminals are
financial crisis have been continuously quick to capitalise. So while the rapid
put to the test – either by extreme weather uptake of digital measures should be
events, growing political tensions or the seen as a positive step, it is important
volatility of commodity prices – many that it is accompanied by the necessary
have still been caught off-guard by the security measures.
unprecedented nature of the pandemic.
In contrast to other events, the impact Bolstering supply chains
of Covid-19 has not been limited by
geography or sector. As the impacts have Covid-19 has meant that companies not
reverberated outwards, with lockdown only need to think about their own business
measures and remote working becoming resilience but also that of their entire supply
Comprehensive
the norm, comprehensive business reliance chain. Considerations relating to the viability business reliance
plans have proved a ‘must have’ for any and sustainability of major suppliers and/or
company that wishes to keep the lights on. major buyers are top of the agenda. plans have proved
But what are the key considerations that Already stretched as a result of numerous a ‘must have’ for
underly these measures? geopolitical issues, such as the escalating
trade tensions between the US and China, any company that
Adapting to remote working companies are now critically revaluating wishes to keep the
their supply chains – hoping to identify and
The adaptation towards a remote-working action changes that will strengthen their lights on.
environment has been remarkably business resilience.
seamless and fast – with most professional For this to be successful, treasury
service companies maintaining, or even departments need to keep on top of real-
improving, business operations and quality time balances and liquidity funding for their
of work. So much so that we could even see suppliers as well as their own company
working from home flexibility become the and its subsidiaries. Towards this aim, one
‘new norm’ for many companies globally. technique being increasingly deployed is
At the heart of the broadly successful payables finance, which enables corporate
transition to the home office lies a host buyers to extend or maintain existing
of digital developments. One such payment terms without threatening supply
development is the rapid uptake in the use chain stability.
of digital signatures. While the solution
has been readily available for a number A good foundation
of years – with Deutsche Bank’s offering
launched in 2018 – the shift from traditional As we reflect on the lessons of the past few
wet-ink signatures has been sluggish. Until months, it is worth focusing on not only the
now. Here, remote working has coincided challenges but also the opportunities it has
with greater interest and uptake of digital afforded. Whether it has been managing
signatures – by necessity. authorisations, implementing end-to-
end payments tracking, enabling digital
Fintech synergies signatures, improving connectivity for
remote working or placing a heightened
The current environment has also brought emphasis on fraud management, the
valuable collaborations between banks pandemic has prompted corporates
and fintech companies to the fore. In fact, to further scrutinise their processes –
innovative technologies, such as real-time digitalising as and where possible along
information on the company’s FX positions the way.
and digital signing, have been incorporated As we look forward, expecting the DENNIS DE-WEERDT
into the business resilience plans of many unexpected will continue to be the order of
companies. Supportive technologies, the day – and corporate clients will need to Global Head of Service and
including artificial intelligence (AI) and ensure they have a partner in a global bank Implementation, Cash Management,
robotic process automation (RPA), have that is flexible and quick to react to any Deutsche Bank Corporate Bank
also played a key role. potential scenario. n
TMI | ISSUE 276 3
MY LIFE
My Life in
Treasury
T he Russian debt crisis of 1998, the dot-com bubble and then the global financial
crash didn’t faze Paul Byrne. In fact, he describes 2008 as a ‘fantastic time’ to be in
treasury, with all the challenges it brought alongside the opportunities to rebuild
businesses and restructure systems. His survival kit includes a can-do attitude, the ability
to think strategically, knowing when to take or leave advice – and a pile of good books to
read on the road.
How did you come into treasury and for Citi, SEB, Merrill Lynch (where I was
what attracted you to the profession? treasurer of their banks throughout the
global financial crisis), AIG and PTSB (an
After qualifying as an accountant, I Irish bank that failed the European Central
quickly realised it wasn’t something that Bank [ECB] 2014 stress test, which I got to
I was particularly interested in doing re-IPO and QBE). These firms gave me the
for the rest of my career. At that time, opportunity initially to work on individual
I was working as a financial controller transactions, including debt deals, equity
for Citi and began to gravitate towards raising, balance sheet restructuring, crisis
the trading floor. I became much more management, deleveraging or M&A,
Paul Byrne, Group Treasurer, interested in the mechanics of funding the which, over time, became a body of work
bank and less about debits and credits. and experience that has enabled me to
Crisis Restructuring/ I was hooked from that point. I knew I continue enjoying what I love to do!
wanted to fund the balance sheet and to Over time, my roles became more
Management, Strategic manage capital and liquidity, hence the geared towards enterprise level and
move into treasury. strategic in nature, enabling me to truly
Adviser and Interim Executive I have been fortunate to have worked make an impact on the business.
4 TMI | ISSUE 276
MY LIFE
How has your career progressed important financial institution) and we How have the demands and needs of
through to the role that you hold needed a robust contingent liquidity treasury changed over the course of
today? modelling solution, which we built and your career, and what particular skills
rolled out across the broader AIG Group. In does the role require today?
As I mentioned earlier, I started out as mid-2014, I was appointed Group Treasurer
an accountant, undertaking Financial of Permanent TSB. PTSB was a struggling As a general observation, the role of a
Controller, Head of Finance and Chief Irish retail bank that was about to fail the treasurer today is far more strategic and
Financial Officer roles, before I secured ECB stress test, with a 100% encumbered less operational that it was 20 years ago.
my first true treasury role in 2001 as balance sheet. One of my first actions was Given the intricacies of operating in an
International Treasury Director. Then, my to position and plan to avert a potential increasingly complex, regulated global
big break came at the back end of 2005 deposit run as a result of the announcement marketplace, I believe the challenge for
when I was offered the role as Treasurer for of the ECB results. treasurers is to remain strategic, relevant
one of Merrill Lynch’s banks, Merrill Lynch I spent 2014 deleveraging the balance
Capital Markets Bank, and it was largely a sheet, selling €10bn in assets and using
derivative shop. these proceeds to pay down system
Towards 2007, I was promoted to funding and start unencumbering the
Treasurer of Merrill’s banks. There were balance sheet, telling the story to rating
eight or nine altogether with an aggregate agencies (I secured two upgrades) and
balance sheet of around US$700bn, and by debt investors. I also re-priced all of our
August 2007 I was in the deep end as the retail liabilities to drive NIM (net interest I have 100%
global financial crisis took hold. Overnight margins) and a return to profitability in enjoyed my career
funding dried up, ultra-high net depositors support of the investment thesis.
were getting nervous and debt markets were At the same time, I was on the road to date, having
locking up and the swap market was broken. meeting and presenting the investment managed through
It was the most fantastic time to be in thesis to potential equity investors
treasury; funding, liquidity and increasing and generally preparing the bank for the Russian debt
regulatory capital were key and innovation its re-IPO which happened in May crisis in 1998,
and a can-do attitude were critical. At this 2015. The transaction was 10 times
juncture regulators, rating agencies and oversubscribed, which saw €500m flowing the dot-com
non-executive directors increasingly
featured in my life.
back to the Irish Government.
My final act for PTSB was to print its
bubble, the global
Bear Stearns folded, Lehman and Merrill first unsecured issuance in ten years. With financial crisis
were sold and my role expanded to include
some of Bank of America’s offshore banks.
PTSB well on the way to recovery I was
approached to become the Group Treasurer
and its aftermath.
All of the challenges that made 2007-8 of Australian global insurer QBE and to
fantastic had disappeared by the end of move my family to Sydney. I built a true
2009 and I was looking for a new challenge group treasury function for QBE, simplifying
when AIG approached me. They had their the international treasury functions,
own issues to deal with having been bailed centralising risk management, liquidity,
out by the US Government to the tune credit facilities and debt issuance. Along the
of $180bn, which they were aggressively way I claimed a couple of world firsts: the
looking to repay by divesting businesses. first green bond issued by an insurer and
They approached me to build a treasury the first and only gender equality bond to be
function for their Chartis P&C (property and issued as an AT1 instrument, which was 24
casualty insurance) business in anticipation times oversubscribed.
of an impending IPO in mid-2010. I have 100% enjoyed my career to date,
A change of Group CEO led to a switch in having managed through the Russian debt
strategy and Chartis was now considered to crisis in 1998, the dot-com bubble, the global
be core and not for sale. I was now Global financial crisis and its aftermath. I have had
Treasurer of Chartis, having built out experiences I never could have envisaged
the global treasury function, re-engaged as a fresh-faced accountant, from balance
with debt markets, unencumbered assets sheet restructuring, crisis management, the
and executed a number of liquidity importance of stakeholder management, PAUL BYRNE
transformation transactions, upstreaming of innovation, understanding the art of the
funds to assist with the repayment of the US possible and a never-say-die attitude. Group Treasurer, Crisis Restructuring/
Government. Treasury is somewhere you can truly Management, Strategic Adviser and
At this time, we believed we would effect enterprise-level change and have a Interim Executive
be designated as a SIFI (systemically great career.
TMI | ISSUE 276 5
MY LIFE
and abreast of the changing environment.
It is vital to create and retain strong
relationships with debt investors, lenders
and markets and to be a trusted adviser to Treasury is
the CFO, CEO and the board.
I believe the three mandatory skills a somewhere you
treasurer should have are: can truly effect
l The ability to develop a strategic enterprise-level
approach combined with a can-do change and have a
attitude
l The ability to build a good team great career.
l The ability to know when to take advice
and when to disregard it
What specific, or perhaps surprising,
qualities do you look for when
recruiting treasury personnel? all of the major changes I have seen over Select the firm you want to work for,
the past five years, the key drivers behind understand what you want to get from
I believe participation in team sports can all of them flowed from the emotional and your first role and how the experience and
be an indicator that a candidate will work financial scar tissue left behind from the knowledge you have gained will position
well in a team environment. I have noticed global financial crisis, whether this was as a you for your next one. Be a good team
this particularly in candidates who have result of: player, learn as much as you can, ask
played hockey or rugby. Similarly, when I questions, integrate into the team, don’t be
see a candidate who has rowed at school, l The changes in the regulatory/ afraid to share your ideas – and have fun
university or for a club, that indicates to supervisory landscape, where the and enjoy the job.
me that they are committed individuals pendulum swung from one extreme
because the very early mornings on the to the other, giving us Basel III with its What would your ideal holiday be?
water and the hours spent on the rowing increased capital buffers, LCR (liquid
machine require a level of commitment. coverage ratio) and NSFR (net stable Before I moved to Australia, I would have
funding ratio) said three weeks somewhere warm and
How important do you think a formal l Recovery and resolution planning, sunny with my family. After almost five
treasury education is, as opposed to structural subordination, the need for years of very warm and sunny days, I think
(or as well as) more general finance or TopCo to be a HoldCo a couple of weeks in a winter setting for
accountancy qualifications? l TLAC (total loss-absorbing capacity), Christmas with the family would be great.
ALAC (additional loss-absorbing
I tend to look for candidates who have capacity) MREL (minimum required What book have you read recently or
treasury work experience, not a treasury eligible liabilities) and PoNV (point-of- what film have you seen recently that
qualification, over a finance or accounting non-viability in Australia) you would recommend, and why?
qualification. I am not sold on the transition l The death of wholesale money markets,
from accountancy to treasury. Yes, I know I value of corporate cash to banks, due I read a lot of books, particularly when
took that route, but my observation is that to B3 prescriptive changes in relation to travelling with roadshows, and I tend to
accountants tend to struggle more to make what ‘sticky’ liquidity is or can be read a couple of chapters of a biography
the switch than some other candidates. l Technological advances that make the or autobiography in the morning and a
job of risk management more about couple of chapters of a historical fiction
In your career, what are the major evaluation and interpretation and less novel in the evenings – and always historical
changes that you have seen within about collation and aggregation fiction on the road. At the moment I am
treasury in the past five years? reading both Traitors of Rome by Simon
Based on your career so far, what Scarrow and My American Dream by Colin
I have been a treasury professional for 20 would your advice be to finance Powell. I am reading Powell’s book as I was
years, spending most of that time within the professionals who are perhaps in their privileged to meet him and he gave me an
financial institution space. When I think of first treasury role? autographed copy. n
If I can be of any assistance to anybody looking for career advice or to share any learnings from my experiences, I am very happy to
do so. Please reach out and make contact via LinkedIn.
6 TMI | ISSUE 276
EACT Head Office
3 rue d’Edimbourg
CS 40011
F-75008 Paris
France
Email: secretary@eact.eu
Telephone: +33 (0)1 42 81 53 98
REPRESENTATIVES
EACT Chair France Jean-Claude Climeau Poland Aleksandra Filipowicz
Jean-Marc Servat Association Française des Trésoriers d'Entreprise Polish Corporate Treasurers Association (PCTA)
(AFTE)
EACT Chief Operating Officer Romania Stefan Frangulea
Richard Cordero Germany Helmut Schnabel The Association of Treasurers of Romania
Association of Chief Financial Officers Germany
(GEFIU) Russia Vladimir Kozinets
EACT Head of Public Affairs & Policy
Russian Association of Corporate Treasurers (RACT)
Tarek Tranberg
Germany Cornelia Hesse
Verband Deutscher Treasurer (VDT) Slovakia Andrej Revay
Austria Jan-Martin Nufer Slovak Association of Finance and Treasury (SAF)
Austrian Corporate Treasury Association
Hungary Tamás Onody
Slovenia Ales Berk Skok
Hungarian Treasury Club (HTC)
Belgium Karen Van Den Driessche Slovenian Corporate Treasury Association (SCTA)
Association des Trésoriers d'Entreprise en
Ireland John Gilsenan
Belgique (ATEB) Spain Jose Carlos Cuevas de Miguel
The Irish Association of Corporate Treasurers (IACT)
Asociación Española de Financieros y Tesoreros de
Croatia Mirjana Ostojic Empresa (ASSET)
Italy Massimo Battistella
The Croatian Association of Corporate Treasurers Associazione Italiana Tesorieri d' Impresa (AITI)
(CACT) Sweden Ulf Rapp
Swedish Association for Corporate Treasurers (SACT)
Luxembourg François Masquelier
Czech Republic Ivan Haco Association des Trésoriers d Entreprise à Luxembourg Switzerland Guillermo de la Fuente
Ceska Asociace Treasury (CAT) (ATEL) Swiss Treasury Association (ACTSR)
Finland Ari-Pekka Latti Netherlands Erwin Bastianen UK Caroline Stockmann
Finnish Association of Corporate Treasurers (FACT) Dutch Association of Corporate Treasurers (DACT) The Association of Corporate Treasurers (ACT)
COVER STORY Supply Chains of the Future By Eleanor Hill, Editor Recovery-Proof Solutions 8 TMI | ISSUE 276
COVER STORY
T he Covid-19 pandemic has highlighted the fragility of supply chains across the globe. TMI speaks to five industry experts to
understand how treasurers can help shore up supply chains right now – with quick-to-implement solutions, ranging from
dynamic discounting to e-invoicing. We also look at the future of supply chains, given a potential resurgence of domestic
sourcing and the rise of sustainability, examining how companies can finance their supply chains to prepare for the economic recovery.
More than 200 of the Fortune 500 have consumer goods, medical supplies, are l Mid-term Demand Shock – Supply
some form of operations in Wuhan, China seeing significant, and rare, demand Shock: Non-essential industries such as
– the so-called epicentre of the Covid-19 surges, all economic players are affected. retail and electronics are a part of what
pandemic1. This fact alone highlights As a result, purchase and demand the mid-term demand shock – supply
how reliant the world has become on are impacted at the same time, which shock category. “They are experiencing
international sourcing, and how fragile blocks financial chains.” Currently, a lagging demand that will likely
supply chains can become when faced we observe three main demand and bounce back relatively quickly once
with disruption from unforeseen events. supply scenarios: different parts of the world start coming
Although China is now reopening, out of quarantine,” he notes.
productivity levels are nowhere near l Immediate Demand Surge – Supply l Long-term Demand Shock – Supply
‘normal’. And the Western world is, at the Shock: Sectors providing food, Shock: Non-essential, premium/luxury
time of writing, largely still in lockdown. essential personal care and health products and related industries such
It is fair to say that the impact of Covid-19 goods have been experiencing as automotives, travel, hospitality and
on supply chains – not to mention ‘stockpiling’ and demand in these tourism are a part of the long-term
purchasing habits – has been immense. sectors has gone through the roof demand shock – supply shock category
Edi Poloniato, Global Head Working because of panic purchases. “Those and will most likely experience a
Capital Solutions, Kyriba, a leading companies are struggling to meet much lower recovery rate in demand.
provider of liquidity and supply chain exponentially increasing and “As such, they are likely to struggle the
solutions explains: “We are experiencing unexpected demand, despite core most to avoid bankruptcies and serious
an unprecedented event. Even if some suppliers pushing the limits of their cash flow crunch while wrestling with
vital sectors, for example agriculture, production capacity,” says Poloniato. supply chain woes,” he believes.
BOX 1: HOW DOES SCF WORK?
1
Supplier
1
2
Buyer
5
4
SCF 3
2
6
Financial Institution
PLATFORM
1 Purchase orders
2 Goods/services and invoices
3 Confirmation/approval of invoices
5
4 Request for discount facility 4 3
SCF
5 Discounted finance provided
6 Invoice payment
6
SCF can be an attractive way for companies to improve their working
capital position. Through SCF, supplier invoices can be paid in advance of
the invoice maturity date, for a lower financing cost than the suppliers’
own source of funds, by leveraging the buyer’s credit rating. In return, the
buyer is typically able to optimise/standardise payment terms.
PLATFORM Source: PwC
TMI | ISSUE 276 9COVER STORY
James Binns, Global Head of Trade and more aware of the importance of their
Working Capital, Barclays, agrees that it is smaller suppliers – and the cash flow
a mixed picture. “As Edi has highlighted, issues these types of businesses face.
With third- sectors related to food, healthcare, or daily Interest in financial solutions to reach the
essentials are currently experiencing high longer tail of smaller suppliers is therefore
party platforms demand, so some corporates are looking gathering pace.”
performing for additional working capital to help
meet that demand. At the other end of the Early payment solutions
dynamic spectrum, in the leisure and hospitality
discounting, sector, and certain areas of the transport
and travel sector, for example, businesses
Against this backdrop, an increasing
number of buyers are looking to leverage
buyers can use are looking for assistance via government reverse factoring, also known as supply
their own funds to schemes such as the UK’s Coronavirus
Large Business Interruption Loan Scheme
chain finance (SCF), solutions for their large
and medium-sized suppliers (see box 1),
assist suppliers. (CLBILS), which helps businesses to while deploying dynamic discounting (see
access finance up to £200m.” box 3) for their smaller suppliers.
For those sectors that are impacted in Poloniato explains: “If the buyer does
less extreme ways, explains Binns, “we not want its working capital to deteriorate
are seeing clients use a mix of CBILS or if it wants to increase its free cash
(for smaller businesses) and CLBILS flow by extending the payment terms,
with working capital solutions. This is an implementing an SCF programme can
interesting trend as corporate treasurers be an efficient solution. While this days
are proactively re-evaluating funding payable outstanding (DPO) strategy
solutions, looking beyond the more obviously ‘generates’ cash, it does not
traditional overdraft and debt-related have to be applied at the expense of
avenues they have relied on previously”. suppliers which may especially be
As a result, Binns believes there feeling the crunch of quarantines,
is rapidly growing awareness of the intermittent production cycles and
funding requirements of supply chains distribution challenges. That is why
and the sustainability of supply chains buyers can help suppliers by offering early
going forward. “While buyers are looking payment terms via SCF banking partners.”
to optimise their payment terms, they Meanwhile, “With third-party platforms
are equally aware of the need to help performing dynamic discounting,
suppliers survive the crisis in order to buyers can use their own funds to assist
maintain the integrity of their supply chain suppliers. This enables financing to reach
for the future. Buyers are also becoming much further down the supply chain than
BOX 2: THE BENEFITS OF SCF PROGRAMMES
During the financial crisis of 2008, which generated demand shocks l Providing financial support for suppliers with internal or external
and triggered significant global supply chain risk, many companies funding – When a critical supplier’s financial health is more adversely
(especially those in manufacturing and retail sectors) found solace in SCF impacted than the company itself, it may be advantageous for the
programmes to help improve their survival rate and future preparedness company to quickly propose early payment programmes to suppliers,
during the liquidity crunch. either with its own cash (dynamic discounting) or through external
According to Poloniato, Kyriba’s customers who adopt a working funding sources without extending existing payment terms (SCF).
capital optimisation programme through SCF, benefit from numerous l Gaining ‘preferred buyer status’ – In industries in which suppliers
advantages, including: are in high demand, investing in working capital optimisation
programmes will pay out a ‘capacity dividend’ to secure production
l Reducing the cash conversion cycle/supplementing cash flow – lines immediately or in upcoming demand surge periods.
Companies experiencing a third-degree cash flow crunch can extend l Supporting alternate supply chain sourcing/diversification –
payment terms with an SCF programme. This will enable suppliers to Companies that need to set up new production facilities or secure/
be paid earlier, shielding them from the negative impact of prolonged develop alternate supplier sources to avoid high dependencies on a
payment terms. SCF programmes enable buyers to significantly single region or entity will require investment capital. Such capital can
reduce their cash conversion cycle, freeing up cash flow while also be sourced from supply chains when payments are streamlined with
incentivising the participating suppliers with accelerated payments. working capital management programmes such as SCF.
10 TMI | ISSUE 276COVER STORY
SCF, and onboarding is typically rapid about is getting paid and on time, not funding the vendors that we already bank
since the technology is sophisticated and whether it is the buyer’s own money or via that platform,” he notes.
the KYC burden is reduced as there is money from a bank. So, solutions such as This is music to Sharp’s ears. “Being
no bank or 3rd party funding involved,” Taulia are gaining significant traction as able to mix SCF and dynamic discounting
Binns adds. more organisations see the benefits, and in a single platform will be vital in order
Colin Sharp, SVP EMEA, C2FO, echoes the flexibility for the long tail of suppliers to serve all of the supply chain – and for
this, saying: “Financial supply chain compared with bank-led solutions. It the buyer to meet and exceed internal key
solutions need to be available for all doesn’t matter how large or small your performance indicators (KPIs) as they
suppliers, especially the more delicate business is, and suppliers can be enrolled move between working capital, margin
small and medium businesses which are in as little as 90 seconds.” and so on,” he adds.
underserved by the financial markets. Our Flipping between SCF and dynamic Such a set-up is also a priority for
Dynamic Supplier Finance enables the discounting solutions is also becoming Taulia, says Rieskamp. “We have recently
support of all suppliers, large and small. easier for those buyers running a mix
Moreover, as James alluded to, the fact of the two initiatives, says Poloniato.
that platforms like C2FO are highly “Technology can help buyers to switch
digitised, and unnecessary paperwork easily from one technique to another BOX 3: WHAT IS DYNAMIC
has been eliminated, means that the depending on their cash situation without DISCOUNTING?
lead times to onboard a supplier are impacting their internal procedures and
vastly reduced. Dynamic Supplier Finance their suppliers. We see examples of buyers
is a highly regarded C2FO innovation, that setting up liquidity thresholds that trigger For those unfamiliar with the terminology,
allows funding from the buyer’s own cash, the use of dynamic discounting or supply dynamic discounting is a solution that
and from our bank and non-bank funding chain finance, for example.” leverages buyers’ unused cash and gives
network, providing seamless flexibility to Here, Binns adds that, in future, suppliers flexibility in taking payments
choose the best funding option(s) for both corporates are likely to want to see SCF earlier than the due/payment date,
the buyer and its suppliers. and dynamic discounting integrated in exchange for a small discount. It is
For buyers with cash that isn’t into a single, bank-agnostic platform, so ‘dynamic’ because it can enable suppliers
generating great returns (not uncommon that buyers can manage the needs of all to strike the right balance between cost
in current conditions), deploying their suppliers – including the long tail and payment date. Generally, the earlier
funds to suppliers through dynamic – in one place. “Certainly, our strategy the payment is made, the greater the
discounting, and improving gross margin at Barclays is to embrace third-party discount will be.
in the process, can be an attractive platforms and we are working to connect
Source: Taulia
option – even more so in times of crisis. to them in the near future. The ultimate
Michael Rieskamp, MD Europe, Taulia, idea would be to offer clients connectivity
notes: “Ultimately, all the supplier cares via their platform of choice and to assist in
JAMES BINNS EDI POLONIATO
Global Head of Trade and Working Global Head Working Capital
Capital, Barclays Solutions, Kyriba
TMI | ISSUE 276COVER STORY
announced a strategic alliance with artisanal and time-consuming process.” like e-invoicing is that the benefits are
J.P. Morgan which offers the bank’s clients Furthermore, even organisations which typically soft or intangible and the costs
both the capability to onboard suppliers of do have a type of e-invoicing solution in time and resources to convert are high.
all sizes across the globe and the flexibility in place often have a blind spot when it We have a Fortune 10 client that has only
to toggle seamlessly between bank-funded comes to interfacing with ERP (enterprise 1% of its invoicing left in paper format. It is
and self-funded early payments. This kind resource planning) – which could, if cheaper for them to have 500 employees
of innovation is very exciting – and great done correctly, speed up and streamline accept, scan, and enter these invoices than
news for corporates.” the overall process. “In addition, convert that 1% to e-invoicing!”
electronic signatures are still rarely used
E-invoicing imperatives for the validation of purchase orders Rethinking risk
or quotes, for example, meaning that
To make the most of such an integrated many organisations are missing out on An area that all the experts agree will
environment in the future, Rieskamp efficiencies here.” be advantageous to focus on as a result
believes that a renewed focus on The Covid-19 crisis is therefore an of the Covid-19 crisis is improved risk
e-invoicing is also called for. “Getting paid opportunity for organisations to recognise management and mitigation in the
on time, or early, requires invoices to be the need to speed up their e-invoicing supply chain. Binns comments: “Given
sent to the right place, and received in process, believes Poloniato. “Not least since the growing awareness of concentration
a timely fashion and in the right format. electronic invoices will become mandatory risk within supply chains, we expect to see
Unfortunately, this isn’t always the case.” in B2B exchanges between some countries, greater focus on contingency planning
Everyone knows that paper invoices are like France, within the next three years.” post-crisis.” Where concentrations exist
inefficient and costly, this is why shared Despite the obvious benefits, building around particular countries or particular
service centres (SSCs) and business the business case for e-invoicing is not suppliers, he believes large suppliers will
process outsourcing (BPO) became so always quite so easy, says Jordan Novak, now be looking to diversify their supply
popular – a place where low-cost workers SVP, Market Innovation, C2FO. “The chains in order to mitigate or at least
could rekey information from paper problem with many of the processes minimise that risk. This could potentially
invoices into ERP systems. But no one
anticipated SSCs being shut down entirely,
and the pandemic has completely changed
the way invoices are dealt with.
“Many companies have begun emailing
invoices as a stop-gap, but this still requires Coping with additional demand will
the customer to input data manually be tough – and the right funding needs to be
into their accounting system, leading to
slow approval times and the risk of error. in place to help see them through the rapid
E-invoicing is therefore receiving a great
deal of attention and there are solutions in
change of pace.
the market that make it very easy to convert
old invoice templates into an electronic
invoice that suits the format needs of the
buyer – with fields like the order number BOX 4: GOING GREEN
clearly marked,” Rieskamp explains.
In response to Covid-19, Taulia has
launched an initiative called Rapid Start As companies review their supply chain risks and financing arrangements, and potentially sign
Invoicing, which can be implemented up new suppliers, there is an opportunity to improve the sustainability of supply chains – in
within seven days. This gives suppliers the terms of Environmental, Social and Governance (ESG) goals.
ability to submit invoices electronically and “One of the things the global stay-at-home orders have shown us is the impact economies
enables buyers to digitise their accounts have on the environment,” says Novak. “From the suddenly clear waters of Venice to the
payable (AP) processes, while keeping on bright blue skies of Delhi, we’ve been shown a glimpse of a cleaner world. I think this will drive
top of outgoing payments and keeping companies and governments to incentivise ESG-led programmes to a greater degree.”
employees engaged in the business. And with the growing demand for SCF, corporates and banks can do more to ensure ESG
“As such, there’s a great deal of value in principles are embedded in these programmes from the get-go, believes Binns. “Equally, with
implementing e-invoicing, and it becomes buyers looking for new vendors, in a bid for diversification and risk mitigation, it is more than
even more powerful when used in likely that there will be an element of ESG consideration during the selection process.”
conjunction with a solution like an early Rieskamp agrees: “I believe sustainability will be a continuing trend in the financial supply
payment programme,” he believes. chain space. Yes, we will see more ethical and green criteria being built in to SCF solutions, but
Poloniato agrees: “Companies are we will also see the social aspect of ESG coming to the fore as buyers act on their responsibility
generally under-equipped with e-invoicing to financially support suppliers – from the biggest to the smallest.”
solutions. Invoice processing is still an
12 TMI | ISSUE 276COVER STORY mean bringing new suppliers onboard. prefer to hold the inventories Increased risk in global supply chains near-shore, with a trusted could also see companies rethinking where logistics partner.” This trend they source products from, and whether is likely to be a particular focus technologies such as 3D printing might be once recovery begins, and global demand advantageous. “Of course, it’s an emerging begins to spike. technology and it is more relevant in certain Elsewhere, the digitisation of documents sectors, such as white goods, components in physical supply chains will also likely and toys, but it will be interesting to see accelerate as companies look to have whether Covid-19 drives an increase in greater visibility and control the use of 3D printing in supply chains, post-crisis, adds Rieskamp. with more production being on-shored or “Track and trace capabilities localised as a means to improve business from source to destination continuity,” notes Binns. are becoming much The financing of 3D printing is also more important. This ties thought-provoking, he says. “First, there is in nicely with digitisation a certain amount of financing required for of the financial supply a local 3D printer. Then, there is intellectual chain through e-invoicing, property (IP) being sold, in terms of which I believe will play an programmes and patterns to operate the important role in enabling 3D printer and make the required item, corporates to be nimbler which will result in a trade finance need to throughout the recovery period.” support these cross-border IP flows. This will be an interesting area for treasurers Recovery readiness funding needs to be in place to help see to watch.” them through the rapid change of pace. Another point of development linked Preparing for the economic recovery is At the same time, average credit quality is to contingency planning is the potential in itself a challenge, with the risk of being likely to have decreased, so there will be an for logistics providers to hold and under-resourced weighing heavily on increased need for risk mitigation between manage inventory. Binns comments: “I corporates’ minds. “As and when recovery different trading counterparties as well.” believe we will see an uptick in inventories begins, suppliers will need funding like He highlights the potential for a return being held, given the renewed focus on they’ve never needed funding before to more structured documentary trade blockages and breakages in global supply because their liquidity buffers will have and the use of instruments such as letters chains, but corporates may not wish to been eroded by the Covid-19 crisis,” of credit, both sight and usance. “These are hold these additional inventories in their explains Binns. “Coping with additional highly effective supply chain finance and own warehouses. Instead, they might demand will be tough – and the right risk mitigation tools and the accounting COLIN SHARP JORDAN NOVAK MICHAEL RIESKAMP SVP EMEA, C2FO SVP, Market Innovation, C2FO MD Europe, Taulia TMI | ISSUE 276 13
COVER STORY
treatment is relatively simple and efficient. between buyer cash and third-party and their own funding to the broader
So, I hope that corporates will give greater funding in a simple experience for the supply chain ecosystem. I hope that one
consideration to the power of some of supplier will be vital. This will also allow of the positives coming out of the crisis
these tried-and-tested solutions, in the more effective steering of EBITDA, will be much greater awareness of what
right situation, as recovery takes hold,” working capital, free cash flow and supply an optimal provision of funding across
says Binns. chain risk as internal KPIs and goals supply chains looks like – and that large,
Meanwhile, the role of governments, continually change. Pre-invoice funding investment-grade buyers will continue
export credit agencies, and the various will also be important as the volume of to recognise their role in influencing the
trade agencies, will be critical in ensuring purchase orders increases in line with ecosystem to the benefit of their suppliers.
that the banks have the right level of economic activity.” In the medium and long term, the benefits
credit appetite and credit limits behind Novak adds: “The key for companies of such an approach to a large buyer – and
them to be able to support the recovery. will be dealing with the pandemic their suppliers – will be much greater than
“Without the right funding in place, hangover and putting financing short-term gains made through pushing
supply chains will not be efficient and programmes in place that are flexible out payment terms, for example.”
they won’t be able to cope with the rise enough to pivot immediately in shifting Poloniato is starker in his guidance
in demand again. Ongoing collaboration economic conditions.” He notes that, around preparing for recovery. “One
between government, trade bodies during recovery, “every supply chain thing is certain: when we come out of the
and banks will be vital, therefore,” system and solution needs to be able to current crisis the world will be different.
cautions Binns. respond as quickly as those companies Some experts predict that this is just a
Sharp echoes this and highlights the which shifted manufacturing from preview and, unless we seriously change
need for multiple players to support cosmetics to hand sanitiser and drive our course of actions and priorities, this is
financing during recovery. “Supply chains value deeper, up and down the supply just the first in a series of crises. Our new
will need to be viewed as an ecosystem, chain. This means true innovation, true normal will be punctuated with an even
some of which can support the working on-demand technologies. It will not be flow of quiet periods and prolonged crises.”
capital goals of the buyer and some of good enough in a recovering, fragile global With this in mind, he believes
which need support from the buyer,” economy to build infrastructure to support organisations should strongly push for
he says. “The ability to access a diverse a single strategy or a single side of your working capital programmes to shore up
pool of funding – bank and non-bank – fulfilment channel”. liquidity preparedness while improving
will be important. As markets ease and Looking at the bigger picture and their odds of success when the tide turns.
corporates have an excess of cash from thinking broader is also one of Binns’ “Remember it’s not a matter of if, but when.
the protective measures currently being key pieces of advice. “For years, I’ve The winning companies will be those which
employed, they will want to deploy cash encouraged large buyers using SCF to look can increase both their financial survival
effectively: the ability to mix seamlessly beyond their own working capital ratios and success rates,” he concludes. n
BOX 5: THE END OF JUST-IN-TIME?
“The crisis is certainly a catalyst to review and rethink supply chain models,” says Rieskamp.
“People have seen how vulnerable global trade is and how reliant businesses are on every link in Remember it’s
their supply chain remaining connected. I imagine that just-in-time (JIT) manufacturing will be not a matter
reviewed, as the risks are so high. I can see much greater attention being paid to managing risks
in physical supply chains, generally. of if, but when.
Novak also believes that JIT could suffer “JIT had its time in the sun in the 2000s and The winning
really showed its limits over the past few months. Having inventory, warehouses, and
bricks-and-mortar stores showed the value in infrastructure, reduced stock keeping units, companies
and generalisation of product. JIT will still have its fit, but it has definitely taken a hit in this will be those
environment.”
Nevertheless, Sharp says that JIT is unlikely to change significantly due to the negative which can
inventory cost implications, but he believes diverse sourcing will be more prevalent, “with more
supplier relationships to manage in more geographies as reliance on China reduces in favour of
increase both
multiple sourcing locations and cheaper labour e.g. Vietnam and Mexico”. This shift will have their financial
implications for SCF geographies and currency coverage too, he cautions.
survival and
success rates.
Note
1 https://www2.deloitte.com/global/en/pages/risk/articles/covid-19-managing-supply-chain-risk-and-disruption.html
14 TMI | ISSUE 276INTERVIEW
A Turning
Tide for Trade
By Eleanor Hill, Editor
E
bru Pakcan has recently been Eleanor Hill (EH): We can’t ignore the Financial markets then began experiencing
appointed Global Head of impact of Covid-19 on trade. What have volatility as questions arose over
Trade, Treasury and Trade been the major knock-on effects to supply manufacturing capabilities in Asia and the
Solutions, Citi. In this candid interview, chains, in your view? robustness of global supply chains. The
she speaks about the impact of the situation intensified as Covid-19 spread
coronavirus pandemic on trade, and airs Ebru Pakcan (EP): The situation is very across the Middle East, Europe and US
her views on the digitisation of trade – dynamic but, broadly speaking, we see and companies grappled to ensure they
from the milestones already reached to a three-stage impact. The first phase had sufficient access to liquidity, and solid
the areas still requiring improvement. She was the immediate shock to the global supplier relationships.
also shares her best advice for treasurers system. In the early part of 2020, Asia The second stage saw organisations
when preparing for a return to ‘normal’. was significantly impacted by the virus. focus on the creditworthiness of
TMI | ISSUE 276 15INTERVIEW
customers, and the impact of the crisis on to dynamic discounting. Buyers are trying EH: How is the digitisation of trade
global demand. As such, companies have to keep their supply chains stable and progressing? Where is there still room for
been carefully reassessing credit limits for assist suppliers through the crisis in any improvement?
their clients and rethinking risk solutions. way they can.
They have also been modelling the EP: Trade is an enormous ecosystem,
potential knock-on effect to demand and EH: Looking slightly longer-term, how with so many different players – from port
attempting to forecast their receivables as do you think the trade landscape and and customs authorities to corporates,
reliably as possible. international sourcing might change as banks and insurers. Aligning all of those
The third phase is adapting to the new a result of Covid-19? Will we see supply stakeholders in a digital world is incredibly
normal as best as possible. Now that chains shortening, for example? And will tough when trade has been paper-based
companies have assessed the potential just-in-time models still be popular? for eons. Digitisation is a long journey that
impact on suppliers and buyers, they need no single institution is in charge of.
to determine how much demand they are EP: There is no doubt in my mind that Our approach is to focus on the parts
willing to supply in the months ahead – we are going to see a long-term impact. that Citi can directly influence. As such,
and what is realistic, factoring in a potential Even before Covid-19, the challenging trade we’ve made significant improvements in
second wave of the virus. This is by no relationship between the US and China our back-office processing to improve data
means an exact science, but companies was driving certain industries and markets management and data mining, as well as
would do well to start planning with six to to reconsider international sourcing in the deploying optical character recognition
12 month horizons in mind. context of supply chain resilience. (OCR) and artificial intelligence (AI)
The pandemic has heightened this capabilities. This means that, once
EH: You mentioned that companies are re-examination of existing set-ups, and documents or instructions make their way
rethinking their risk mitigation tools. there is likely to be an uptick in domestic into the bank, they are more or less 99%
Could you expand on that? Which types manufacturing in geographies such as the digital from that point.
of trade finance products are proving US as a result. But companies also have to With our own operations digitised, the
popular? take into account the cost of sourcing closer next step is to determine how to digitise
to home, where labour and parts are often the interface between Citi and the rest of
EP: In general, we are seeing a move more expensive. At a time when economic the ecosystem. This is a complex task, but
back to basics. Over the last few years growth is already under significant pressure, we have made great progress in terms of
open account trade has rendered many margins will be squeezed, so the cost of improving the digital interface between
‘traditional’ trade finance products more manufacturing will be under close scrutiny. the bank and our clients, via electronic
or less obsolete. But in this heightened risk Another behavioural change I expect to banking channels, SWIFT FileAct and
environment companies are being more see over the longer term is the shift towards application programming interfaces (APIs).
cautious. Where new supplier relationships digitising supply chains. E-commerce was We expect to see greater uptake of these
are being put in place as a result of already growing at 15-20% annually, and digital solutions going forward, which will
disruption to existing supply chains, it now that countries across the globe are in help to further the digital agenda.
is not possible to perform due diligence lockdown, virtual shopping is accelerating. The hardest part of the journey involves
through physical site visits. Buying Organisations that did not previously the rest of the ecosystem – which is out of
organisations are therefore reliant on interact with their customers through digital individual institutions’ control. There are
digital due diligence, but this isn’t quite the channels are swiftly realising the benefits a number of consortiums that are driving
same – so they are looking for added risk of doing so. Businesses and consumers are progress in a collaborative way, however.
mitigation too. As a result, we are seeing becoming much more familiar with buying These bodies have impressive visions for
traditional tools such as guarantees come goods and services online. It is reasonable the future of trade, but execution of those
back into favour. to expect that digital demand will continue goals is tough, given the scale of the task in
We are also seeing creative approaches post-crisis, so companies will likely be hand. More work is certainly needed in this
to supply chain finance, ranging from re-assessing their sales and distribution collaborative space to help achieve a truly
leveraging government liquidity schemes strategies as a result. digital trade ecosystem.
Trade is an enormous ecosystem, with so many
different players – from port and customs
authorities to corporates, banks and insurers.
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