Cash & Liquidity Management

SEB Guide to Working Capital 2013 - Introduction An overview of the contents for the guide, explaining why the path of more specific, industry-based approach was necessary and how this will help to take the working capital concept to the next level of detail and practicality.

SEB Guide to Working Capital 2013

Sharing Insights from an Industry Perspective

Foreword by Lars Millberg, Head of Global Transaction Services, SEB Merchant Banking

Lars MillbergWelcome to the SEB Guide to Working Capital 2013, published in conjunction with Treasury Management International. In this Guide, we explore the impact that different business models have both on working capital requirements, and the ways in which companies optimise working capital. In the past, many discussions on working capital have been generic in nature, and take a broad-brushed approach to applying solutions for optimising working capital. By taking a more specific, industry-based approach, and analysing the needs of companies at different points in the supply chain within each industry, we aim to take the working capital concept to the next level of detail and practicality. In addition to featuring the experiences and perspectives of some of the world’s most-respected industrial corporations, we are delighted that PwC share their substantial working capital expertise and industry insights throughout the Guide.

Over the past year or so, SEB has conducted a detailed exploration of the working capital drivers, challenges and objectives in a wide range of industry segments in which our customers operate. Adopting an industry-based approach to solution and service design is not new in itself. However, the way in which we are doing this is quite different from the industry silos in which a number of banks have segmented their business in the past. In particular, while companies operating within an industry will be subject to similar issues either directly or indirectly such as shifting customer demand, new regulations and changes to the cost and availability of inputs such as raw materials and fuel. However, their behaviour and business model will differ significantly depending on the function they fulfil within the supply chain for each industry.

In the telecoms sector for example, a mobile phone designer such as Nokia or communications technology provider such as Huawei will each have quite different working capital requirements from those of an operator such as Vodafone, with a large retail customer base and huge capital investment and financing needs. Similarly, in this Guide, Bombardier is a large manufacturer of aircraft and trains, so it is subject to shifts in public sector spending, and in the wider transport and logistics industries. While issues such as rising fuel costs and changing customer behaviour do not have a direct input, they will impact on demand and the working capital challenges that their customers need to address. In contrast, metals company Rautaruukki Corporation (Ruukki) is at the other end of the supply chain for the mining and metallurgy industry, and is therefore subject to the trends affecting this industry, as well as each of the industries that their customers represent.

At SEB, we leverage the in-depth expertise and comprehensive solutions that we have developed over many years to understand the specific nature of each company’s cash and working capital management requirements, whilst reflecting the specific implications that changes to regulations, technology, customer demand and availability of raw materials will have on the industry as a whole in various ways. In addition to designing and delivering highly targeted solutions and services, we recognise that as the connection point for many of the world’s most respected companies, we have a vital role to play in co-ordinating wider debate and knowledge sharing, a concept that we describe as a ‘knowledge network’.

This Guide is just one of the ways in which we facilitate the knowledge network. We are pleased to welcome five of our customers operating in different industries and geographies, who share some of their experiences, challenges and solutions in optimising working capital. While in each case they are affected by the wider trends affecting the industries in which they operate, they have unique business models according to their position within the supply chain. Each customer’s article is accompanied by commentary from Julian Roberts, Director, Working Capital Management at PwC in which he shares insights into working capital trends, constraints and opportunities either directly or indirectly relating to the customer’s industry.

It would be unrealistic to try to represent every industry in a Guide such as this, so we have had to be selective. In many cases, there will be similarities across different industries, so we are sure you will find that much of the content strikes a chord with your own experiences. In addition, please do not hesitate to contact us if you would like to discuss your cash and working capital challenges and the opportunities that exist to address them.

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