Trade Finance
Published  5 MIN READ
Please note: this article is over 9 years old. If you feel this article is inaccurate or contains errors get in touch here . Many thanks, TMI

De-Risking Global Trade with Financial Supply Chain Analysis

Stuart Roberts, Global Trade Sales Head, Treasury and Trade Solutions, and Prashant Ramachandran, Trade Analytics Lead, Treasury and Trade Solutions, Citi

Stuart Roberts Prashant Ramachandran

The outlook for the world is uncertain, volatile and varied, with growth in the US, deflationary pressures in the EU, recession concerns in Japan and slowing growth in China and some other emerging markets. Multinational companies with global footprints and globally dispersed supply chains face three key challenges – the loss of emerging markets as a growth engine, the end of easy money and a concurrent sudden rise of interconnected risks, including from FX volatility, sovereign defaults, interest rate increases, commodity price movements, trading partner defaults and rising geopolitical instability.

While the risks are not as great as 2008 – and there are no liquidity fears – global firms must pay attention to their financial supply chains, the often under-appreciated twin of the physical supply chain. Most of the risks that a firm’s global operations are exposed to are felt first in the financial supply chain: they lead to working capital stresses and subsequent disruption of the physical supply chain. Maintaining supply chain stability while freeing up cash to focus on growth opportunities requires companies to take a holistic view of their financial supply chain and develop a refined supplier and customer segmentation strategy based on financing and risk drivers. By doing so, many of the risks that firms face in 2015 can be mitigated and cash can be freed up for investing in growth. However, for companies to gain a global view of the financial supply chain and segment suppliers and customers effectively they must increase their analytical rigor, mine appropriate financial data and tap the practical know-how of their banking partners.

Citi proactively supports its clients’ need for supply chain insight through a new tool called Global Flows Analytics. Using the latest big data and machine learning technologies, Citi mines the $3 trillion of client payment flows that pass through its global network every day and combine it with Citi’s institutional knowledge and credit and risk data to generate actionable financial supply chain insights for clients. Citi’s experience shows that a bottom-up approach that relies on leveraging client payments data to map-out the financial supply chain can unlock huge value for clients and helps to make visible the risks of the current environment. Five steps are essential for unlocking this value: