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Taking the Holistic Approach

by Robin Page, Chief Executive, TMI

Robin PageLast year’s edition of TMI’s popular annual survey of developments in the field of working capital optimisation made it clear that the whole topic had become inextricably entwined with that of supply chain finance, and this new edition shows that the process is continuing. We are delighted to be able once again to present a series of informative articles by professionals at the top of their game, covering a variety of aspects of what is one of the core responsibilities of today’s treasurer.

The European market in trade receivables securitisation (TRS) is examined in depth by Philip Kerle, who presents the results of a survey carried out by Demica, of which he is the Chief Executive Officer. While acknowledging that many of the more exotic securitisation instruments which flourished before the financial crisis have disappeared, the survey showed that claims of the demise of securitisation are quite wrong, and many of those which are solidly based with high-quality assets have not only weathered the storm but “look set for a revival and growth”. Overall, the survey clearly demonstrates that TRS is “an increasingly relevant and helpful financing technique for a growing number of companies”, Kerle concludes.

The move of corporates into ‘growth mode’ as the crisis recedes is also noted by Bill Borden of Bank of America Merrill Lynch. He discusses the payables strategies which are currently driving working capital improvements, prominent among which are an increased focus on measuring performance plus a switch to more efficient payment tools. Borden usefully summarises the most important challenges to improving working capital and emphasises the importance of a holistic, rather than silo-based, approach, including “regular communication about what’s best for the company overall, rather than individual departments”.

Sebastian Hölker of UniCredit says persuasively that the future of supply chain management is “both global and local”, and points out that while there are some benefits for corporates in rationalising their banking relationships, doing business with just one bank alone “can expose firms to an unnecessary level of risk concentration”. The approach of UniCredit is to leverage local expertise within an international framework, and Hölker believes “that this mindset will lead to the largest advances in supply chain finance practices over the next few years”. Specific products such as the Bank Payment Obligation (BPO) are being developed with this in view, and allow banks with large networks of correspondent banks like UniCredit to finance their clients’ side of the deal and ask a regional affiliate to take the other side.