Interoperability through digital platforms is key to achieving scale in supply chain financing

One of the main hurdles to supply chain financing is the complex and fragmented nature of the supply chain itself, especially for global organisations. For instance, a tech multinational firm with a USD 20 bn annual turnover would typically have at least 200 suppliers spread across over 15 countries, each banking with a least a handful of local financial institutions.

Furthermore, global trade processes and systems lag considerably in digitalisation compared to other treasury and working capital processes. For instance, in most countries, international trade documents still need to be physically sighted due to regulatory and legal constraints. This poses a formidable challenge to achieving scale through a fully end-to-end digitalisation process in areas such as supply chain financing.

In order to achieve true end-to-end digitalisation, it is important to not only converge all relevant functionalities and processes onto a single platform, but also attain a seamless and smooth workflow between disparate functionalities and processes through interoperatibility. Taking a look at the TASConnect platform, all activities necessary to facilitate supplier financing can take place on a single digital platform. In fact, we think it can offer much more than that. A one-stop digital platform can pave the way for interoperability, bringing a range of benefits like efficiency, visibility as well as transparency in regulatory compliance.

As a result, enterprises will now be able to scale the depth and breadth of financing programs to include medium and smaller suppliers, which was previously not possible due to manual processes.

Interoperability is the ability for different information systems, devices or applications to seamlessly communicate, exchange data and use the information, regardless of each of their underlying technologies. We highlight below some examples of interoperability in an anchor firm’s digital platform.

Onboarding of suppliers

The on-boarding of suppliers to a financing programme is often a laborious and manual operation involving the supplier, the anchor firm, their respective banks and mountains of documents. Yet, this is a critical part of any supply chain finance programme, as the supplier needs to provide evidence of its business viability and financial credibility to gain access to the anchor’s bank financing.

However, with a digital platform, the onboarding process can occur at speed if the respective banks and suppliers are already on the anchor’s digital platform or can be brought onto the platform. With the latter, for instance, an anchor firm can send out a blast email via its digital platform to its top 50 to 100 suppliers with a link that connects the onboarding process with their choice of banks, thus allowing innumerable suppliers to be onboarded simultaneously.

The know-your-customers (KYC) process to vet the supplier can also be conducted seamlessly as all the necessary information required by the anchor firm’s bank are readily available on the platform. More importantly, none of the stakeholders need to change their processes to facilitate this interoperability. This is a critical point if one is to gain their support for the programme.

Data driven underwriting

Manual underwriting usually involves extensive paperwork and time-consuming data collection. Moreover, these often lead to rather subjective risk assessments, especially for smaller ticket sizes, which can be avoided through a programatic approach.

But with the ‘platformisation’ of data, it is now possible for banks and financial intermediaries to underwrite pre-shipment financing risk using AI/ML driven data analytics on a single digital platform.

This data-driven approach not only improves the underwriting efficiency and reduces manual processes, but also helps banks optimize risk management, thus enhancing their underwriting decisions.

ESG compliance of suppliers

The days of incorporating a token paragraph on environmental, societal and governance awareness in a company’s policies have long passed, especially for global listed MNCs. These days, large multinational public companies are not only required to adopt strict ESG compliance and are rated accordingly, but the onus has gone beyond their immediate operations to include that of their suppliers. Global MNCs now need to ensure and demonstrate to regulators and investors that their supply chains are ESG compliant.

One of the ways this can be demonstrated is through interoperability within a digital supply chain platform. Most banks incorporate ESG criteria in their lending activities, which guides the appropriate interest rates based on a borrower’s level of ESG compliance. Meanwhile, there are data firms which specialise in collecting and scoring ESG data profiles of companies, including suppliers. STACS, a partner of TASConnect, is an example of such.

In this instance, adopting a single digital platform provides an avenue for banks to vet the ESG profile of the anchor firm’s suppliers when setting the relevant interest rates for supplier financing. The action also provides an audit trail to substantiate the anchor firm’s ESG compliance in its supply chain. The process highlights the interoperability benefit.

Visibility on physical goods

The ability for a CFO to gain visibility of the supply chain is invaluable as it facilitates timely decision-making. By using physical supply chain in the service of financial supply chain, digitalisation has now made it possible to provide relevant parties (like banks, FIs and large anchors) unprecedented visibility of the physical movement of goods, especially, in the pre-shipment stage.

This visibility and transparency can help to enhance the banks and FIs’ understanding of the pre-shipment process, enabling them to better underwrite credit risk in the pre-shipment stage of the working capital cycle.

Sentiment analysis using AI models

Digital platforms can be adapted to include the risk monitoring of supply chain risk sentiment. Our partner TAS Sense utilizes AI models to scan over 70,000 websites to produce risk assessment scores on suppliers. This means that with a single digital platform at TASConnect, an anchor can monitor the risks of its top 50 or 100 suppliers.

By mining data and websites to spot potential risks to the supply chain such as natural disasters, strikes or fire, a digital platform can provide timely analysis on the supply chain risk sentiment, allowing CFOs the opportunity to make timely decisions to adjust and realign their procurement strategies, if necessary. These tools also allow banks and FIs to proactively monitor portfolio risk.

The ability to substantially mitigate performance risk highlights the adage – ‘Forewarned is Forearmed’.

Digital platforms may be the answer to neglected pre-shipment supply financing needs

Global supply chain financing needs have expanded multifold in recent years, driven by a combination of business needs, operational necessities and technological advancement. According to the Supply Chain Finance Market 2024 Report, the global supply chain financing market revenue was valued at USD 7.3 billion in 2023 and is projected to reach USD 12.3 billion by 2032.

The global reopening surge in demand following the pandemic, coupled with supply constraints due to the outbreak of geopolitical conflicts, have pressured prices at both ends, leading to prolonged global inflation. As a result, central banks have raised interest rates and have kept them higher for longer to rein in price pressures. This has significantly increased the financing cost of underlying products and commodities, especially for small and medium-sized businesses which are faced with increasingly tighter working capital constraints. Meanwhile, technological advancements, particularly in fintech, have also unveiled financing opportunities at scale within the supply chain that were previously deemed unfeasible.

What’s more, in Asia, the bulk of supply chain financing remains in the post-shipment part of the working capital cycle. This barely scratches the surface as the majority of supply chain financing needs lie in the pre-shipment part of the cycle. Anecdotally, the pre-shipment section could comprise as much as two thirds of the entire working capital cycle. More critically, this is the area where the typically small-and-medium sized suppliers may often need working capital support to purchase materials or pay salaries to manufacture and deliver their products.

The onset of digital platforms has, for the first time, made it possible to address the huge financing needs currently unmet in the pre-shipment part of the chain.

Demand for pre-shipment supply chain financing in Asia has remained largely unmet due to the complexity, fragmentation and semi-to-largely-manual processes. This has hampered the ability for banks and financial institutions to underwrite the risk at speed and scale. For instance, a tech multinational firm with a USD 20 bn annual turnover would typically have at least 200 suppliers spread across over 15 countries, each banking with a least a handful of local financial institutions. The logistical challenges of navigating the often-manual backend processes of SMEs, not to mention their multiple domestic banks, have rendered this part of the supply chain rather unfeasible for financing… until now. So, what’s changed? The onset of digital platforms has, for the first time, made it possible to address the huge financing needs currently unmet in the pre-shipment part of the chain. The ‘platformisation’ of data means it’s now possible for banks and financial intermediaries to embark on data-driven underwriting including underwriting pre-shipment risk using AI/ML driven data analytics.

We, at TASConnect, believe that workflow automation can help penetrate deep into the supply chain to multiple tiers that can’t be reached with the present offerings. Besides, platforms, through the principle of interoperability, can also enable multiple and disparate workflows and activities that are necessary for supplier financing to be done on a single platform, bringing unprecedented levels of efficiency and speed. Some of these functionalities include providing banks and financial institutions with supplier credit profiling, digital onboarding of suppliers, documenting hubs, automated and seamless payment systems, foreign-exchange processing and even the monitoring of supply chain participants through AI model-led, in-situ, software applications.

A conventional manual method may be able to reach just 20 to 30 suppliers within a 3 to 4 months timeframe, a platform can enable an enterprise to scale up to almost 10 times over.

The bottom line – platforms can enable supply chain financing to reach far more suppliers than previously possible, helping to direct need-based working capital to where it is most required. For instance, while a conventional manual method may be able to reach just 20 to 30 suppliers within a 3 to 4 months timeframe, a platform can enable an enterprise to scale up to almost 10 times over, allowing it to reach 200 to 300 suppliers within that same period without any additional deployment, not to mention the automated workflows that can ensure an error-free environment.

Aside from enabling efficiency and unlocking economics for all the value chain participants, there are also wide-ranging benefits for the enterprise in facilitating pre-shipment supply chain financing. We highlight the most obvious benefit – helping the enterprise build supplier loyalty. A typical SME supplier tends to supply the top handful of competing enterprises of that particular market or industry. Thus, it is important for a CFO that when the need arises, the supplier in question will prioritise the enterprise over its rivals. For instance, in the event of supply disruption or other unforeseen circumstances that could jeopardise the enterprise’s business.

By standing out among its rivals with programmes that help suppliers gain access to funding, an enterprise can build supplier loyalty as these programmes pave the way for smoother business operations for the supplier. As a result, the supplier becomes sticky to the enterprise, indirectly benefiting the latter.

“Higher for Longer”: What Can Enterprise CFOs Do in This Era of Higher Interest Rates?

After bearing the brunt of one of the most aggressive US interest rate hike cycles since the early 1980s, it’s no surprise that the prospect of rate cuts by the Federal Reserve has become the hottest topic for Enterprise CFOs this year.

The anxiety is understandable, whether for SMBs, regional conglomerates or MNCs. Between March 2022 and July 2023, the Fed raised rates by a total of 11 times, sending its benchmark policy rate to a 23-year high of 5% to 5.25% from a near zero percent. For CFOs who have seen their companies’ financing costs jump 10-fold in 18 months, the impact on the bottom line has been significant. But a Fed rate cut has remained elusive so far. What’s more, the Fed has signalled it may keep rates higher for longer. Even if some rate cuts do happen later this year, rates will likely stay in the 3-4% band for the best part of this decade.

While value chain finance programs have existed for a long time, their manual and paper-based nature has meant that CFOs are unable to adopt them for the long tail of their companies’ suppliers and distributors – the very entities in the value chain, that happen to need liquidity the most.

Clearly, CFOs of global multinationals would be well advised coming to terms with this new normal, and focus on what is within their control. For example, the case for optimizing working capital for themselves and their extended value chain (suppliers and distributors) is the most compelling it has ever been. The opportunity here is a digital transformation of enterprise working capital management processes. Such a transformation program, if well conceived and executed, would bring material improvements to the cash conversion cycle (CCC), a metric that expresses, in days, how long it takes a company to convert the cash spent on inventory back into cash from selling its product or service. Needless to say, freeing up cash trapped across the value chain is a vastly superior option to mobilising funds externally in this inclement rate climate.

While value chain finance programs have existed for a long time, their manual and paper-based nature has meant that CFOs are unable to adopt them for the long tail of their companies’ suppliers and distributors – the very entities in the value chain, that happen to need liquidity the most. This is especially so for global corporations with suppliers and clients in multiple countries, regions and cities – each with their own unique payments process, credit terms and domestic banks.

TASConnect’s mission is to help enterprises with tools to effect such a digital transformation. Our innovative working capital solutions, focused on empowering enterprises, harness technology to connect enterprise treasuries with the extended value chain and the banking system, thereby effecting a material improvement in the cash conversion cycle and related metrics.

With the help of TASConnect’s award-winning platform-as-a-service, clients can extend the scale & scope of their supplier and buyer financing programs. The platform enables fully automated workflows in procurement-to-pay and order-to-cash cycles through a single sign-on thereby eliminating the need and hassle of managing many-to-many multi-party touchpoints. The net effect is not just improvements in capital efficiency, but enhanced availability of liquidity to suppliers and distributors, at better rates.

The importance of this factor is worth underlining. For example, the potential for a small but critical supplier to slip into financial distress due to liquidity problems should not be underestimated as most small businesses operate on tight liquidity and margins. And if suppliers are not able to meet their commitments to the enterprise, this can be a significant risk to business operations.

Given that the new normal is here to stay, adopting a transformative agenda in working capital management may be the single most important initiative for CFOs and Treasurers to consider.

TASConnect’s platform allows more suppliers to participate, and allows them to access cheaper financing via a programme supported by the larger enterprise. This helps alleviate the financial pressures faced by the suppliers while strengthening the company’s supply chain resilience as well as its relationships with strategic suppliers.

As the adage goes, in every adversity lies an opportunity. Given that the new normal is here to stay, adopting a transformative agenda in working capital management may be the single most important initiative for CFOs and Treasurers to consider.

TASConnect is here to help. We build working capital management programs that are just right for your circumstances. Do reach out to us today for a free, no obligations discussion.

TASConnect transforms procurement, financing and supply chain operations with GraviTASC, in collaboration with Gravity

The realms of supply chain management and financial solutions have remained distinctly separate, a cumbersome division far from ideal. But imagine a world now where you can master both physical and financial supply chains, all from one platform.

Acknowledging the potent synergy and enhanced efficacy inherent in a unified approach, GraviTASC was created as a pioneering collaboration between TASConnect and Gravity Supply Chain.

This innovative solution is designed to synergise the efforts of CFOs, treasury departments, procurement teams, and distribution functions. This industry-first, disruptive solution breaks down system silos and eliminates operational bottlenecks within your supply chain, giving you unwavering control and visibility, with easy access to data and financing options.

Enhance your top and bottom line, while lowering procurement and financing risks

GraviTASC is poised to be a game-changer for CFOs, CPOs, CDOs and CIOs alike, offering a host of benefits that streamline operations and enhance decision-making processes.

The primary advantages include real-time transparency and traceability of goods and shipment statuses at an individual Purchase Order level – helping de-risk procurement processes and financing decisions for corporates and banks respectively, while offering material improvements to key metrics in the Cash Conversion Cycle.

TASConnect is a leader in Working Capital Management solutions for leading global enterprises, helping them optimise the Cash Conversion Cycle while ensuring ample supply of liquidity across the extended value chain. Now, the introduction of GraviTASC further strengthens this core proposition, beyond enabling several other positive outcomes across various facets of supply chain and financial management:

• Enhanced ETA and Production Management: better production planning and resource utilisation minus unnecessary demurrage and detention, leading to material reductions in your Cost of Goods Sold (COGS).

• Efficient Team Collaboration: All Enterprise teams and functions can finally be on the same page with aligned KPIs and a shared workspace, benefitting from operational efficiencies and a subsequent reduction in labour costs due to streamlined collaboration.

• Faster Time-to-Market: GraviTASC accelerates the procurement process, reducing the number of days from PO creation to vendor booking, ensuring a faster time-to-market and improved throughput.

• Improved Supplier Performance Risk Management: with complete ‘first mile’ visibility through every stage of manufacturing, QC and logistics, you can stay on top at an individual Purchase Order level, and if issues occur, initiate mitigating actions well in time.

• Enhanced Profit Management: GraviTASC contributes to profits by facilitating a reduction in product markdowns, by achieving better on-time arrival KPIs and seamlessly creating a transaction history for financing partners for the provisioning of credit.

• Ample liquidity, all across your value chain: Strengthen your supply chain health and sustainability with data-backed PO financing. With actionable visibility across various stages of manufacturing, QC and shipment, GraviTASC gives yourfinancing partners the requisite confidence using data to provision suitable pre-shipment credit facilities based on agreed production milestones acting as disbursement triggers.

GraviTASC marks a significant step change in the evolution of supply chain and financial management solutions. CFOs, treasury and procurement heads now have a powerful tool at their disposal. This solution not only simplifies complex procurement procedures but also enhances transparency, traceability, and efficiency throughout the supply chain – optimising operations, improving sales throughput and driving substantial cost savings for enterprises across industries.

About TASConnect

Headquartered in Singapore, TASConnect is a wholly owned subsidiary of SC Ventures Holdings Limited and incubated through SC Ventures – Standard Chartered’s innovation, fintech investment and ventures arm. We are a leading working capital solutions platform connecting complex enterprise ecosystems to deliver economic value with end-to-end visibility and control. We are firm believers in the principles of co-creation and collaboration with our clients. For more information, please visit tasconnect.com

About Gravity Supply Chain Solutions

Gravity Supply Chain Solutions is the developer state-of-the-art technology that gives unprecedented 24/7 visibility of your entire supply chain network. By uniting manufacturers, logistics service providers and retailers on one platform, Gravity drastically improves collaboration and decision-making at every stage of the supply chain. With dedicated offices in five major cities around the world, they provide support when and where you need it most.

 

TASCircle: How can businesses balance the 3Ps – Profit, People and Planet?

In an era where collaboration and innovation are paramount, TASConnect recently launched our inaugural TASCircle event on 14 March 2024, setting the stage for transformative dialogues among industry leaders.

The genesis of TASCircle stemmed from recognising the power of bringing together leaders from diverse industries. The goal was simple yet profound: to create a space where executives could freely exchange views on pressing issues affecting both corporate landscapes and society at large.

Our first topic of discussion aimed to foster a deeper understanding of the intricate balance between Profit, People, and Planet. The exchange yielded a plethora of insights that underscored the complexity of navigating today’s business environment.

The need for a more holistic ESG assessment

One critical obstacle faced by certain industries – particularly those in the commodity sector – is in securing financing due to perceived risks associated with environmental, social, and governance (ESG) factors. This highlights the imperative for financial institutions to re-evaluate their criteria and adopt a more holistic approach to assessing risk and opportunity.

Lack of a market premium for eco-friendly products

Moreover, the event shed light on the inherent tension between sustainability objectives and financial viability, particularly for small and medium enterprises (SMEs). While there is a growing consensus on the importance of sustainable practices, the lack of a market premium for eco-friendly products poses a significant challenge. This underscores the need for collaborative efforts across organisational functions and stakeholders to drive meaningful change.

Consumer education is key to reducing emissions

Consumer education emerged as another pivotal theme, with participants recognising its pivotal role in driving behavioural shifts and reducing emissions. By empowering consumers with knowledge and promoting sustainable practices such as cold washing, companies can significantly mitigate their environmental footprint while enhancing brand reputation.

Our circle raised the importance of inclusive ESG considerations, emphasising that sustainable business practices extend beyond environmental concerns to encompass social and governance dimensions. From factory workers to truck drivers, the discussion underscored the imperative of prioritising the well-being of all stakeholders along the value chain.

With so many interlocking factors that needed to be balanced, we asked how effective is our participants’ organisations in adopting Artificial Intelligence (AI)-led analytics and tools to enhance their supply chain resilience. 67% responded that they could do more and 33% felt that strategies have to be different in various regions. Our participants were also hopeful in the use of platforms coupled with AI and Machine Learning (ML) to provide ESG data visibility and design rule-based actionable for multiple stakeholders such as suppliers, manufacturers, consumers, financiers and investors.

Survey results

To scale and implement different strategies across regions, digitalisation is essential to see real change. With the help of digital platforms like TASConnect, decision makers will have a more simplified and connected value chain system. On the sustainability front, TASConnect for instance works with ESG providers and financiers to enable sustainability-linked supplier financing. This allows corporates to improve their visibility and act upon their Scope 3 emissions whilst incentivising their suppliers for positive ESG actions through lower financing rates.

Ultimately, TASCircle epitomises TASConnect’s commitment to fostering collaboration, innovation, and responsible leadership in today’s dynamic business landscape. As the world grapples with unprecedented challenges, platforms like these serve as beacons of hope, uniting industry leaders in their collective pursuit of a more sustainable and equitable future. Through ongoing dialogue and concerted action, TASConnect aims to drive meaningful change, one TASCircle at a time.

How TASConnect automated Lenovo’s supply chain finance processes as a Validated Partner of the AWS Partner Network and a Qualified Software

We are a working capital solutions Software-as-a-Service platform that unlocks efficiencies and economics by enhancing scalability, visibility, and cross-border connectivity for domestic and multi-national businesses globally. In order to build an all-in-one platform connecting all supply chain ecosystem partners, we had to maintain top industry standards for data privacy and cybersecurity which was only made possible by Amazon Web Services (AWS). 

As a Validated Partner of the AWS Partner Network and a Qualified Software, we are not only powered by AWS, but also compliant with Foundational Pillars of AWS Architecture, Security, Reliability and Operational Excellence. The alliance with AWS enables us to Build, Market and Sell together by innovating, creating and delivering value to customers 

Our end-to-end financing solution built on the AWS Cloud includes: 
       ● Enhancing efficiencies and sustainability in accounts payable and accounts receivable 
       ● Enabling access to working capital sources 
       ● Automating and standardising complex workflows with your ecosystem partners 
       ● Empowering control and business intelligence over your finance programmes 

TASConnect’s universal adapter solution enables the smooth integration of multiple front and back-end systems, connecting fragmented ecosystems – anchor clients, suppliers, buyers and financiers: 
 
Enterprise buyers are able to utilise our platform’s pre-to-post shipment solutions to achieve programme scalability, enhance economic value and elevate process efficiencies in your supplier network. 
 
Enterprise sellers can improve their cashflow and expand sales growth while mitigating buyer payment risk using our accounts receivable solutions.  
 
Banks and Financial Institutions can grow their revenue, automate and create bespoke deal structures, drive ESG, and integrate easily and quickly onto TASConnect. 
 
In just under two years, TASConnect achieved a record of processing US$19 billion in financed invoices and also clinched Top 20 start up business in 2023. 
 
As seen in one of our client cases, we fully transformed and automated Lenovo’s previously manual supply chain finance processes together, empowering Lenovo’s treasury function with end-to-end visibility and control, all via one single platform: 

     ● Accounts payable financing automation to boost efficiencies and scalability  
     ● Supplier portal to empower suppliers with increased cashflow, faster collections and real-time information at invoice level  
     ● Bespoke workflow to fully integrate into Lenovo’s existing business arrangement and put control in their hands  
     ● Customised reporting, dashboards and analytics that allow treasury to make informed and optimal decisions 

Hugh Wu, Global Treasury Head of Lenovo said “TASConnect helped us transform and fully automate our previously manual supply chain finance processes. The platform is customised to integrate all our financing banks and replicate our own workflows. Our Treasury function is now empowered with end-to-end visibility and control, all via one single platform.” 
 
If you are interested to find out more about how we can empower your supply chain finance or understand more about our AWS Architecture diagram, feel free to reach out to our team here. 

ISO 20022 and trade finance: how standardised approach will reshape the industry

What is the ISO 20022 Standards?

ISO 20022 is a standard for all stakeholders in the financial services industry, which significantly reduces the complexity of sending and deciphering information in a structure data format. This methodology can be used to develop structured financial messages and API resources to help reduce the data misinterpretation and ultimately unify existing messaging standards.

The use of ISO 20022 brings enormous benefits to the financial services industry, as it improves end-to-end processing across domains and geographies that currently uses vastly different standards and information formats.

 

How does the ISO 20022 create interoperability?

While MT103 and Fedwire each uses a different standard and syntax, both provide the same information as ISO 20022. An example of how ISO 20022 create interoperability across standards is, while the MT103 Single Customer Credit Transfer 2u ISO 2u st 20 the 52a “Ordering” “DebtorAgent” element being structured differently, it is still essentially describing the same business concept, which is the financial institution that services the account of the ordering customer (or debtor). As such, both concepts can be understood and mapped to the same ISO 20022 business components when processing the data.

 

How is ISO 20022 going to re-shape Trade and Supply Chain Finance?

Today, each bank has an online application where in a corporate will upload the bespoke files containing invoices for discounting (custom format). Such files formats are not standardized and imposes heavy transformation costs, consuming both time, money and resources to translate and decipher prior to book the trade and then process the payment via the MT or MX format message.

In the trade services area, a suite of ISO 20022 messages has been developed to cover e-invoice, invoice financing, demand guarantees and standby letters of credit, as well as factoring services.

 

What is the current stage of adoption?

While there will be a co-existence period from 2022 till 2025 for handling both the MT and MX for CBPR payments, some countries are more aggressive for local RTGS to completely shift to ISO 20022. The adoption of ISO 20022 throughout the correspondent is banking do Targeted to be complete by the end of 2025, ultimately seen as the de facto standard for global cross-border payments.

This sets a strong foundation for upcoming innovations in both the payments and trade space as technology players can leverage on these standards to look at who clients transact with, when are they transacting, and how are they transacting to provide deeper insights on client behavior which helps banks make better credit decisions.

Source: ISO 2022, SWIFT 6th Limited Edition 

How to leverage platform based supply chain finance solutions

Parvez Murshed (Head of Pre-Sales & Platform Solutions, TASConnect) is a banker with more than 20 years experience, specialising in Trade Supply Chain Finance and Transaction Banking through various leadership roles within Citigroup in Asia.

Choosing Between a Single and Hybrid SCF Platforms: A Decision for Multi-National Treasurers and CFOs

Today, treasurers and CFOs of large multi-national corporations often must spend time deciding whether to provide their Supply Chain Finance (SCF) mandate to a single large bank which has its own proprietary SCF platform, or to go with a platform that can bring in funders including multiple banks and other finance providers. There is also a hybrid model where banks have tied up with outside platform providers.

The banks are facing limitations in terms of keeping up with the developments in the markets and with new technology and client requests. Most banks are not able to provide real-time Management Information Systems (MIS) and customised reports per client needs. The biggest issue facing banks today is the scarce technology dollars. There are always unlimited asks from various markets, local regulatory compliance, specific clients’ requirements and ever shrinking budget pool for tech dollars. Multiple rounds of review before they can make enhancements to their platform. platforms today are clunky and do not have client friendly interface and dashboards.

 

Overcoming Banks’ Limitations with SCF Platforms: Consolidation and Customisation

Entering the era of platforms opens a door of flexibility and customisation for the clients. A Fintech-created platform will have the flexibility to create customised workflows, dashboards and enforce client’s rule sets and provide real-time reporting back to client’s ERP.

Some banks have not yet been able to develop APIs for their SCF platforms. As a result, host to host integration is the only option and can take months to implement. Clients also do not want to connect with multiple service providers and banks. For example , if you want your supplier’s KYC done for onboarding into a SCF program, a bank may take a month while some FinTech will be able to do this in about 48 hours pulling KYC data through various sources by API calls. If a bank wants to implement an ESG solution, they have to implement their own ESG framework, get multiple levels of internal approval and then sign up with an external service provider for monitoring of the ESG performance by the suppliers. However, SCF platform is able to consolidate all such ESG capabilities in one place and launch fast in the market. Taking cross-boarder payment and FX conversion as another instance, most banks have limited capability due to the footprint restrictions, especially in illiquid and developing markets. FinTech usually has a better market coverage and local payment system capabilities by integrating with multiple platforms.

While banks bring in liquidity into the SCF programs, they also have limitations in terms of how much credit facility they can allocate. Their distribution capabilities are also limited due to competition with other banks and higher return requirements for capital, which higher calls for skim le to higher pricing for the suppliers. The time taken for distribution can be long sometimes due to scarcity of credit lines and market condition. As a result, invoices may not get discounted on time and suppliers run out of cash. This could be more acute in markets like Vietnam or Indonesia where the secondary market is nascent or non-existent.

 

The Value of TASConnect as a Single Point of Convergence for Multi-National SCF Solutions

That’s where a platform provider like TASConnect adds tremendous value to the multi-national clients by working as their extended ERP and single point of convergence to bring multiple banks, funders and service providers to one place be it for financing, supplier KYC, FX or ESG . The flexibility and nimbleness from pre-to-post shipment create transparency and visibility to clients’ end-to-end trade and supply chain ecosystems. Clients do not have to connect with all the stakeholders individually anymore, to access the holistic SCF solutions. This is the future of platforms and TASConnect is already ahead of the game by creating the future, today.

 

Leveraging on supply chain finance platforms to help corporates accelerate sustainability

Lynette Lee (member, SC Ventures) focuses on driving initiatives and start ups in Sustainability (ESG) space within the Fintech innovation industry. She advances ESG-integration standards and drives the evolution of such stewardship through spearheading collaborative ventures with industries.

The Intersection of Supply Chain Finance and Sustainability: An Evolving Global Landscape

Ever since the COVID-19 pandemic, we can clearly see the evolution of global economy being intertwined with supply chain finance and sustainability. These are topics that have grown in importance for businesses and organizations if they want to be recognized as global players who til as corporate citizens that contribute to profit, planet and people in their journey.

 

Balancing Profit and Responsibility: The Growing Importance of Sustainable Supply Chain Finance

Supply chain finance involves managing the financing and cash flow of the supply chain, while sustainability is focused on the environmental, social and economic impacts in the supply chain. The success of companies that have incorporated sustainability (ESG) in their business led to operations increased interest in the pursuit of solutions that can balance the implementations ESG solutions alongside profitable management of supply chains. Demands for sustainable supply chain finance solutions that are both profitable and socially responsible has grown. supply chain, while reducing costs and increasing profits.

Organizations need to use a variety of strategies and technologies to meet the rising demands of sustainability and supply chain finance efficiently. Technology also plays a key role in supply chain finance and sustainability. and reduce costs. Artificial intelligence helps increase efficiency and reduce waste by analyzing and optimizing supply chain data. Predictive analytics can help organizations anticipate and respond to market changes and gain cash flow mobility.

 

Assessing the Impact of Supply Chains on Environment and Society: A Structured Approach

The first step is to use certified and recognized frameworks to prioritize the crucial and critical topics that impact their businesses.
This helps with two areas:

    1. Standardize the language between finance, sustainability operations and helps in communications to regulators, investors, financiers and customers.
    2. Set the baseline for double materiality measurements

Using this identifiable structure, businesses can confidently assess and evaluate the impact of the supply chain on the environment and society. They can now deep dive into environmental impacts of the materials and processes used, as well as the social shabus impacts of labor ps practice their strategy and solutions can be implemented to reduce the impact and increase efficiency.

Undeniably, supply chain finance and sustainability are two of the most important topics in today’s business landscape. Organizations must be aware of the trends, evaluate the impact of their supply chains, and use modern technologies that covers their ecosystem to reduce costs and ensure long term sustainability.

Economic risk impact in the context of the Russia-Ukraine conflict

Hansel Quek (Chief Risk & Compliance Officer, TASConnect) held various key roles in the risk management space across the financial services industry and Big Four, where he led risk & compliance engagements, strategy and developed due diligence for mergers & acquisition of companies for different sectors.

In 2022, as US, UK and allied nations continue to ramp up sanctions on Russia, this will have an impact on the flow of goods, services and financial market activities globally. If we look at the consequences of these sanctions on financial, commodity and consumer market, the following points start to emerge.

 

Restrictions on certain Banks and transactions (including access to USD and other currencies) by excluding them from the SWIFT payment system

After much deliberation, a cohort of nations including EU, US, Canada and UK and other states agreed to ban a number of Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) international payment messaging system. If we peer in closer, seven Russian banks were removed from the global financial system but access of other Russian banks including two Russian key lenders Sberbank and Gazprombank were exempted.

The two key lenders were exempted because most of the payments linked to oil and gas were handled by them, which the EU heavily depends upon for its industrial and domestic needs.

Nevertheless, as for alternatives, Russia may reroute their transactions through China’s own Cross-border Interbank System (CIPS) and Russia’s own System for Transfer of Financial Messages (SPFS). However, they come with their own pros and cons.

Arising from this, there are some very visible effects of these sanctions in the aftermath. The complete cutoff from the global financial system means that a portion of global trade, specifically based on Russian consumption and export, will be severely affected.

Russia imports heavily from Netherlands and Germany, which will lead to an impact on the earnings of these two countries. On the other hand, the selective ban – as referenced above – keeps the EU imports of energy products (crude oil, natural gas and solid fossil fuels amongst others) from Russia in the green, for now.

 

Restrictions on Russian Central Bank and its sovereign debt

The sanctions on the Russian Central bank are mainly directed towards its ~630 USD billion in reserves. Restricting its usage means cutting off Russia’s ability to finance the ongoing invasion. It also means restricting its ability to bolster its currency, the Ruble. Indeed, since the sanctions have gone into effect, the Ruble has fallen to historic lows, almost 40% down from pre-invasion levels.

This has had widespread effects on the domestic movement of money in the country. Interest rates have been hiked to 20%. Locally, there has been a limit of 10,000 USD (in any currency) imposed on holders of Forex accounts, with any additional withdrawals in Rubles. Basically, the ability of the Russian consumers to move their assets to more stable currencies has been hamstrung entirely. Meanwhile, the Russian stock market remains closed.

Several rating agencies and banks have been revising their ratings on Russia’s creditworthiness. Fitch, JP Morgan, Moody’s, S&P and more have lowered their credit ratings and the sovereign debt outlook by several notches, calling “default” imminent. If that happens, it’ll be the first time since 1998.

 

Export controls aimed on high-tech products, technology components and parts

The US Commerce department had also imposed a set of exacting controls on technology products including military technologies and products through its Bureau of Industry and Security, thereby severely hampering Russia’s access to these technologies needed to further its military capabilities.

These are aimed at Russia’s defense, aerospace and maritime sectors which also means that the entire value chain in defense technologies has been restricted from Russian access. This includes semiconductors, computers, telecommunications, information security equipment, lasers, and sensors.

Following this, the EU, Japan, Australia, United Kingdom, Canada, and New Zealand have also announced their plans to impose similarly targeted restrictions. This is expected to block Russia’s exports of defense equipment, hinder the manufacturing base for the same and stop its military ambitions by a fair extent.

 

Restrictions of imports from Russia

A preliminary look shows that Russia is a leading exporter of oil, natural gas, wheat and metals. The US has already imposed a ban on oil, natural gas and petrochemical products from Russia, the EU and UK are set to follow.

In anticipation of the same, already strained global supply chains have been run into overdrive. Oil prices are up 60% year-to-date, wheat prices have hit record spikes of 70%, and prices of nickel and palladium have skyrocketed to historic highs.

The corresponding effects on production of plastic, steel and other co-dependent industries has been immense.

 

Freezing of visas (travel ban) and assets of corporates, banks and individuals (including cargo ships on the waters)

Sanctions on individuals, including members of Russia’s government, industry magnates and oligarch’s have been aimed at their assets including offshore bank accounts, properties around the world. Their visas have been revoked and many have been stuck at their current places.

The list extends to nearly 160 oligarchs and lawmakers, and their relatives. The ban also extended to their respective companies, thus causing many countries to actively seize, restrain and stop servicing ongoing businesses owned by these individuals.

Arising from the above, this means that exports of metals, oil and other commodities have been affected even without considering the already existing net of sanctions.

 

Airspace restriction

Airspace restrictions have gradually been added to the set of sanctions imposed. This has had two broadly defined avenues – banning Russian owned/operated aircraft in sovereign airspace (Canada, the European Union and several other European nations, including Switzerland have already put this into effect) and banning international airlines and cargo aircraft from flying in Russian/hostile airspace, thus raising risks of price spikes.

The Kremlin has retaliated with sweeping bans on all EU countries, and others such as the U.K., Canada and Switzerland.

This means that transcontinental flights are having to take longer routes and, in some cases, have cancelled them entirely. Routes from the West to Asia fly over the very same Russian airspace and have been affected the most by this. Air fuel prices and costs are likely to increase as a result, leading to the global aviation recovery taking a hit as it recovers from a Covid induced slowdown.

Along with these broad moves, there have been pullouts by several global players, including leading F&B brands, oil companies, banks, payment firms and consumer brands from Russia’s markets. As a result, the past few weeks have seen a rout in global stock market indices and investor wealth taking a significant hit.

This loss of trade, shooting prices and a hit to the movement to goods, services and cash is unprecedented. The sheer weight of these sanctions also means that the Russian economy is in shambles. Trade partnerships are being rewritten overnight, with the global supply chain facing bottlenecks of immense magnitudes.

The aftershocks of these sweeping sanctions will reverberate for a while, long after military actions have ceased.