Financial supply chain management: the time is now

Late-2008 and 2009 certainly saw an increased take-up of financial supply chain solutions from corporates. However, this was a trend that was developing for some time before the financial crisis struck and, despite the return of some degree of normality, demand is not subsiding. One factor contributing to an increased interest in financial supply chain (FSC) management during the economic turmoil was a need for liquidity among many corporates. As credit markets contracted, difficulties in accessing conventional sources led to a surge in demand for solutions that can unlock cash trapped in the supply chain. Indeed, more generally, trade-oriented financings proved their resilience as corporates sought all sources of liquidity available. Another issue brought sharply into focus was counterparty risk. A possible tendency to neglect this during periods of favourable economic conditions was rapidly reversed as the danger of trading partners not honouring obligations became real. While there was previously a certain amount of cynicism towards FSC, much of this has now been dispelled as its benefits have been tried and tested under extreme economic conditions. Certainly, many of the obstacles that previously blocked or hindered take-up have now been cleared. From the perspective of transaction banking providers, demand for FSC solutions is growing at such a rate that existing credit capacity will soon be outstripped. However, this is something being mitigated by the increasing popularity of syndicated and club deals in this sector, as well as through the use of imaginative structures and vehicles that are able to bring in new types of investors.