Supply Chain Finance More Important than Ever – Citi
(24 January 2023 – Australia) Citi is making a renewed push into supply chain and receivables finance to help businesses manage sharply rising inflation and interest rates.
The concern for the health of supply chain finance is amplified by inflation, which is hovering around 40-year highs in many countries, and also rising interest rates. These new challenges hit the smallest suppliers hardest, but the good news is as demand for resiliency grows, so too does the opportunity for smaller players not traditionally as engaged in global trade.
Supply chain finance uses the higher rating of buying companies to enable suppliers to gain early access to attractively priced finance. This increases suppliers’ resilience, shoring up the physical supply chain.
Although Greensill Capital’s collapse led to legal proceedings and put a spotlight on companies use of supply chain financing, Citi is now urging CFOs and treasurers to take advantage of the product. The bank claims in a new report featuring East & Partners research that higher costs are hurting suppliers’ profit margins because they are financing inventories at their own cost of capital in an inflationary environment and that in these conditions.
Enterprises are now focusing on inventory management strategy, diverse and longer-term partnerships with producers, and a deeper investment in digital tools. The research also show they are focused on bringing the same resilience to their financial supply chains that they have brought to their physical supply chains to counter disruption” Citi CEO Jane Fraser commented in the report.
“Supply chain disruptions are expected to persist due to global challenges, despite easing of pandemic-era constraints. There are also emerging concerns around global economic headwinds, inflation and rising interest rates will see Australian economic growth slow in 2023” Australian Industry Group CEO Innes Willox said.