Enrico Camerinelli, Vice President CSCMP Italy Roundtable

Supply Chain Finance: ostacoli e preoccupazioni ancora da superare?

21 giugno 2017 - IBM Client Center (MI)

Manifesto della Round Table Italiana del CSCMP

• La Round Table Italiana del CSCMP è il luogo d’incontro dei professionisti della Supply Chain per:• Scambiarsi conoscenze, esperienze e buone pratiche

• Approfondire la conoscenza della professione grazie anche all’apporto di colleghi e studiosi di altre nazioni

• Collaborare a progetti d’interesse comune

• Offrire e trovare opportunità di lavoro

• A questo scopo i membri:• Organizzano e partecipano ad eventi e discussioni

• Realizzano progetti di sviluppo e/o sistematizzazione delle buone pratiche della professione

• S’incontrano e discutono regolarmente

➢ Connettere

➢ Sviluppare

➢ Formare

Source: EBA, 2014

Let’s Agree on Supply Chain Finance

Europe, the Middle East, and Africa34%

North America25%

Latin America1%

Asia-Pacific40%

Reverse Factoring Potential by Geography(N=US$790 billion)

The Focus on Reverse Factoring

$0

$274

$164

$86

$71

$13

$0

$93

0,2%

3,5%

35,0%

44,4%

9,6%

2,7%0,2%

4,5%

AAA AA class A class BBB class BB class B class CCC class Unrated

Potential Reverse Factoring Business by Buyer Credit Rating and as a Percentage of Total Reverse Factoring Programs

Reverse factoring potential (InUS$ billions)

Percentage of current reversefactoring programs (N=1,200)

Investment grade Noninvestment grade

Who’s Running Reverse Factoring

The Context• A significant portion of reverse factoring programs are anchored around

subinvestment-grade companies

• The global SCF market is morphing into more articulated schemes with various models available to meet the needs of corporate clients.

Number of relationships in the network

Valu

e d

istr

ibu

ted

in

th

e n

etw

ork

B2B

marketplace

finance

Fund providers

Purchase orders/

Unapproved invoices

B2B platform

Investors

Loans

P2P

platform

Selected

supplier

SCF

platform

Anchor

buyer

Selected

supplier

Fund providers

Approved invoices

Selected

supplier

Selected

supplier

Selected

supplier

Selected

supplier

Anchor

buyer

SME

SME

SME

The Market

• Credit rating alone is not the only criterion to properly segment SCF potential.

• Growing opportunities for players with IT platform that intercepts the needs of sub-investment-graded companies.

• Large multinational buyers developing innovative financing schemes with Tier-2 suppliers.

• Banks: from proprietary SCF portal to partnering with fintechs for SCF platform and SME onboarding.

MARKET TRENDS

MARKET IMPLICATIONS

Ideas to remember

• One important phenomenon in SCF is distributors’ emergence and separation from originators.

• Distributors purchase SCF assets and resell them into the secondary market, where investors enjoy better returns than bank deposit or money market funds rates.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology• Definitions vary by region and practitioners.

• SCF’s original focus on working capital and receivables financing has expanded to invoice-based, portfolio-based, with or without recourse, domestic or international, confidential or with notification.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology

• SCF Programs Bureaucracy• Banks require frequent credit checks, KYC, which distract from business and turn SCF

programs into an administrative nightmare.

• Internal barriers between corporate departments: procurement, logistics, and IT are left out of the process.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology

• SCF Programs Bureaucracy

• Lengthy Onboarding Practices• The level of information among companies about SCF is still low.

• Companies already have financing lines in place and do not want to change.

• Companies’ internal disconnects between treasury and procurement functions represent a serious concern.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology

• SCF Programs Bureaucracy

• Lengthy Onboarding Practices

• Legal and accounting treatments• CFOs concerned about reclassification of trade indebtedness as bank debt.

• Absence of clear guidance from regulators and accounting firms.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology

• SCF Programs Bureaucracy

• Lengthy Onboarding Practices

• Legal and accounting treatments

• Improving risk assessment of unapproved invoices• Funding decisions on the trading partners’ performance history instead of the buyers’ or

the suppliers’ credit.

• The supply chain bank.

The Stakes

To keep from losing control of the SCF marketplace, banks must resolve major pain points in the areas of:

• Terminology

• SCF Programs Bureaucracy

• Lengthy Onboarding Practices

• Legal and accounting treatments

• Improving risk assessment of unapproved invoices

• New entrants• P2P lenders, dynamic discounters, and early-payment marketplaces.

• Help buyers and suppliers efficiently exchange purchase orders and invoices, and accelerate cash transfers using innovative technology.

The takeaways

• Increasingly target SCF programs to subinvestment-grade companies.

• Strategically decide whether to use own SCF platform to originate participants from SMEs or to partner with new P2P lending fintechs.

BANKS

• Target SCF programs for end-to-end supply chain performance.

• Select SCF platforms that include solutions from specialized fintechs.

• Resolve pain points to regain control of supply chain collaboration.

CPOs