By John Pfisterer, Global Head of Revenue Strategy at LiquidX, based in NY
LiquidX held a panel at Eurofinance 2022 with industry experts Gregg Murphey, Assistant Treasurer of Novelis Inc, Iris Hernandez, Finance Director of Flex Ltd., and Andrew Farnhill, our Head of Business Development in Europe. This group of thought leaders discussed recent industry trends, such as back-office digitization, time and cost efficiency, and supply chain management strategies, and how they have been directly impacted by fintech solutions for corporates worldwide.
In their discussions, it was made clear that by leveraging fintech tools, businesses are able to bolster their performance significantly both in spite of and in addition to industry trends. These solutions are vital in an entirely new trade finance environment that is facing an array of challenges.
Recent Challenges within Corporate Treasury
Working capital has been dealt several blows recently. From the slowdowns and disruptions of the pandemic to the increasing pressure of inflation, the trade finance industry is still attempting to make significant progress. Corporate treasurers are facing their own specific challenges in the midst of it all.
Resistance to Change
There has been an interesting hurdle of accepting new treasury strategies both internally and with customers. From an organization standpoint, becoming fully automated assists in improving one area, while potentially revealing holes in another. Taking the time to pause a process or strategy to assess how it affects another can be draining and tedious for the people responsible for the work.
One of our customers, Flex Senior Vice President & Treasurer Christian Bauwens shared, “One of the big challenges we have found is finding external partners willing to do the same automation journey that we do. And that’s really the ultimate objective, right? It’s not just what we do internally. As soon as you get out of your system, it’s blocked by your partners. Finding willing customers to embark on an automation journey has been a tough challenge.”
Burn out has been a large challenge for overworked employees that worked through the pandemic. Due to the exhaustion, there may be considerable resistance from these teams and desire to keep operations the same as they have always been. On the other hand, automation can help improve their workload overall.
“On the people side of things, there’s a real cry from employees that they’re a little bit worn out,” said Gregg Murphey, Novelis Inc’s Assistant Treasurer. “We really want to improve on an automation or technology journey to help with attrition rates.”
The implementation of these tools will provide relief for overworked teams in the long run. It’s only a matter of acknowledging that people are a little worn out and may be wary of change. Until then, resistance to fintech and low morale remain a significant challenge.
Lack of Stronger Security
There are also certain gaps that exist in security for corporate treasurers. There is a need for better security when it comes to trade payables and receivables management. Cybersecurity is not a perfect world and a lot of risk still exists in protecting information and trade. For example, there’s ample opportunity to commit fraud when a business can only validate payment instructions via phone call with suppliers. The protection of the entire supply chain is essential, but there appears to be little in the market for solutions or tools that can comprehensively handle it.
Differences in Solutions by Jurisdiction
The variation between regional solutions presents challenges as well. A U.S. solution can work well and provide automation locally, but there may not be a global equivalent and no means of transitioning the U.S. tool to a larger scale. This presents a particular obstacle for banks, corporates, and governments, especially when you consider jurisdictional limitations and legal disparities.
The Post-Pandemic States & Standards
As the effects of the pandemic started to shake out, treasurers found that while certain aspects of business remained unchanged, there was a new level of pressure that had developed. Concern over the financial viability of suppliers and customers became more prevalent, particularly on the supplier side.
While some suppliers are investment grade companies that can weather out a storm, there may be other players who are considerably smaller than the larger conglomerates in the supply chain. The pandemic highlighted just how delicate the supply chain is when smaller suppliers are considered critical for obtaining as much inventory as possible, but no longer viable.
“What became really important for Novelis was learning if some of our suppliers are investment grade companies that can weather the storm,” shared Murphey.
This has pushed corporate treasurers to work towards a more robust position from a trade finance perspective. The investment of tools and solutions to secure the viability of suppliers with working capital needs, such as SCF, became a more integral part of their strategies. Being able to offer assistance at a lower cost of credit was a valuable asset.
There were several shifts in industry trends that changed the environment also. Today, businesses are impacted by the ongoing change in base rates worldwide, fluctuating financial stability, inventory constraints, fragmented networks, and beyond. On a larger scale, there is an increased demand for visibility and liquidity access.
For organizations internally, there is a common atmosphere of burnout among team members. This “new normal” has employees feeling overworked. Quiet quitting has become a popular trend, where employees no longer strive to innovate, grow, or accelerate in their roles.
These new standards in the industry have led to strategy adjustments that lean more on technological solutions, like digitization, to help with position management, risk mitigation, working capital, and providing relief to exhausted employees.
Achieving New Efficiencies with FinTech
For many, leveraging technology has helped bolster the efficiency and productivity of their businesses. Having access to the tools and services of fintech companies like LiquidX offers organizations the ability to strategically inject stability into not only their own operations, but their supply chains as well.
Working with financial institutions in a traditional program can be difficult due to a lack of flexibility and an inability to change the scope of a program. When partnered with a fintech provider, access is provided for back office management and reporting that financing partners may not have on their platforms. The marriage between traditional banks and fintech open new opportunities for corporate treasurers to help develop and utilize a product with more creativity and less regulatory muster.
“I think this is something that fintech, particularly LiquidX, offers. The ability to quickly ramp up a program is an excellent example of what you’re looking for in a fintech. The stand up bilateral programs with banks can be very clunky,” said Murphey. “Having all of the back office and reporting that’s necessary to support it is a huge boon. That’s something that traditionally banks often leave behind.”
In the midst of this melding of strategy is the new addition of blockchain technology. The use of blockchain has broadly improved efficiencies across multiple industries. This tech has been able to simplify risk management, information efficiency, and working capital management at a faster pace. This is especially true when leveraged with inventory management and financing in the midst of supply chain shortages and excess on-hand inventory.
There are still some gaps that the corporate treasury field is navigating, but there is a lot of growth and traction taking place as well. Current events have essentially changed the way the supply chain operates today, but having access to the resources and technology to stabilize and bolster the line provides a huge advantage.
LiquidX has been at the forefront of offering fintech solutions to help corporate treasurers with a trade finance platform that seamlessly connects the entire supply chain in one solution. Our platform provides innovative workflow tools to support clients looking to strengthen supplier and customer relationships. To witness firsthand, request a demo or contact us directly to learn more.