New York, NY (PRWEB) July 27, 2012
Treasurers are playing a more important role in supply chain finance (SCF) and as a result are improving risk management procedures, while creating cash and working capital optimisation.
Treasurers have become more involved in supply chain finance (SCF), as part of a strategic shift in the treasury teams responsibilities within an organisation. The trend has largely arisen since the financial crisis of 2008 when risk management, including supplier and counterparty risk, became more of a priority for the C-level and boards of almost all organisations.
This changing role for treasury has coincided with the movement towards global trade on open account terms; that is without trade finance instruments. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) reports that more than 80% of global trade is now done on open account terms, a percentage that appears to grow each time a new study is conducted.
This combination of factors increases the responsibilities placed on an organisation to support its business trading relationships and, where there is a financial component, the requirement for the treasurer to be involved. Depending on geographic region, treasury either is involved with or actually leads SCF programmes at least 50% of the time and this involvement is growing every year.
Treasurys involvement results from the increase in trade with suppliers worldwide which, in turn, means an increased demand for financial tools to support those trading relationships. Traditionally, those tools were trade finance instruments such as letters of credit (L/Cs) or business guarantees. While they continue to exist, especially where required by regulation in certain markets, open account trading necessitates a different set of financing arrangements that arent necessarily balance sheet items. As such, SCF is often the answer.
From a treasurers perspective, there are two primary reasons to be involved in SCF:
