Mitigating the risks of open account trade - Risk - CorporateTreasury - News - FinanceAsia.com - The network for financial decision makers

Corporate care

But for a supply-chain-financing programme to work most effectively, the anchor client not only needs to carefully select the suppliers — some firms look at suppliers’ operating cash flows and debt- to-equity ratio of their suppliers or ask for up-front payment or deposit before they sign off a contract — but must also stay actively involved in the management of the supply chain. Heads of supply chains in multinational corporations (MNCs) also tend to enjoy more seniority and access to CFOs and treasurers than do their counterparties in Asian firms, but this too is changing.

“The factors ensuring a successful supply chain finance programme would be the dynamics of the supply chain — corporate-supplier/buyer relationship, the strength on the product, the length and depth of the relationship. This relationship should be viewed as an ecosystem where it is a symbiotic relationship,” said Ashutosh Kumar, global head of corporate cash and trade at Standard Chartered. “The corporation will have to have a view that a successful supply chain programme involves their participation and not a programme solely conducted by a financial institution, as the financial institution relies on the cooperation and information flow from the corporation to mitigate the risks.”

Mitigating the risks of open account trade - Risk - CorporateTreasury - News - FinanceAsia.com - The network for financial decision makers