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Industry roundup: 24 February

McKinsey outlines how mining companies can maximise value

Cash flows from operations from most mining companies are likely to continue their recent strength over the near term, reports McKinsey. The management consulting group reports that this gives the industry an opportunity to review how it has used cash in previous cycles in charting a path forward in which it invests for growth, optimises balance sheets and adjusts internal processes.

In an online article How to navigate mining’s cash-flow conundrum McKinsey senior analyst Himangi Gupta and colleagues Siddharth Periwal, Oliver Ramsbottom and James Whitecross analyse mining industry cash flows over the past two decades, the ‘pain points’ experienced during sudden changes in cycle and practices that can help companies strengthen financial resilience.

Their report notes that prices for many mined commodities have hit record levels in recent months, leading industry commentators to speak of a new ‘super cycle’ and drawing similarities with the 2009-2011 spike in commodity prices that followed the global financial crisis.

“As record cash flows provide an ability to grow after years of cash conservation, a refreshed expansion strategy could include organic growth and a rethink of allocation decisions to emphasise more greenfield investments and sustainable processes, which are better suited to today’s evolving regulatory backdrop,” comment the report’s authors.

“An M&A strategy built around a series of smaller deals could enhance growth prospects and avoid some of the pitfalls of past large acquisition moves done at high premiums. And more flexible processes to manage investment project leverage and create commodity pricing outlooks can even out some uncertainty in the next business cycle.”
 

Botswana to discontinue cheques from 2024

Botswana’s central bank and the Bankers Association of Botswana have announced that in response to the increasing use of alternative electronic payment systems, the southern African country will discontinue the use of cheques from the start of 2024.

The move will apply to both the issuing and the acceptance or collection of cheques, said Seamogano Mosanako, the head of communications and information services at the Bank of Botswana (BoB), in a statement.

“As of 31 December 2023, all banks in Botswana will cease to accept cheques for deposit and/or encashment,” said Mosanako who advised the public to use cash and alternative payments instruments including debit or credit cards, electronic funds transfers, internet banking, mobile money transfer and other digital payments platforms and instruments.

Mosanako said the use of cheques has become less effective as alternative digital payment systems gained in popularity and was presenting various challenges including a lengthy processing period of about two to four days to obtain value, prone to fraud such as forgery of account holders’ signatures, dishonoured payments due to issuing of cheques without sufficient funds.

The ending of cheques as a means of payment in Botswana reflects of the availability of more cost-efficient, safe, secure and convenient digital payment instruments, she added. Over the period to the cut-off date and beyond banks in Botswana will run a campaign to educate their clients on alternative payment methods, especially digital channels.

 

Few organisations have escaped supply chain disruptions, UK report finds

Only 3% of organisations report that they avoided supply chain disruption in 2021, according to a survey of 250 UK-based supply chain decision makers.

The research, conducted by market researcher 3Gem on behalf of the supply chain management software and consultancy company Blue Yonder owned by Japan’s Panasonic, found that 97% reported some degree of impact.

Factors outside of company control and the resulting consequences varied from company to company, with organisations reporting customer delays (59%), stalled production (44%) and staff shortages (40%). Following the disruption, 63% of businesses said that managing the supply chain has become a priority.

Survey respondents said that they are unsure about what the future holds, with 37% of organisations concerned about the long-term implications of the Covid-19 pandemic on the supply chain. This is followed by Brexit (24%), a pressure to be more sustainable (19%), the changing regulatory landscape (12%) and a lack of investment (7%).

“Businesses are right to feel concerned when it comes to their supply chain,” says Wayne Snyder, Vice President, Retail Industry Strategy, EMEA, Blue Yonder. “In 2021 we saw unprecedented disruption, and as we look ahead, several macro factors on the horizon are likely to drive further interference. 

“To stay ahead of today’s supply chain complexities, organisations need to be able to plan intelligently, while having the visibility and flexibility to respond at pace. This can only be achieved by having a real-time, end-to-end view of the supply chain that leverages technologies such as artificial intelligence (AI) to recommend and optimise actions.” 

The research also suggested that most organisations clearly understand the impact of disruption and are proactively managing concerns by investing time and resource in the supply chain, with 83% of organisations having increased investment in the supply chain over the past 12 months and 11% investing more than US$25 million (£18.6m).

Technology is the common factor when spending this investment. Asked how they deployed budgets, 86% of organisations invested in technology, followed by developing new skills and defining a new supply chain strategy (60%).

One unexpected result was that 58% of organisations also invested in the sustainability of the supply chain. Blue Yonder described it as “an encouraging move” given that 2021 research from the MIT Center for Transportation & Logistics, which the company also sponsored, found that 9% businesses had decreased their commitment to sustainability last year, while 55% thought it remained the same or were unsure as to the status. 

Asked about the technology that would have the most significant impact in reducing disruption, 67% of organisations believe that the ability to view and manage the supply chain from end-to-end will help them manage disruption better. This is followed by advancements in AI technology (53%), new types of delivery options powered by the likes of robots and drones (43%), and the use of technology to better manage their workforce (42%).

“These stats highlight just how vital new technology is in reducing risk across the entire supply chain,” said Michael Feindt, Strategic Advisor, Blue Yonder. “Especially considering the fact that 71% of organisations have implemented new technology over the last 12 months to reduce disruption in the future.

“The study also showed that more than 68% of companies state that planning, forecasting, and inventory management were their most important areas for technology investment, with end-to-end supply chain management and AI technology deemed critical by 53%.

“Of course, disruption isn’t always avoidable, but having the technology in place to support change and empower organisations to make decisions in real-time will go a long way in minimising risk and improving overall business resilience.”  

 

Islamic finance “helping to meet sustainability goals”

Islamic finance has a major role in plugging the gap between long-term sustainability and inclusive growth, with the 17 sustainability development goals (SDGs) as a guiding compass, according to Bank Negara Malaysia (BNM) deputy governor Datuk Shaik Abdul Rasheed Abdul Ghaffour.

In his keynote address at the Islamic Finance International Conference, a two-day event organised by the United Nations Development Programme (UNDP) the deputy governor said most of the SDGs were aligned with the objectives of Shariah or Maqasid Shariah, making Islamic finance naturally advance and spearhead sustainability goals.

“This is the case in Malaysia, where sustainability objectives are materialised through the adoption of value-based Intermediation (VBI) practices. For a few years now, Islamic financial institutions have contributed significantly in pursuing sustainability efforts domestically. We also see many Islamic financial institutions helming sustainability efforts in their respective financial groups, both domestic and foreign.”

Abdul Rasheed said that Malaysia’s Islamic financial institutions have collectively intermediated over Ringgit (RM) 155.6 billion (US$37bn) in VBI-aligned initiatives over the past three years. As a mature system, Islamic finance was poised to scale up value-based finance solutions he added and continues to take the lead in creating a greater impact on the environment, economy and society through several measures including harnessing the power of digitalisation and embracing transformative change.

“Studies show that an estimated 70% of new value to be created in the economy over the next decade will be based on digitally-enabled platforms, priming conditions for breakthrough innovation to perennial problems.” he said.

Abdul Rasheed also stressed that with the right and responsible application, emerging technologies can amplify the impact of Islamic finance in meeting sustainability goals. “For example, the infusion of big data, artificial intelligence and machine learning allow a better understanding of the varied and specific needs of the different segments, especially the unserved and underserved.”
 

Evolution launches new trade credit protection programme

Alternative credit investment manager Evolution Credit Partners, which provides trade credit protection (TCP) on accounts receivable from high yield buyers against their possible non-payment or bankruptcy, has announced the launch of its new TCP programme that it says offers increased customisation and flexibility for buyers. 

Describing TCP as a critical instrument to enable safe trade among suppliers, buyers, factors, and banks, Evolution says that it expands the reach of trade credit protection to both public and private high yield corporates. “Despite the largest portion of corporates being unrated or below investment grade, it is a largely underserved segment of the supply chain often constrained by credit counterparty concerns,” the company adds.

Rene Canezin, co-founder of Evolution said: “Our new TCP programme goes beyond what is commonly called the vendor put market. Our most prominent new features expand protection to not just include protection against bankruptcy, but other forms of non-payment. Other features include no reporting requirements and the ability for clients to extend their protection if there are unexpected continuing exposures... [it] has been very well received by both corporate suppliers and financing providers such as factors and commercial banks.”

Evolution says that through the increased allocation of capital to high yield buyers in the trade finance marketplace under its TCP program, the company has positioned itself as a large-scale financing and credit protection alternative to bridge a significant subset of the trade finance gap which has largely lacked financing solutions. “Evolution's trade finance solutions enable sellers to transact during periods of market uncertainty or disruption allowing them to expand business relationships with high yield strategic customers,” it states. 

The company launched in April 2018 after spinning out from Harvard Management Company. It had approximately US$2.5 billion in assets under management as of December 2021 and invests across two primary credit strategies: leveraged finance and trade finance. Since 2020 Evolution has expanded the applications of its credit expertise from financing highly leveraged corporates to the trade credit protection and trade receivables finance space, often serving clients through hybrid solutions applying a combination of leveraged finance and trade finance strategies.
 

PNC Treasury Management adds on-demand pay tool

PNC Bank unit PNC Treasury Management has launched PNC EarnedIt, described as a “groundbreaking new on-demand pay solution”.

Powered by DailyPay Marketplace, an on-demand pay service designed for businesses with at least 500 employees, PNC EarnedIt offers pay-on-demand as an employee benefit to its clients, enabling their employees to access earned pay throughout any point in the pay cycle instead of waiting for payday.

PNC EarnedIt leverages companies' existing payroll and time management systems to convert their employees’ time worked into net earnings. This available balance is accessible to employees via a mobile application 24/7, 365 days a year, where they can select the speed at which – either immediate or next business day – they would like to receive a portion of their earned pay. The solution is described as both bank and card agnostic, so all transfers through PNC EarnedIt will be delivered to employees’ existing bank accounts or the card of their choosing.

“Consumers increasingly want access to their pay in real-time to make informed financial decisions,” said Chris Ward, executive vice president and head of Data, Digital & Innovation for PNC Treasury Management. “At PNC, we understand that the financial landscape has changed and continues to evolve to be more immediate and interconnected. Therefore, we are focused on delivering financial products and solutions – such as PNC EarnedIt – that enhance the customer experience and provide consumers with financial options.”

As the release notes, with the US and other developed economies experiencing one of the toughest labour markets in decades, companies are evaluating several new employee benefits to attract and retain talent. While on-demand pay is a relatively new employee benefit, it is quickly gaining popularity for the flexibility it gives employees – many of whom are trying their best to manage cash flow – to be able to use their pay when they need it most.

DailyPay’s CEO and founder, Jason Lee, said the company was “incredibly excited” to deepen its relationship with PNC. “The DailyPay Marketplace provides banks, fintechs and merchants, among others, with the opportunity to participate in the on-demand pay movement, providing a highly sought-after benefit to their clients,” he added. “The impact of our technology on both businesses and workers has been extraordinary and drives a trickle-up economy, at a time when we need it most.”

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