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Industry Roundup: 24 March

Supply chain disruption the "new normal", warns WTO

Supply chain disruption is the new normal and businesses that accept disruption as a permanent part of the commercial landscape - and build supply chains able to withstand this new reality - are best placed to thrive in today’s world, suggests the World Trade Organisation (WTO). 

The WTO, an intergovernmental organisation that regulates and facilitates international trade, hosted a Global Supply Chain Forum on 21 March. During a series of virtual ‘fireside chats’ WTO members and stakeholders from all parts of supply chains advocated strategic investment and diversification as ways for organisations to deal with disruption.

One example of the strategic investment cited by the WTO is multinational businesses, many of which are responding to disruption by shrinking their supply chains on the basis that smaller chains equal smaller risks. Among them is manufacturer Samsung US, which is mitigating against semiconductor shortages by re-shoring its chip manufacture, with Apple set to follow suit, by making its own ARM-based microprocessors. Electric car manufacturer Tesla already makes its own chips in one of its US production facilities.

Forum speaker Charles Darr, executive VP of maritime policy and government affairs at global shipping company, MSC Group, warned that supply chain disruptions would have “somewhat of a permanent effect”.

“There have been a series of shocks, and we may not be done yet,” he said. “This has gotten everyone’s attention on just how susceptible supply chains may have been to things such as lack of diversification, and also the need for investment.”

WTO Director General Ngozi Okonjo-Iweala said the WTO could help by supporting the quick clearance of goods at borders and promoting “further liberalisation of trade in transport and logistics services to bolster supply chain infrastructure,” citing an area of supply that many regard as integral to the success of supply chains.

Edward Sweeney, Professor of Logistics and Supply Chain Management at the UK’s Heriot-Watt University, explores the impact of globalisation on logistics and supply chain management in his book Global Logistics: New Directions in Supply Chain Management. He shows how logistics is now at the heart of long-term strategic plans in almost every business, after many years of being on the periphery.

He also echoes the sentiments of the WTO speakers, by saying that uncertainty in a shrinking world “is a characteristic of the international business landscape in which supply chains now operate”. 

Sweeney comments: “As a result, major companies have become strongly focused on supply chain risk management. This means identifying where risks of any kind exist in the network, assessing the potential impact of these risks, and putting mitigation strategies into place.” These strategies are wide-ranging and cover a spectrum of risk - both to demand and supply.

In terms of managing risk, speakers at the WTO forum advocated that organisations invest in digital solutions, including robotics and blockchain, to better manage risk. 

However, John Denton, Secretary General of the International Chamber of Commerce (ICC), cautioned that even with such investment, resilience would never be achieved unless “you ensure access not only to digital skills but also digital platforms”. 

“That also means we need bold reforms in terms of the digital economy,” he added.

Partial reopening for Russian stock market

Stocks rallied in early trading on the Moscow stock exchange, which has partially reopened after a shutdown of nearly four weeks following Russia’s invasion of Ukraine. The MOEX index rose by as much as 11% in its first session since 25 February, with investors favouring energy giants Gazprom and Rosneft.

Shares in banking group Sberbank also rose, although it has felt the impact of Western sanctions and exited most of its European markets at the start of this month. However, the airline group Aeroflot, whose fleet is banned from much Western airspace, saw its shares move sharply lower.

Today’s session is subject to several restrictions, with only 33 of the 50 stocks that comprise the Russian equity benchmark trading, a ban on short selling and foreign investors not yet able to sell stock.

Bloomberg quoted Hasnain Malik, a strategist at emerging markets information service Tellimer in Dubai, who commented that Moscow still isn’t a ‘functional market’, given the curbs on overseas investors selling shares.

“With restrictions on foreign selling and repatriation this is not a functional market in terms of efficient price discovery, given foreigners dominate the market’s free float, he noted

“The one fundamental factor that has improved during the stock market’s suspension is the partial recovery in the currency as Russia tries to shift oil and gas trade to roubles.”

There was also evidence that Russia’s government has followed up its pledge to prop up the market by directing its wealth fund to buy shares. Reuters reported on 1 March that Moscow planned to channel up to one trillion roubles (£7.7 billion) from its National Wealth Fund on buying Russian stocks.

Daleep Singh, deputy US national security adviser for international economics, was also sceptical about the reopening of the Moscow exchange. “What we’re seeing is a charade: a Potemkin market opening,” he commented.

“After keeping its markets closed for nearly a month, Russia announced it will only allow 15% of listed shares to trade, foreigners are prohibited from selling their shares, and short selling in general has been banned. Meanwhile, Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading.

“This is not a real market and not a sustainable model, which only underscores Russia’s isolation from the global financial system. The United States and our allies and partners will continue taking action to further isolate Russia from the international economic order as long it continues its brutal war against Ukraine.”

Crédit Agricole introduces post-Brexit charges

French bank Crédit Agricole has introduced a €5 (US$5.50) charge for withdrawals made with UK-issued credit and debit cards and recently began imposing a new €18 flat fee on any bank transfers coming from Britain. Reports suggest that more European banks are likely to introduce similar fees.

Since the UK has left the European Union, the Single Euro Payments Area (SEPA) rule that European Union (EU)-wide charges cannot be higher than costs for domestic transfers no longer applies to the UK

Although the country can still use the SEPA infrastructure, the cost cap no longer applies and entitles EU-based institutions to start charging fees for transfers to and from the UK, as well as ATM withdrawals across the EU from UK-issued or registered bank cards.

The UK’s financial watchdog, the Financial Conduct Authority (FCA) has previously warned that cash withdrawals across the EU “may become more expensive” post-Brexit. “We expect firms to let you know about any changes in charges that affect products you have,” the FCA said.

While UK banks normally charge non-pound sterling transaction fees for customers making purchases or withdrawing money abroad, these were already in place before Brexit took effect.

London business daily City A.M. reports that the additional cash machine fees come as Crédit Agricole customers in France have found flat fees being added to money transfers coming from the UK. The change could potentially affect British visitors in Europe who have no EU bank account, such as tourists and business travellers, and also owners of second homes and Britons resident in France or elsewhere in Europe.

The European Consumer Centre, an EU-wide lobby and consumer group focused on cross-border payments in Europe, suggests that banks are not permitted to charge these newly introduced fees. According to Bianca Shulz, the group’s director for France “even though the UK has left the EU, it remains a SEPA member; the rules have therefore not changed with regard to SEPA transfers.”

However, the paper notes that a Crédit Agricole spokesperson reportedly responded: “I can confirm that the commission is different if the country operating the payment is or is not part of the European Economic Area, whether they belong to SEPA or not.”

Citi pairs with Stenn on supplier financing

Citi announced that it has started working with Stenn, a London-based global platform providing SME funding, as part of the expansion of its global trade payables finance product suite to include deep-tier supplier financing and helping to provide access to funding across global supply chains.

Launched in 2015, Stenn’s online platform provides SMEs with financing opportunities to help support their international trade. The offering will cover onboarding, compliance, risk management, and potential financing for a large universe of deep-tier suppliers.

Citi added that historically, deep-tier suppliers have had less access to credit as they are typically SMEs. Financing options available in the market have been limited or may come at a high cost. 

It said that the new offering extends the benefits of Citi’s Supply Chain Finance programs by providing financing to the suppliers of the supplier, which has previously been an underfinanced area; ultimately completing the client value chain. Deep-Tier Supplier Financing will also help deliver growth to the economies whereby financing is made available directly to the manufacturer of goods, as well as to the deep tier suppliers. 

Chris Cox Head of Trade and Working Capital, Treasury and Trade Solutions, Citi, commented: “Deep Tier Supplier Financing provides our clients with solutions that can further strengthen relationships with suppliers and help to improve the resilience of supply chains, by working to providing access to attractive financing. With Stenn, we believe we can provide further sustainability and visibility to our clients’ supply chains, by bringing financing to the last mile supplier.”

Greg Karpovsky, CEO, Stenn commented: “The pairing of Stenn’s scalable & digital platform with a financial giant like Citi is a major step forward, in helping to provide more SMEs with virtually seamless access to affordable finance to support their international trade. SMEs reportedly face a financing gap of US$3.7 trillion. To date, Stenn has issued over US$5 billion of finance to SMEs in over 70 countries.  Working with Citi is a significant milestone in helping struggling SMEs in a global post-pandemic trade environment.”

NatWest enters UK ‘buy now, pay later’ market

NatWest is the first of the UK’s Big Four banks to announce plans for entering the contentious buy now, pay later (BNPL) market, which enables customers to split their purchases into several repayments.

The bank said that the service will be launched this summer and will enable customers to make a purchase almost anywhere that accepts Mastercard. BNPL options often appear at online checkouts and can help consumers avoid paying interest on their borrowing while spreading the cost

BNPL services have seen a rapid increase in popularity recently with more consumers relying on the products as inflation rises. However, concerns have been raised about the BNPL industry and the danger that customers could easily get into debt, while interest rates are typically high if the provider is not repaid promptly.

“There’s a clear demand for buy now, pay later and we are determined to make it better and safer,” said David Lindberg, CEO of Retail Banking at NatWest. “We have listened to our customers and are excited to provide them with a proposition that gives them greater flexibility to manage their finances. Customers told us they value fraud protection on purchases and useful tools and reminders to help them budget.”

NatWest said that it will put in place safeguards to help ensure lending is affordable and transactions will also be covered by all the protections customers expect from a fully regulated bank. The new service will offer structured repayments, credit scoring and affordability checks.

The bank added that by offering a fixed credit limit, customers will know in advance they can plan their purchases with confidence. NatWest’s mobile app will help customers use and manage their BNPL product, enabling them to monitor repayments, view their outstanding balance and send notifications to help keep on track with payments.

Kelly Devine, Division President for Mastercard UK and Ireland, added: “Offering people choice in how they pay is at the heart of what we do, so we are working closely with NatWest Group to give customers greater flexibility and control in how they pay and where they shop.

“Buy now, pay later has become a popular means to spread the cost of a purchase and with NatWest we are co-creating a solution which benefits from Mastercard’s reach as well as our trusted relationships with consumers.”

Burgan Bank launches cash management platform

Kuwait’s Burgan Bank has launched the Cash Management Solutions (CMS) online platform to expand the range of digital financial solutions and tools it offers to corporate customers. It said that the CMS platform translates the progress made in the bank’s strategy to support corporate customers through modern digital banking services that help them easily and efficiently manage their businesses online.

Established in 1977, Burgan is Kuwait’s third-largest bank by assets. The bank's corporate customers can now access a range of integrated digital banking solutions through the single sign-on CMS platform and gain full visibility and control of their accounts. Burgan said that the Platform will also help customers manage their businesses online with the highest cybersecurity standards to protect their banking information and sensitive corporate data.

Services provided by CMS Online include the ability to easily access and monitor financial accounts and commercial activities, whether for Burgan Bank accounts or third-party accounts. Customers can also monitor payment flows by viewing and tracking deposit and loan details online, settling corporate credit card transactions, and generating detailed statements and reports to follow up on the financial status of their companies.

“The CMS Online platform is the first of its kind comprehensive tool in the Kuwaiti banking sector and is exclusively designed for Burgan Bank’s corporate customers,” said Mr. Fadel Abdullah, Chief Corporate Banking Officer at Burgan Bank. “We continue to strengthen our leadership in this area by introducing innovative services that help customers accelerate the financial flow of their companies and improve the level of financial control and access.”

Sterling Bank adds liquidity management app

Nigeria’s Sterling Bank has launched Omni X, an integrated investment and liquidity management online platform offering a wide range of digital products and service offerings to users. It said the solutions are configured to enable businesses invest and raise seamlessly and also complements Sterling’s existing corporate Internet banking platform

Executive Director, Corporate and Investment Banking, Sterling Bank, Yemi Odubiyi, said: “Omni X is deliberately designed to offer a simple, easy and effective platform to manage the daily liquidity needs of corporates.”

Lagos-based Sterling added in a statement that at a recent event for corporate leaders, its Group Head, Client Coverage and Financial Institutions, Kashetolulope Lawal, said that Omni X would provide convenience to corporate clients by expediting financing decisions, speeding up transaction processing times and automating investment processes. It would minimise the incidence of human errors associated with manual processing to improve customers’ experience and drive business productivity; dovetailing into profitability for users.

Lawal said: “Omni X becomes an imperative solution for corporates across various sectors to invest and raise financing simultaneously where possible due to the nature of their businesses, the time sensitivity attached to these activities and the culminating desire for an improved solution that does the most in the shortest time possible.”

Omni X also incorporates corporate account opening and other services for seamless on-boarding and transaction processing as well as solutions for investments, liquidity management and access to advisory services. Lawal also said that the platform aimed to simplify the major banking needs of businesses, investments and financing in the financial and other allied services sectors.

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