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More companies use AI for supply chain management – Industry roundup: 9 July

More companies apply AI and machine learning to supply chain management

Companies are using artificial intelligence (AI), automation or machine learning (ML) for at least one supply chain management application, a new study by US business software company Epicor and Nucleus Research has found.

Almost half of companies in the essential “make, move and sell” industries perceive escalating costs as the foremost challenge confronting their supply chains, which the combination of AI, ML and automation is being used to address.

Nearly two in three (63%) of businesses identifying as ‘high growth’ – those that have achieved revenue growth of 20% or more over the past three years – have already integrated generative AI (Gen AI) into their respective supply chain operations to manage cost and operational challenges, the study finds.

“Our 2024 Agility Index underscores the growing adoption of AI and other automation technologies as an essential factor in enabling supply chain businesses to better thrive and compete,” said Vaibhav Vohra, Chief Product and Technology Officer at Epicor. 

“These cognitive capabilities are coming together to empower workers and their businesses to more readily adapt to shifting market conditions and better serve their customers.”

To compile the Agility Index for 2024, Nucleus Research surveyed more than 1,700 supply chain management leaders from the US, UK, Ireland and Asia Pacific (APAC) to understand how they are leveraging powerful technologies like AI and ML to thrive, while simultaneously navigating challenges like supply chain disruptions, escalating costs and skilled labour gaps.

The study also uncovered anticipated future investments in these technologies. Respondents indicated they are integating Gen AI into digital supply chain operations across functions such as product descriptions, natural language querying, reporting, in-application assistance and customer service chatbots, with the latter noted by 72% of organisations as the most prevalent use case.

This widespread implementation is attributed to the emerging technology's ability to streamline customer interactions across various sectors. 

Similarly, 67% of companies currently employ Gen AI for crafting product descriptions, leveraging the technology's capacity to analyse customer sentiment and forecast market demand. This enables a more informed approach to product design and feature development.

Meanwhile, businesses are implementing machine learning most frequently in inventory optimisation (45%) and demand forecasting (40%), underlining the critical role of emerging technologies in managing inventory levels and accurately predicting future demand.

Survey respondents say their greatest hope for the impact of automation technologies lies in increased efficiency and productivity (32%), cost savings (26%) and improved supply chain automation (23%), reflecting a strong belief in the potential of these technologies to drive significant improvements in supply chain management.

“When workers are empowered to spend more time innovating—what humans do best—that’s where the real value creation happens,” adds Vaibhav. “That is agility.”

 

French election “ends pro-business agendaʺ

France’s corporate leaders are resigned to the end of a decade-long business-friendly climate after President Emmanuel Macron’s snap legislative elections resulted in a hung parliament, reports the Financial Times.

Many French executives were relieved when the second round of voting at the weekend saw the far-right party neutralised in a new National Assembly in which no political grouping has a clear majority. But the feeling was quickly replaced by unease that the victory of the left, which has radical tax and spend plans, or political gridlock would derail market-oriented reforms made under Macron.

“We need to wait, but we are all worried,” said a business lobbyist. “We were on the right path.”

Executives have benefited from a pro-business drive initiated by Macron, beginning in 2014, during his stint as economy minister, and continuing with his move to the Élysée as President in 2017. They were taken aback by their champion’s decision to dissolve the National Assembly following the disastrous performance of his party last month during the European elections in June.

Over the past four weeks, business leaders have had to contemplate the possibility of a protectionist, Eurosceptic far-right government. Some executives even courted Marine Le Pen’s Rassemblement National. However, the populist right-wing party, which won the first round of the elections on 30 June, performed below expectations in the second round, obtaining 143 seats.

While the leftwing alliance Nouveau Front Populaire (NPF), which came in first on Sunday, has fallen short of a majority, executives are worried about a future government more inclined to levy taxes on companies and the wealthy, and place added pressure on the state’s already bloated finances. On Monday France’s employers trade association, Medef, said the policies conducted under Macron had “produced results in terms of growth and jobs” and needed to be “pursued and amplified”.

The NPF, a coalition put together just before the elections which includes the Socialists, the Greens, the Communists and the radical left-wing France Unbowed party, went through the entire campaign without designating a candidate for the post of prime minister.

Its leaders met on Monday in an attempt to agree upon who would be put forward for the job. “We are preparing to govern, to apply the programme which is ours,” said Manuel Bompard, co-ordinator of the France Unbowed party.

The programme features a 90% tax rate on annual income of over €400,000 (US$432,000), a reduction in the retirement age from 64 to 60, a block on the price of “essential goods”, a 14% increase in the minimum wage and spending commitments of at least €150 billion over three years.

Government bond markets in France saw some selling early on Monday, but were fairly muted overall despite political gridlock after a second round of legislative elections.

The yield, which moves inversely to the price, on the 10-year French government bond rose 3 basis points in early trade, but retreated shortly after and was relatively flat at 3.221% around 9:30 a.m. London time.

Jitters have spread through France’s bond market in recent weeks. The 10-year yield topped 3.3% — a roughly 8-month high — after Macron called the snap parliamentary election in the middle of June.

 

South African banks to change EFT payments

South Africa’s banks will implement a significant change to domestic electronic funds transfer (EFT) between South Africa, Lesotho, Eswatini, and Namibia from this September.

Regulators in the Common Monetary Area (CMA), comprising South Africa and its three neighbours, Namibia, Lesotho, and Eswatini, decided to discontinue processing electronic EFT payments and collections within the CMA.

The CMA’s decision means South African account holders can no longer make EFT payments to account holders in other CMA countries. They will also not be allowed to receive EFT payments from other CMA countries unless they are initiated on a global banking channel.

Before this restriction, South African account holders could make EFT payments to Lesotho, Eswatini, and Namibian accounts.

South African banks initially warned their account holders that the regulatory changes would start to be applied three months ago and 15 April 2024 was scheduled as the final day of processing domestic EFT, including credit payments and EFT debit collections to and from Namibia.

However, the Bank of Namibia extended the effective date to 30 September 2024 and regulators have decided to extend the deadline. The final day of processing domestic EFT, including credit payments and EFT debit collections, to and from Lesotho and Eswatini, is 9 September 2024.

Nedbank has confirmed that people making and receiving payments or collections to beneficiaries in a CMA country after September 2024 will not be able to use EFT.

“You can use our global payment platform, global transactions on the Nedbank Business Hub, or our global host-to-host solution to make and receive these payments,” it said.

The bank also warned that debit order collection processing will only be supported in-country and not between countries.“Debit orders collected from accounts within the CMA will have to be initiated from an account domiciled in Namibia, Lesotho or Eswatini,” it stated.

This will require access to an in-country banking service to submit debit order collections and the receivables and billing processing accounts. Alternatively, debtors can initiate payments from the respective CMA countries using a cross-border service.

Standard Bank said all payment flows between countries within the CMA will be done via the Swift platform and will no longer be processed via EFT rails.

 

RBI joins Project Nexus for instant cross-border retail payments

The Reserve Bank of India (RBI) has joined the recently-launched Project Nexus an international initiative to enable instant cross-border retail payments by interlinking domestic Fast Payments Systems (FPSs) (see Industry Roundup July 3).

RBI has been collaborating bilaterally with various countries to link India’s FPS — the Unified Payments Interface (UPI) — with their respective FPSs for cross-border Person to Person (P2P) and Person to Merchant (P2M) payments.

While India and its partner countries can continue to benefit through such bilateral connectivity of FPS, with Project Nexus, a multilateral approach will provide further impetus to the efforts in expanding the international reach of Indian payment systems.

As the RBI notes, Nexus, an initiative developed by the Innovation Hub of the Bank for International Settlements (BIS), aims to connect the FPSs of four ASEAN countries (Malaysia, Philippines, Singapore, and Thailand); and India, which would be the founding members and first mover countries of this platform.

An agreement to this effect was signed by the BIS and the central banks of the founding countries: Bank Negara Malaysia (BNM), Bank of Thailand (BOT), Bangko Sentral ng Pilipinas (BSP), Monetary Authority of Singapore (MAS), and Reserve Bank of India at the end of June, in Basel, Switzerland. Indonesia, which has been involved from the early stages, continues to be involved as a special observer.

The platform can be extended to more countries, going forward. It is expected to go live by 2026. Once functional, Nexus will play a major role in making retail cross-border payments efficient, faster, and more cost effective.

 

Tax windfall continues for Ireland’s economy

Ireland’s government collected €12 billion (US$13 billion) in corporation tax in the first half of 2024, a 15% increase on the same period in 2023.

Ireland has benefited from reforms to global tax rules, which means major companies pay much of their corporation tax in the country and the government is setting up a sovereign wealth fund with the windfall.

Last year, Ireland raised €24 billion in corporation tax, three times the figure of €8 billion that it collected just six years ago.

Meanwhile the country’s Finance Minister, Jack Chambers, announced that he is bringing forward the budget by a week to 1 October, fuelling speculation that Ireland’s governing coalition plans to call a general election before the end of the year.

Chambers told Irish broadcaster RTÉ the government is “absolutely committed" to running its full term into next year and the new budget date is due to ministerial commitments in Europe the following week.

The Irish economy has been performing relatively strongly with the latest tax returns underling the health of the country’s job market. Income taxes over the first six months of 2024 were almost €17 billion, up 7.5% on a year ago while value added tax (VAT) receipts were up by 6.2%., reflecting buoyant consumer spending,

However, an independent budget watchdog, the Irish Fiscal Advisory Council, has cautioned the government against a “giveaway” pre-election budget, which it warns could lead to inflation rising again.

“As the economy is already operating at full capacity, loose budgetary policy would add to price pressures,” the Council comments. “As always, there are several seemingly compelling demands for tax cuts and spending increases.

“But the government needs to make choices. Doing everything now would add to price pressures and could overheat the economy.”

 

Only 22% of CFOs are ready for climate reporting, says Accenture

Just over one in five (22%) of finance executives at large companies believe that they are well prepared to meet upcoming requirements to report and seek external assurance on climate-related risks and opportunities, according to a new survey released by global professional services firm Accenture.

The figure is low despite most companies expect sustainability reporting requirements to increase over coming years, and as more prepared executives are more likely to view sustainability as an opportunity for their companies

For the report, From Compliance to Competitive Advantage, Accenture surveyed 730 chief financial officers (CFOs) and senior finance executives at companies with more than US$1 billion in revenues across 11 countries and 15 industries, and conducted a series of in-depth interviews with finance and sustainability executives.

Accenture noted that the report comes as sustainability-related regulation and legislation increases around the world, with a focus on areas including increasing market transparency around environmental, social and governance (ESG) risks and opportunities, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) regulation and the US SEC’s climate disclosure rules, measures setting prices on the carbon content of imports, such as the EU’s Carbon Border Adjustment Mechanism (CBAM), and initiatives to provide incentives and grants for specific sustainable activities, such as the US Inflation Reduction Act (IRA) and EU’s RePowerEU plan.

The survey indicated that the finance executives are feeling the pressure of the evolving regulatory landscape, with nearly 85% of respondents reporting that they expect an increase in mandatory disclosure over the next three years, and 90% agreeing that ESG issues will be a major focus for them over the next five years.

Additionally, more than 80% said that they feel pressure from at least three groups of stakeholders to take action on sustainability, with the most commonly cited stakeholders applying pressure including regulators, board members and shareholders.

While the finance executives are increasingly pressured on sustainability issues, however, the survey found that most do not yet feel ready to meet many of the new requirements, with only 22% of CFOs reporting well prepared to disclose on climate-related risks and opportunities and to seek external assurance on their disclosures, and only 10% feel well prepared to meet these reporting requirements in all sustainability areas such as resource use and circularity.

For the report, Accenture identified and assessed companies’ preparedness across 9 key sustainability capabilities across categories of ESG Measurement, ESG Management and Talent, including capabilities ranging from data management, quality and integration to transparency and integration on non-financial key performance indicators (KPIs), ESG considerations in business decisions, and ESG skills in the finance team and finance skills in the sustainability team.

Across nine capabilities, the report found a wide variety of preparedness, assessing 12% of companies as weak on ESG measurement and management, 73% at a moderate level of preparedness, with some having automated ESG data capture and most moving closer to integration of ESG into their management systems, and 15% as having strong capabilities, gathering detailed ESG information, automatically monitoring quality, using ESG data to improve business decision making, using predictive analytics to identify potential ESG risks, and cultivating complementary skills within their finance and sustainability teams.

The study found a strong correlation between companies that are well prepared on ESG measurement and management and those that view sustainability as an area for opportunity and growth. The survey found, for example, that 68% of companies in the “weak” group reported a challenge in striking a balance between sustainability and profitable growth, compared to only 20% of the “strong” group, while “strong” companies were more than twice as likely (20%) to already consider sustainability as a significant value driver for their organizations than “weak” companies (9%).

 

Taiwan builds a prototype platform for CBDC: hearings next year

Taiwan has built a prototype platform for a potential central bank digital currency (CBDC) and plans to hold multiple hearings and forums on CBDC issuance next year as its central bank continues to study and develop a digital currency.

Taiwan’s Central Bank Governor, Chin Long Yang, said in a research report that building a digital currency is not an international competition and that the central bank has yet to set a fixed timeline for CBDC issuance.

Yang is scheduled to present the report on CBDC development progress on Wednesday at Taiwan’s Legislative Yuan, according to the office of the parliament’s finance committee chair.

The report said that the central bank has developed a CBDC prototype platform, with a two-tier issuance structure and that initially the CBDC will be non- interest bearing and CBDC wallets could come in both anonymous and registered versions.

On the retail front, the report states that the prototype platform has increased its processing speed to 20,000 transactions per second. The central bank also plans to develop a wholesale CBDC, which could be used as a clearing asset for asset tokenisation.

Taiwan began studying CBDCs in 2019 and has completed two stages of testing, The central bank has adopted a ʺprudent approachʺ towards the issuance of a potential CBDC, the governor said.

The central bank added that cryptocurrency and stablecoins ae not pat of the CBDC research as those assets are separate from the digital currency system, The crypto industry remains largely unregulated in Taiwan, with the financial regulator requiring crypto service provides to comply with anti- money laundering (AML) laws,

Last month, the local crypto sector officially established an industry association to formulate self-supervisory rules under the government’s guidelines, The Ministry of Justice has also proposed amendments to the current AML laws that would require domestic and overseas crypto firms seeking to operate in Taiwan to register for AML compliance. Failure to do so could result in imprisonment for up to two years.

 

Axa and BNP Paribas explore asset management joint venture

French insurance and BNP Paribas are reportedly considering a potential asset management merger, a move that would create a unit with US$1.5 trillion assets under management (AUM).

According to a Bloomberg report, citing sources, the two major French groups are exploring a joint venture (JV) for their asset management businesses. Talks are ongoing, however, and no decisions have been made, with Axa reviewing other merger options for the future of its asset management business.

This would not be the first JV between the two firms. In 2005, BNPP AM and Axa IM co-founded EasyETF, marking their entry into European exchange traded funds (ETFs). However, AXA IM sold the business to BNPP AM in 2009. The latter is currently a top 10 ETF issuer in Europe with US$28.1 billion AUM.

Axa IM re-entered European ETFs in September 2022, with the launch of two active ETFs, a key area of focus for the French insurer.

From an ETF perspective, the duo’s ranges would have little crossover, with BNPP AM traditionally focusing on rules-based ETFs while AXA IM has predominantly launched active ETFs.

In February, BNPP AM launched its first active ETFs that apply an “index-like approach” combined with its proprietary ESG methodology.

Consolidation have marked the asset management industry in recent years amid ongoing cost pressures. Amundi’s acquisition of French rival Lyxor from Société Générale in January 2022 is the most recent high-profile tie-up of two ETF issuers. The deal created Europe’s second-largest ETF issuer behind BlackRock, with US$241bn AUM, as at the end of Q1.

 

ABA review into low open banking take up calls for collective rethink

The Australian Bankers’ Association (ABA) says that the country’s opt-in open finance programme has failed to reach its potential four years after launch.

Australia's Consumer Data Right (CDR) regime went live to customers of major banks in July 2020, and to customers of other banks in July 2021. In addition to significant government investment, the banking industry has invested around A$1.5 billion (US$1 billion) into CDR since 2018.

A review of the scheme conducted on behalf of the ABA by Accenture found that in 2023 only 0.31% of bank customers were using CDR and that more than 50% of data sharing arrangements had been discontinued or allowed to lapse.

The review also found that the CDR is negatively impacting competition in the sector as mid-tier and regional banks incur disproportionately higher compliance costs compared to major banks. This in turn is leading to vital technology and customer projects in digital banking and scam protection being deprioritised.

ABA CEO Anna Bligh comments: “Despite the best efforts of Government, regulators and industry, this review makes it clear that CDR has not realised its potential.

“Australians have enthusiastically embraced digital innovations in banking such as mobile wallets and PayID, however uptake of the CDR has been comparatively low. It’s time to go back to the drawing board. The current CDR regime isn’t delivering for customers or enhancing competition and a new pathway forward is needed.”

Customer Owned Banking Association (COBA) CEO Michael Lawrence says smaller banks have collectively invested over A$100 million in CDR, with very little benefit to customers or competition. “While we support the intent of the CDR to increase competition, it has actually made it more difficult for smaller banks to compete by tying up resources with little to no tangible return,” he says. “Before smaller banks commit more resources, we ask for a clear roadmap to ensure the CDR delivers on its original intent to improve competition.”

 

Apac investment banking fees down sharply in H1

The Asia-Pacific region, excluding Japan, recorded a 25% year-on-year (yoy) decline in investment banking (IB) fees to US$9.3 billion in the first half of 2024. It was the lowest H1 figure in the region since 2016, based on a report by the London Stock Exchange (LSEG).

Fees generated in the region accounted for 16% of total fees earned globally; IB fees from America accounted for 55%, and Europe 24% .

Within the Asia-Pacific (excluding Japan), China’s state-owned investment company Citic took the top position for overall IB fees, with a total of US$489.5 million. It accounted for a 5.3% wallet share of the total Asia-Pacific IB fee pool.

Equity capital markets underwriting fees were down 52% on the year to US$1.6 billion in the region – the lowest since 2013. Its debt capital market fees fell 5% to US$5.5 billion, while syndicated lending fees tumbled 39% to US$1.2 billion, compared to H1 2023.

The estimated advisory fees earned from completed mergers and acquisitions (M&As) were also down 28% on the year to US$964 million in the region.

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