Citi Ventures Team

When a major vehicle manufacturer announced in January that it plans to stop selling new combustion-powered cars and light trucks by 2035 in favor of battery-powered vehicles, it was one of many recent signals that the automotive industry is on the verge of a transformative switch from gas to electric.

The Thing Economy: Electric Vehicle Charging and Energy Commerce	

Identifying effective solutions to help address our clients’ evolving needs is a key part of Citi’s role as one of the world’s leading trade finance banks. Citi approaches this challenge by tapping into its innovation ecosystem, where its in-house innovations are complemented by a diverse range of collaborations with external partners. Valeria Sica, Head of Trade product development in Citi’s Treasury and Trade Solutions, talks about Citi’s open and flexible approach to collaborating with innovators in working to deliver relevant, viable, and transformative technologies to support clients and help shape the future of trade finance. Valeria Sica, Head of Trade product development, Treasury and Trade Solutions, Citi Complex at the best of times due to its historical reliance on paper and the many parties involved, global trade is not typically renowned for speed when it comes to adopting new technologies. Yet in the decade or so since the financial crisis, the sector has shown remarkable agility, as well as an appetite for innovation not least with respect to the digitization of various elements of the supply chain and in the provision of trade finance. The pandemic’s testing of trade’s resilience uncovered a capacity to nimbly adapt, thanks, in large part, to advances in digitization. For example, paper-intensive processes are now being replaced by digital and automated capabilities. New platforms using blockchain technology are allowing corporates and banks to access data and documents remotely, in real-time and more securely than by couriering them. Trading partners can communicate instantly to process trades and manage finance more quickly and effectively. Artificial intelligence (AI) and machine learning (ML) are coming into their own, helping to speed up and carry out document-heavy tasks more efficiently. Identifying potential and driving innovation Such advances require advocates. As one of the world’s major trade finance banks, Citi views its role as helping to drive innovation. Many ideas start at Citi’s own Innovation Lab. But just as many are proposed to the bank by a fintech company or start as a suggestion by a client. Citi’s collaborative innovation framework led to a variety of collaborations, including agreements to employ new technologies; various forms of joint venture; collaboration with one or more partners to develop a particular product or service; or Citi joining a consortium of industry players that, together, are working to address challenges facing the industry. While neutral with respect to their origins, Citi’s role is to find, develop and deliver solutions for its clients. This involves running any potential innovation through our evaluation process putting ideas and innovations through their applicability paces. The winners must directly address a client need, be viable, have the potential to advance the bank’s overarching strategy to build the global trade bank of the future, and must also improve trade and the provision of trade finance as a whole: hence the bank’s determination to collaborate and consolidate innovation on an industry-wide basis. Below are just some examples of Citi’s role as a partner, an investor, and as a catalyst. Many address the same issues: authenticity of trade documents and faster flows. From the numerous companies out there, we’ve carefully selected those that we want to work with: i.e. those that we think have the potential to change global trade through a community of people and technical functionality. Trade Information Network: Pushing the boundaries to revolutionize open account trade Some ventures, particularly those involving a step change in industry practice, are best executed by collaborating with industry partners. An excellent example is the Trade Information Network, a consortium that Citi helped found in 2018, together with five other banks1. As an inclusive global multi-bank, multi-corporate network in trade finance, it seeks to transform open account trading by digitizing it creating an inclusive and open industry-standard network that is open to both banks and corporates. It allows corporates to communicate trade information to banks easily and securely (for instance by digitally submitting and verifying purchase orders and invoices), and to request trade financing directly. Buyers and suppliers are in control of their data, designating who can access it. Having reliable information assists banks and can help reduce errors and fraud. Having information earlier in the supply chain can help unlock earlier financing. By deploying open architecture, standardized connectivity and governance principles modelled on SWIFT, the Network aims for maximum adoption that eases access to trade finance for a wider range of companies, including small-medium size enterprises (SMEs). The fundamental purpose is to address the persistent industry issue of the global trade finance gap estimated at US$1.5 trillion2 which affects SMEs, thereby helping such businesses, and global trade, to reach their full potential. Citi will use the network to offer additional financial support to suppliers earlier in the supply chain cycle. 1 ANZ, BNP Paribas, Deutsche Bank, HSBC and Standard Chartered 2 https://www.adb.org/publications/2019-trade-finance-gaps-jobs-survey Komgo: Powering trade networks When the objective is nothing less than automating the global trade network and digitizing trade and asset finance processes, an industry-based approach uniting banks and corporates appears the obvious route to take. In 2018, Citi helped found Komgo with other strategic investors from the bank and corporate community, which now includes 168 corporate and 33 bank users. Komgo supports global digital trade flows through four software solutions, each focused on a critical area of trade: KYC, tracking trade documents and verifying their authenticity, harmonizing and verifying receivable data, and managing issuance and amendments of trade finance instruments. Komgo offers an interoperable and secure data exchange and trusted trade network. It has recently launched its “Digital Agent” collateral tracking suite for collateralized revolvers and has the functionality to support electronic bills of lading (BLs) once the trade community is ready. Allowing verified participants secure communication through structured authenticated messages and using open APIs to interface with other third-party systems, Komgo digitizes workflows and transactions throughout the lifecycle of many key trade finance instruments. This can strengthen trust between members of the trade community. Komgo’s products and strategy to build a global digital network of bank and corporate participants were key reasons Citi got involved. Trusple: Blockchain platform for international trade targeting SMEs and banks In 2020, Citi partnered with BNP Paribas, DBS Bank, Deutsche Bank, Standard Chartered and Ant Group (the company operating Alipay, the largest mobile payment platform in China), to launch Trusple, a blockchain platform for international trade transactions that targets SMEs and banks. SME buyers and sellers without established relationships can often face delays in shipments and payment settlements, which may place pressure on their finances and cashflow. Trusple tackles this challenge as well as helping banks support global trading by SMEs by leveraging smart contracts powered by AntChain to automate the trade transaction. The platform uses “smart” contracts to automatically update information on a trade on the platform, including progress on delivery. It also aims to integrate bank-offered trade finance including automated bank payments using smart contracts. Contour: Digitizing letters of credit While Citi was a co-founder of the above ventures, it may also be equally happy to join a pre-existing consortium, provided the idea helps benefit its clients and advances trade finance. An example of this is Contour, a blockchain-based trade finance network that Citi joined in 2020. Using enterprise software firm R3’s Corda blockchain platform, Contour’s aim is to digitize the traditionally paper-heavy letter of credit (LC) process. It succeeded in reducing the average time it takes to execute from five to ten days (for paper LCs) to under 24 hours in most cases. Having all necessary documents available digitally and in real-time on a trusted digital platform allows banks and trading partners to reconcile their documents more quickly while helping to enhance document security. This represents a huge leap in terms of efficiency for what some consider traditionally cumbersome LCs as well as demonstrating that even the most paper-heavy parts of trade finance can enter the digital age. TradeLens eBL: Automated bills of lading on a blockchain-enabled digital shipping platform Citi is also collaborating with TradeLens, a multifunctional blockchain-based shipping platform. A key offering of the platform is the TradeLens eBL: a standard, industry-supported, end-to-end digital solution that provides shippers, cargo owners, freight-forwarders, banks, and carriers with a streamlined and secure process for the issuance, transfer and surrender of original bills of lading. The TradeLens platform jointly developed by IBM and A.P. Moller-Maersk is helping to increase efficiency and transparency for the large numbers of parties commonly involved in supply chains. Connecting more than 400 organisations across the globe, including global shipping lines MSC, CMA-CGM, customs authorities from over a dozen countries, and gathering data from an additional 600 ports and terminals worldwide: TradeLens provides participants with a single, shared source of shipping data and with trade documentation verified by blockchain technology, helping to ensure a secure record of all transactions. All permissioned parties can follow cargo movements around the world in near-real-time, digitize their documentation and facilitate cross-organizational collaboration and workflows. Citi is also currently piloting the platform’s digital verification, assignment and endorsement of automated bills of lading (eBLs) for LC transactions, which may lead to significant cost reductions. TradeAssets: e-marketplace for trade finance assets Another pre-existing consortium Citi joined is TradeAssets, an institutional trade finance e-marketplace also powered by blockchain and operated by Fintech Innovations International in Dubai. TradeAssets is implementing a step change in the digitization of the marketplace among banks for trade finance assets. It offers banks an online, 24/7 real-time portal for the origination and distribution of trade finance assets, covering LC confirmations, LC discounting, standby LCs, bid and performance bonds and guarantees. Allowing banks to communicate on and trade in such documents more efficiently can help address financial exclusion in emerging markets, thus helping to combat the trade finance gap. Membership stands at 67 financial institutions across 20 countries, with many more anticipated to join across Europe, the Americas and Africa in the near future. HighRadius: AI-powered order-to-cash and treasury management software leader Another example of a strategic investment in AI is Citi Ventures’ partnership with HighRadius, a software company specializing in cloud-based integrated receivables, to develop and launch Citi® Smart Match. Applying HighRadius’ proprietary AI and ML technology, alongside Citi’s own proprietary assets, Citi® Smart Match automates the cash application to the accounts receivable process, matching open invoices to payments received. This traditionally manually intensive process can suffer delays due to difficulties in obtaining remittance information or be hindered by inconsistent payer behaviour and payment mechanisms. Applying AI enabled business logic to match payments received with expected receipts, enhancing straight-through-reconciliation rates while helping to reduce costs and days sales outstanding. This in turn helps to optimize working capital for clients. Cashforce: Real-time analytics for cash forecasting and working capital One of the core challenges faced by large corporates in driving working capital management initiatives is timely data visibility across a complex ERP infrastructure. Citi has invested in and established a strategic partnership with Cashforce to help clients address this challenge. The fintech has developed the ability to extract disparate business data across a large company’s enterprise infrastructure, normalize that data, and deliver analytics to help support agile decision making. Cashforce’s analytics tools are being deployed by Citi clients to join up initiatives between their treasury, finance and core business. The tools are being used to help improve treasury cash forecasting and provide finance and business stakeholders with real-time analytics to assist in making working capital management decisions. The technology is also helping clients assess credit risk dynamics across their distribution and supply chain, identify foreign exchange exposures, and more accurately plan future liquidity needs. Citi is collaborating with Cashforce to help the bank’s clients deploy these advanced data and analytics tools as well as support their journey towards more efficient and resilient supply chains. Using artificial intelligence for compliance and transaction monitoring Over recent years, Citi’s digitization of trade data has helped the bank develop new ways to address compliance, standardize global control processes and make compliance processes more efficient by focusing resources on the areas of highest risk. To achieve this, Citi partnered with several organizations. With EY and SAS, Citi deployed compliance system covering boycott language detection and sanction screening. Further, the team is working to develop a platform for trade-based money laundering (TBML) and fraud controls that uses an advanced risk analytics scoring engine. The engine harnesses machine learning to detect potentially higher-risk transactions through analyzing historical behaviour and current transaction data points in real time. To address the emerging risks of abnormal vessel behaviour, Citi’s Innovation Lab is developing a solution that uses an API to receive Lloyd’s List Intelligence’s vessel data to create a real-time vessel evaluation platform. The platform uses self-learning AI to determine if a vessel is potentially engaging in elusive or unusual movements. Lastly, Citi partnered with a vendor on a real-time AI tool that, once deployed, will screen and evaluate the goods in a trade transaction for the potential inclusion of military or dual-use goods. Home grown innovation Citi’s in-house program of projects are equally varied in complexity and range, from providing trade clients with access to digital trade documents and data, to solving more narrowly focused technical problems. For example, Citi’s secure online global platform CitiDirect® underpins all of its other services to trade clients, in addition to cash management services offering fast, easy access to critical real-time information, the ability to initiate transactions in minutes and digitally-manage instructions for trade instruments including guarantees, LCs, trade loans, export collections and supply chain finance transactions for receivables and payables finance: all on a secure, user-friendly web-based platform. Mobile functionality additionally allows clients to manage their trade finance with ease. An example of a more narrowly focused innovation that brings benefits is Citi’s own unique optical character recognition (OCR) technology that uses bespoke software to digitize traditional paper-based trade processing. The application identifies and classifies trade documents and extracts key data. Finally, Citi works closely with SWIFT using MT798 FileAct or the “Trade Envelope”. This provides corporates and banks with a single, standardized and secure channel through which to exchange trade data via structured authenticated messages on the SWIFT platform. Welcoming the trade finance market of the future These are just some examples showing that innovation and collaboration are in Citi’s DNA. Citi’s aim is to be the catalyst for change, embracing new ideas, technologies, and solutions. If that means collaborating, we welcome it. If that requires investment, we are committed to doing so. If internal development is needed, we’ll bring our resources and talent to help meet the challenge: all with the goal of benefitting clients and helping to secure the long-term future of trade finance.

How tech is changing the future of trade

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Digitisation is prompting major changes across industries and companies, economies, and societies. Businesses must respond to new business models, disruption by new entrants, and the emergence of virtual infrastructures and new ecosystems. They also need to understand digital trends and the opportunities (and threats) they represent. For these reasons, Citi has established a new forum for policy advocacy to formulate and share Citi’s point of view on key policy areas related to technology and digital developments, such as crypto currencies, cyber security, AI, data and ESG. This framework seeks to enable all economic participants — such as governments, corporates, financial institutions and households — to use digitisation to create value, achieve sustainable growth and productivity, and mitigate the risk of disruption. Everyone knows that new business models are emerging, but Citi is looking to make it easier for clients to identify the implications of those models — and most especially the opportunities and potential risks they present — early on. This is the first installment in a new series where Citi experts and corporates talk to TMI, examining how digitisation and emerging digital trends are impacting businesses in different sectors. Maureen O. Freeman, Managing Director, Global Solution Sales, Consumer and Healthcare, Treasury and Trade Solutions, Citi Peter Cunningham, Managing Director, EMEA Corporate and Public Sector Sales Head, Treasury and Trade Solutions, Citi E-commerce is coming into its own – and it’s no longer just for retailers. By setting up online stores, companies have gained direct access to their customers, and the data that comes with digital transactions. For treasurers in many sectors, not least consumer goods, this shift opens up the chance to significantly enhance data-driven cash management and garner a new level of insight. But to make the most of this new digital ecosystem, treasurers must also plug into other stakeholders in the business, in an advisory capacity. It’s no secret that the Covid-19 pandemic has accelerated e-commerce capabilities. With global lockdowns preventing footfall in retail stores, the internet became ‘the place to shop’ in 2020 – and beyond. Indeed, e-commerce is expected to grow to $6.5tr. by 2023, effectively doubling from 2019 levels. And the very definition of e-commerce is evolving too: where once it used to refer to sales websites, it now spans multiple points of sale including ‘traditional’ online, in-app, social media, and smart assistants. In this flourishing digital era, many corporates have leapfrogged towards a direct to consumer (D2C) approach, leaving behind the middlemen of yesteryear. This trend has been especially clear in the consumer goods sector, according to Maureen O. Freeman, Managing Director, Global Solution Sales, Consumer and Healthcare, Treasury and Trade Solutions, Citi. “Before the pandemic, when a consumer goods company referred to ‘e-commerce’, they were most likely talking about the sale of goods through other well-known online retailers or marketplaces,” she explains. “With the ‘distance’ created by global lockdowns, consumer goods companies realised how disconnected they truly were from their end consumers – this is something they hadn’t much considered previously as the business model had almost always been to use distributors. But just as the pandemic converted people to remote working and digital operations, it opened the eyes of consumer goods companies to the opportunity to truly own the consumer experience – and the data that comes with that. D2C sites are the obvious channel to accomplish that and, amazingly, one of our Citi clients created over 20 D2C sites within their brands globally in a matter of months.” Adopting an omnichannel approach While this client story illustrates flexibility and resilience, it also highlights one of the challenges around getting e-commerce right – not only from a sales perspective but also from a finance and treasury point of view. Peter Cunningham, EMEA Corporate and Public Sector Sales Head, Treasury and Trade Solutions, Citi: “With more channels available to make sales, the ability to seamlessly traverse these channels, whether you are the consumer or the treasurer, is critical. What happens, for example, if a consumer buys a product through an app, for instance, but goes to the website to request a refund? Can the e-commerce path and the trail of the information and financial flow follow one another?” Cunningham has indeed worked first-hand with companies that have successfully adopted such an omnichannel approach. “Leading companies now have the capability to interact with consumers through multiple media. Shoppers can buy items online and return them in the physical store, without any blockages in the data flows, for example,” he says. “But this is very much at the best practice end of the scale. There is still a long way to go for many corporates, not only around how to achieve a truly end-to-end omnichannel approach, but also around encouraging consumers to engage with the brand.” This is where customer experience comes into play. “Some treasurers might be wondering how this relates to them, but there is a clear link between great customer service and the smoothness and stability of cash flows. Treasurers and the wider finance function also have a strategic role to play in helping organisations to prioritise the payment methods offered to consumers, for example,” notes Cunningham. Digital-savvy consumers arguably have far less tolerance today to jump through hoops to make purchases than in the past. The more that a sale becomes a hassle to a consumer, the more likely they are to avoid both that particular sale and the retailer involved going forward. Freeman comments: “To avoid this type of poor customer experience, it is important there is a good connection across the organisation on the corporate side from the very beginning of a shift towards D2C sales. And treasury can, and should, be an adviser on the project.” Indeed, pitfalls can occur where D2C decisions have been taken without being passed in front of a treasury lens. Cunningham notes: “Without the guidance of treasury, commercial directors may not pay attention to issues such as payment terms, for example. They might not be necessarily thinking, ‘what is the cost of using this payment/collection channel?’. It is also unlikely that they will fully consider the risk they’re exposing the company to. For example, what currency is the company selling in, and is it a functional currency? This is the advisory piece that treasury can provide.” Freeman adds: “In its advisory capacity, treasury also brings a deep understanding of the global environment. If, for instance, a company is based in the US and trying to launch an e-commerce proposition in Asia, it may not fully understand the payment/collection options available and which ones consumers in that region prefer. Treasurers are best positioned to advise here since they have insights others don’t.” One example of where treasury working together with the business on the e-commerce approach has worked successfully is at a US sports apparel company, which has had well-publicised growth in its D2C business. Says Cunningham: “Treasury was really at the forefront of this project, with the treasurer working hand in hand with the web designers as they were creating the online checkout page for some of the European sites. The treasurer was instructing the web team to put a certain payment instrument first in the checkout options, another second, and so on. “This enables the firm to subtly point the consumer to its preferred collection instrument that has a lower interchange fee. And by following the guiding principles of minimising costs and the risk of potential non-collection, i.e. decline rates, the treasurer can actually influence the success of the organisation’s D2C sales.” Mining data for insights The revelations do not stop there, however. The gold dust for companies that adopt the D2C approach, beyond the upside of disintermediating the middleman, is the data that they now own and have direct access to, says Freeman. “The challenge is to ensure that appropriate, standardised processes are in place from the very beginning of a D2C effort to ensure that a single transparent view of that data is in place as this side of the business grows. “While the direct-to-consumer part of the company might start small in the overall context of the business, and managing it with some manual processes was acceptable in the beginning, companies need to be prepared for exponential growth. As orders increase, and the velocity and volume of cash flows ramps up, the last thing companies need is bespoke, manual processes behind the scenes,” she cautions. Thankfully, treasurers, particularly those in multinational companies, have been proactive in pursuing standardisation in areas such as services, processes, and technology. “But with he excitement over e-commerce and the unprecedented growth as a result of Covid-19, some companies have been tempted to skip these steps. Again, the treasury team acting in its advisory capacity can help set the company on the right path,” she adds. “Slowly but surely, we are now seeing standardisation start to happen, not only on the infrastructure side but also on the payment side. Having a proper handle on reconciliations, preferably with automated processes, is critical in a dynamic e-commerce environment,” Freeman continues. “Treasurers require visibility on what has been recorded as sales, where that is in the banking structure, whether it is actually in the bank account, or whether there is a delay on it, and so on.” After all, capturing and analysing the right data at the right time is essential for one of treasury’s core responsibilities: cash flow forecasting. Here, tools such as artificial intelligence (AI) and machine learning (ML) can support treasurers as they engage with prescriptive analytics to gain more insight around the data they now own. If treasurers are able to harness that data from e-commerce in a more real-time way, perhaps via application programming interfaces (APIs), they can then use automation, ML algorithms and AI to quickly analyse that data and present them with ‘next best step’ options. Freeman adds: “This is not about taking the human factor out of treasury, but these technology tools can show a treasurer their cash position in real time, what’s happening in the next three days, and present the options available across areas such as investments, borrowing, foreign exchange [FX] management and so on, for the treasury team to act upon.” But – critically – in order for this to happen, the data has to be intelligible. This can be easier said than done because typically companies that have a large e-commerce network have a patchwork of different instruments, countries and providers in the mix, all of which report data in varying ways. How that data is normalised and centralised is a huge project for corporations. This foundation is essential for treasurers to then go on to enhance their predictive capabilities. Cunningham comments: “Establishing that foundation presents an opportunity for treasurers to be more specific and granular in terms of the forward-looking operational cash forecasts. And if you can forecast with a much higher confidence level on that cash, you can invest out further on the yield curve, and perhaps be slightly more risk tolerant on some of the other aspects of treasury.” Freeman agrees: “Now that treasury has the data, it’s really important to be able to make it useful and be able to act on it more immediately, particularly if your model is moving more towards instant payments and instant collections. We’re entering a world of instant liquidity, and treasurers who have the right tools in place to enable them to make on-the-spot informed decisions will have the competitive edge.” New business models Another rising trend that will likely enable more accurate cash forecasts is the growth of subscription-based models. According to Suora, a billing software provider, companies in the ‘subscription economy’ have registered compound annual growth rate (CAGR) of 18% between 2012 and 2019, a rate five times faster than that of the S&P 5002 . For companies that are able to blend a subscription-based business model into their existing operations, or even replace the pay-per-service model with subscription services, this means much more predictability of incoming cash, which in turn provides more of a stable operating cash balance. “This is an interesting dynamic and transformational in terms of cash flow,” says Cunningham. “But of course, changing from an up-front lump sum income into an advertised fixed period such as 24 months also raises a number of questions from the treasury side. In terms of the net present value, firms may rather have the money up front as opposed to a drip feed over two years. That is a change that the finance function needs to prepare for. Then there’s the cost of collection to consider – the treasurer will now be making 24 collections not just one and there will be costs associated that could eat away at margins.” This also creates implications for the cash flow conversion cycle, such as days sales outstanding (DSO). For decades, treasurers have had a model that matches that with income and receipts, effectively self-funding through the cash conversion cycle with access to other borrowing when gaps appear that need to be bridged. With any move to a subscription model, the equation for corporate collections has changed. Cunningham explains: “The danger is that you create a funding gap in terms of your internal sources of funds and you need to bridge that gap. Can you just deploy excess operating cash or do you need other fund facilities? It’s an interesting dynamic – and I think many firms will find that the efficiencies of the subscription-based model do outweigh the downsides.” Embracing change This focus on efficiency and margins is also driving digitisation across the supply chain, which will inevitably impact supplier relationships. Technologies such as drones, blockchain, the Internet of Things, and data analytics will be key in building the ‘factory of the future’, according to Freeman. For corporates that have been ramping up e-commerce, this focus on digitisation has also extended to the warehouse and logistics. “In the consumer goods space, there’s been a lot of thought around where the factories are located and potentially changing where manufacturing occurs,” notes Freeman. “Many are looking at having manufacturing closer to the end client rather than at a remote hub – and even encouraging suppliers to move with them. The use of data and automation within the factory is also being explored, so a linear process in the factory is being replaced by workflows that adapt in real time to the current circumstances. Just as in treasury, robotics and data are vital in the factory of the future – but all parties in the supply chain need to be on board for maximum efficiency.” From a treasury perspective, it is important to understand the impact these changes might have on the supplier relationship. “If a large buyer has asked a major supplier to move its site, or to become more digital, it may well be that the finance function needs to extend some kind of olive branch here to reassure suppliers. For example, any costs incurred by the supplier could be offset by treasury rolling out supply chain finance programmes,” says Cunningham. Of course, not every treasurer will face such a situation, but it is worth being aware of the potential impact of the factory of the future on the treasury of the future. Preparing for tomorrow Whichever way the e-commerce boom and the digitisation of factories impacts an organisation, arguably the most important step in setting up the company for success is ensuring treasury remains firmly connected to other stakeholders within the organisation. Being ‘plugged in’ to D2C conversations from an early stage enables treasury to bring its unique perspective to the table. Cunningham comments: “So, for those treasurers who are not yet part of this conversation, it is time to ask questions. ‘Am I aware of the company’s e-commerce strategy?’ and ‘Who do I need to link with in order to make sure we as a company are making the right decisions?’ are great starting points.” Making those connections is a foundation for success – and an opportunity for treasury to showcase how their payments and risk management expertise can positively influence the company’s future growth.

<article class="mb-15">   <h4 class="mb-15">Digitisation is prompting major changes across industries and companies, economies, and societies. Businesses must respond to new business models, disruption by new entrants, and the emergence of virtual infrastructures and new ecosystems. They also need to understand digital trends and the opportunities (and threats) they represent.</h4>  <h4 class="mb-15">For these reasons, Citi has established a new forum for policy advocacy to formulate and share Citi’s point of view on key policy areas related to technology and digital developments, such as crypto currencies, cyber security, AI, data and ESG. This framework seeks to enable all economic participants — such as governments, corporates, financial institutions and households — to use digitisation to create value, achieve sustainable growth and productivity, and mitigate the risk of disruption. Everyone knows that new business models are emerging, but Citi is looking to make it easier for clients to identify the implications of those models — and most especially the opportunities and potential risks they present — early on. This is the first installment in a new series where Citi experts and corporates talk to TMI, examining how digitisation and emerging digital trends are impacting businesses in different sectors. </h4>  <div class="row mt-30 mb-15">   <div class="col-md-4 col-md-offset-2 col-12 text-center">    <img class="mb-15 rounded-circle" alt="Headshot" src="/rcs/citigpa/storage/public/icpublic/maureen-freeman.jpg">    <p><strong> Maureen O. Freeman</strong>, </p>    <p> Managing Director, Global Solution Sales, Consumer and Healthcare, Treasury and Trade Solutions, Citi </p>   </div>   <div class="col-md-4 col-12 text-center">    <img class="mb-15 rounded-circle" alt="Headshot" src="/rcs/citigpa/storage/public/icpublic/peter-cunningham.jpg">    <p><strong>Peter Cunningham</strong>, </p>    <p>Managing Director, EMEA Corporate and Public Sector Sales Head, Treasury and Trade Solutions, Citi</p>   </div>  </div>  <p>E-commerce is coming into its own – and it’s no longer just for retailers. By setting up online stores, companies have gained direct access to their customers, and the data that comes with digital transactions. For treasurers in many sectors, not least consumer goods, this shift opens up the chance to significantly enhance data-driven cash management and garner a new level of insight. But to make the most of this new digital ecosystem, treasurers must also plug into other stakeholders in the business, in an advisory capacity.</p>  <p> It’s no secret that the Covid-19 pandemic has accelerated e-commerce capabilities. With global lockdowns preventing footfall in retail stores, the internet became ‘the place to shop’ in 2020 – and beyond. Indeed, e-commerce is expected to grow to $6.5tr. by 2023, effectively doubling from 2019 levels. And the very definition of e-commerce is evolving too: where once it used to refer to sales websites, it now spans multiple points of sale including ‘traditional’ online, in-app, social media, and smart assistants.</p>  <p> In this flourishing digital era, many corporates have leapfrogged towards a direct to consumer (D2C) approach, leaving behind the middlemen of yesteryear. This trend has been especially clear in the consumer goods sector, according to Maureen O. Freeman, Managing Director, Global Solution Sales, Consumer and Healthcare, Treasury and Trade Solutions, Citi. “Before the pandemic, when a consumer goods company referred to ‘e-commerce’, they were most likely talking about the sale of goods through other well-known online retailers or marketplaces,” she explains. </p>  <p> “With the ‘distance’ created by global lockdowns, consumer goods companies realised how disconnected they truly were from their end consumers – this is something they hadn’t much considered previously as the business model had almost always been to use distributors. But just as the pandemic converted people to remote working and digital operations, it opened the eyes of consumer goods companies to the opportunity to truly own the consumer experience – and the data that comes with that. D2C sites are the obvious channel to accomplish that and, amazingly, one of our Citi clients created over 20 D2C sites within their brands globally in a matter of months.” </p>  <hr>  <h3 class="text-citi-blue">Adopting an omnichannel approach </h3>  <p> While this client story illustrates flexibility and resilience, it also highlights one of the challenges around getting e-commerce right – not only from a sales perspective but also from a finance and treasury point of view. Peter Cunningham, EMEA Corporate and Public Sector Sales Head, Treasury and Trade Solutions, Citi: “With more channels available to make sales, the ability to seamlessly traverse these channels, whether you are the consumer or the treasurer, is critical. What happens, for example, if a consumer buys a product through an app, for instance, but goes to the website to request a refund? Can the e-commerce path and the trail of the information and financial flow follow one another?”</p>  <p> Cunningham has indeed worked first-hand with companies that have successfully adopted such an omnichannel approach. “Leading companies now have the capability to interact with consumers through multiple media. Shoppers can buy items online and return them in the physical store, without any blockages in the data flows, for example,” he says. “But this is very much at the best practice end of the scale. There is still a long way to go for many corporates, not only around how to achieve a truly end-to-end omnichannel approach, but also around encouraging consumers to engage with the brand.” </p>  <p class="text-citi-blue text-bold"> This is where customer experience comes into play. “Some treasurers might be wondering how this relates to them, but there is a clear link between great customer service and the smoothness and stability of cash flows. Treasurers and the wider finance function also have a strategic role to play in helping organisations to prioritise the payment methods offered to consumers, for example,” notes Cunningham. </p>  <p> Digital-savvy consumers arguably have far less tolerance today to jump through hoops to make purchases than in the past. The more that a sale becomes a hassle to a consumer, the more likely they are to avoid both that particular sale and the retailer involved going forward. Freeman comments: “To avoid this type of poor customer experience, it is important there is a good connection across the organisation on the corporate side from the very beginning of a shift towards D2C sales. And treasury can, and should, be an adviser on the project.”</p>  <p> Indeed, pitfalls can occur where D2C decisions have been taken without being passed in front of a treasury lens. Cunningham notes: “Without the guidance of treasury, commercial directors may not pay attention to issues such as payment terms, for example. They might not be necessarily thinking, ‘what is the cost of using this payment/collection channel?’. It is also unlikely that they will fully consider the risk they’re exposing the company to. For example, what currency is the company selling in, and is it a functional currency? This is the advisory piece that treasury can provide.”</p>  <p class="text-citi-blue text-bold"> Freeman adds: “In its advisory capacity, treasury also brings a deep understanding of the global environment. If, for instance, a company is based in the US and trying to launch an e-commerce proposition in Asia, it may not fully understand the payment/collection options available and which ones consumers in that region prefer. Treasurers are best positioned to advise here since they have insights others don’t.” </p>  <p> One example of where treasury working together with the business on the e-commerce approach has worked successfully is at a US sports apparel company, which has had well-publicised growth in its D2C business. Says Cunningham: “Treasury was really at the forefront of this project, with the treasurer working hand in hand with the web designers as they were creating the online checkout page for some of the European sites. The treasurer was instructing the web team to put a certain payment instrument first in the checkout options, another second, and so on.</p>  <p> “This enables the firm to subtly point the consumer to its preferred collection instrument that has a lower interchange fee. And by following the guiding principles of minimising costs and the risk of potential non-collection, i.e. decline rates, the treasurer can actually influence the success of the organisation’s D2C sales.”</p>  <hr>  <h3 class="text-citi-blue">Mining data for insights </h3>  <p> The revelations do not stop there, however. The gold dust for companies that adopt the D2C approach, beyond the upside of disintermediating the middleman, is the data that they now own and have direct access to, says Freeman. “The challenge is to ensure that appropriate, standardised processes are in place from the very beginning of a D2C effort to ensure that a single transparent view of that data is in place as this side of the business grows. </p>  <p> “While the direct-to-consumer part of the company might start small in the overall context of the business, and managing it with some manual processes was acceptable in the beginning, companies need to be prepared for exponential growth. As orders increase, and the velocity and volume of cash flows ramps up, the last thing companies need is bespoke, manual processes behind the scenes,” she cautions. </p>  <p> Thankfully, treasurers, particularly those in multinational companies, have been proactive in pursuing standardisation in areas such as services, processes, and technology. “But with he excitement over e-commerce and the unprecedented growth as a result of Covid-19, some companies have been tempted to skip these steps. Again, the treasury team acting in its advisory capacity can help set the company on the right path,” she adds. </p>  <p class="text-citi-blue text-bold"> “Slowly but surely, we are now seeing standardisation start to happen, not only on the infrastructure side but also on the payment side. Having a proper handle on reconciliations, preferably with automated processes, is critical in a dynamic e-commerce environment,” Freeman continues. “Treasurers require visibility on what has been recorded as sales, where that is in the banking structure, whether it is actually in the bank account, or whether there is a delay on it, and so on.” </p>  <p> After all, capturing and analysing the right data at the right time is essential for one of treasury’s core responsibilities: cash flow forecasting. Here, tools such as artificial intelligence (AI) and machine learning (ML) can support treasurers as they engage with prescriptive analytics to gain more insight around the data they now own.</p>  <p> If treasurers are able to harness that data from e-commerce in a more real-time way, perhaps via application programming interfaces (APIs), they can then use automation, ML algorithms and AI to quickly analyse that data and present them with ‘next best step’ options. Freeman adds: “This is not about taking the human factor out of treasury, but these technology tools can show a treasurer their cash position in real time, what’s happening in the next three days, and present the options available across areas such as investments, borrowing, foreign exchange [FX] management and so on, for the treasury team to act upon.”</p>  <p> But – critically – in order for this to happen, the data has to be intelligible. This can be easier said than done because typically companies that have a large e-commerce network have a patchwork of different instruments, countries and providers in the mix, all of which report data in varying ways. How that data is normalised and centralised is a huge project for corporations. This foundation is essential for treasurers to then go on to enhance their predictive capabilities. </p>  <p> Cunningham comments: “Establishing that foundation presents an opportunity for treasurers to be more specific and granular in terms of the forward-looking operational cash forecasts. And if you can forecast with a much higher confidence level on that cash, you can invest out further on the yield curve, and perhaps be slightly more risk tolerant on some of the other aspects of treasury.”</p>  <p class="text-citi-blue text-bold"> Freeman agrees: “Now that treasury has the data, it’s really important to be able to make it useful and be able to act on it more immediately, particularly if your model is moving more towards instant payments and instant collections. We’re entering a world of instant liquidity, and treasurers who have the right tools in place to enable them to make on-the-spot informed decisions will have the competitive edge.” </p>  <hr>  <h3 class="text-citi-blue">New business models </h3>  <p> Another rising trend that will likely enable more accurate cash forecasts is the growth of subscription-based models. According to Suora, a billing software provider, companies in the ‘subscription economy’ have registered compound annual growth rate (CAGR) of 18% between 2012 and 2019, a rate five times faster than that of the S&amp;P 5002 . For companies that are able to blend a subscription-based business model into their existing operations, or even replace the pay-per-service model with subscription services, this means much more predictability of incoming cash, which in turn provides more of a stable operating cash balance. </p>  <p> “This is an interesting dynamic and transformational in terms of cash flow,” says Cunningham. “But of course, changing from an up-front lump sum income into an advertised fixed period such as 24 months also raises a number of questions from the treasury side. In terms of the net present value, firms may rather have the money up front as opposed to a drip feed over two years. That is a change that the finance function needs to prepare for. Then there’s the cost of collection to consider – the treasurer will now be making 24 collections not just one and there will be costs associated that could eat away at margins.” </p>  <p> This also creates implications for the cash flow conversion cycle, such as days sales outstanding (DSO). For decades, treasurers have had a model that matches that with income and receipts, effectively self-funding through the cash conversion cycle with access to other borrowing when gaps appear that need to be bridged. With any move to a subscription model, the equation for corporate collections has changed. </p>  <p class="text-citi-blue text-bold"> Cunningham explains: “The danger is that you create a funding gap in terms of your internal sources of funds and you need to bridge that gap. Can you just deploy excess operating cash or do you need other fund facilities? It’s an interesting dynamic – and I think many firms will find that the efficiencies of the subscription-based model do outweigh the downsides.” </p>  <hr>  <h3 class="text-citi-blue">Embracing change</h3>  <p> This focus on efficiency and margins is also driving digitisation across the supply chain, which will inevitably impact supplier relationships. Technologies such as drones, blockchain, the Internet of Things, and data analytics will be key in building the ‘factory of the future’, according to Freeman. For corporates that have been ramping up e-commerce, this focus on digitisation has also extended to the warehouse and logistics.</p>  <p class="text-citi-blue text-bold"> “In the consumer goods space, there’s been a lot of thought around where the factories are located and potentially changing where manufacturing occurs,” notes Freeman. “Many are looking at having manufacturing closer to the end client rather than at a remote hub – and even encouraging suppliers to move with them. The use of data and automation within the factory is also being explored, so a linear process in the factory is being replaced by workflows that adapt in real time to the current circumstances. Just as in treasury, robotics and data are vital in the factory of the future – but all parties in the supply chain need to be on board for maximum efficiency.” </p>  <p> From a treasury perspective, it is important to understand the impact these changes might have on the supplier relationship. “If a large buyer has asked a major supplier to move its site, or to become more digital, it may well be that the finance function needs to extend some kind of olive branch here to reassure suppliers. For example, any costs incurred by the supplier could be offset by treasury rolling out supply chain finance programmes,” says Cunningham.</p>  <p> Of course, not every treasurer will face such a situation, but it is worth being aware of the potential impact of the factory of the future on the treasury of the future.</p>  <hr>  <h3 class="text-citi-blue">Preparing for tomorrow </h3>  <p> Whichever way the e-commerce boom and the digitisation of factories impacts an organisation, arguably the most important step in setting up the company for success is ensuring treasury remains firmly connected to other stakeholders within the organisation. Being ‘plugged in’ to D2C conversations from an early stage enables treasury to bring its unique perspective to the table. </p>  <p class="text-citi-blue text-bold"> Cunningham comments: “So, for those treasurers who are not yet part of this conversation, it is time to ask questions. ‘Am I aware of the company’s e-commerce strategy?’ and ‘Who do I need to link with in order to make sure we as a company are making the right decisions?’ are great starting points.” Making those connections is a foundation for success – and an opportunity for treasury to showcase how their payments and risk management expertise can positively influence the company’s future growth. </p> </article>

How to Ace Digital Treasury Lessons from Consumer Goods and Retail Leaders

The past year or so has been defined by challenges and uncertainty for global trade due in part to supply chain disruption brought about by the pandemic and a boom in demand. In this report, we discuss the current state of play in supply chain disruption and present why it can be imperative for corporates to engage with a bank that could help navigate through the storm. State of Play – Supply Chain Disruption The supply chain of large multi-national corporates can be extremely complex due to the global nature of operations and the diversity of products produced. By taking a sample of 12 large industrials companies globally, we demonstrate the inter-sector dependency of supply chains of these companies, tracing three layers upstream of their suppliers. Figure 1. Supply Chain Dependency – Industrials Source: Citi Global Data Insights, Bloomberg In Figure 11, the colour intensity of the sector corresponds to how ‘concentrated’ that sector is. This can be a useful proxy to help identify sectors in the supply chain that are heavily reliant on a few companies, which may make them more susceptible to supply chain shocks. It is evident from the diagram that Auto Parts and Semiconductor supplies are critical to this sector, but attention should also be paid to the presence of multiple other sectors in this interlinked supply network. Focusing on tech2, the shortage of semiconductor equipment unsurprisingly appears to be an even bigger issue for the sector. Other tech supplies such as Electronic Components and Computer Processing Hardware are also prevalent in this sector. Similar to what we have observed of the Industrials sector, the supply chain of tech broadens out rapidly to other sectors with merely tracing upstream by two layers. These observations may demonstrate the expansive nature of the global trade and the scale of the problem if their supply chains are disrupted, as the ripple effect could easily expand beyond the immediate supply layer. Figure 2. Supply Chain Dependency – Technology Source: Citi Global Data Insights, Bloomberg Figure 3. Supply Chain Disruption – mentions in corporate documents Through natural language processing (NLP) on corporate filing and other public documents, we analyse corporate sentiment surrounding supply chain issues globally. It appears that the negative sentiment expressed in corporate documents has been increasing since the beginning of 2021 with a large spike seen in the second half of 2021. Source: Citi Global Data Insights, AlphaSense Figure 4. Supply Chain Disruption by Industry – mentions and sentiment in corporate documents The industry breakdown as shown in Figure 4 highlights the top 20 industries where supply chain issues were mentioned with the highest frequency and where the most pain appears to be felt as the negative sentiment dominates. Source: Citi Global Data Insights, AlphaSense Figure 5. Ports Experience Increases4 in Average Stop Duration by Shipment To understand the scale of the problem on the ground, leveraging shipping data from Contguard3, Figure 5 supports that the bottlenecks indeed spread across the globe with the most significant escalations in average wait time seen in the US, Asia, South America and Middle East. Most of these ports have reported double-digit increases in terms of average stop duration by shipment when comparing 2021 to 2020. Source: Contguard Figure 6. Average % Idle Time per Shipment The average percentage of idle time per shipment, which can be a useful data point for corporates to optimize inventory levels, has also increased to over 70%, well above the 3-year average of 58% across the shipments that Contguard tracks. Source: Citi Global Data Insights, Contguard Figure 7. Supply Chain Topics Mentioned in News Source: Citi Global Data Insights, Yewno Supply chain issues have also been widely reported in the news media, especially over the past 12 months. By using NLP to extract topics mentioned, Figure 7 illustrates the terms that are most often associated with supply chain news articles. Unsurprisingly “Shortage” and “Procurement” are the two most mentioned terms highlighted in the news but importantly supply chain optimisation, inventory control management and order fulfilment have also been the key topics discussed. The supply chain challenges observed currently can highlight the importance of engaging with a bank that has a global footprint and a culture of fostering innovations to help corporates navigate potential roadblocks at this critical time. Helping clients work through supply chain disruption Recent events have underscored the importance of a steadfast, experienced and innovative financial collaborator and advisor when it comes to helping to mitigate exposure to market risk. The value of such partnerships can be particularly evident when businesses are required to act swiftly in response to rapid, widespread or unexpected developments. Throughout the pandemic, leading banks have been a stalwart for businesses – working closely with clients to help support their daily operations and working capital needs and working to ensure the wheels of global trade continue turning effectively. Examples The collapse of Greensill Capital put many supply chains at risk. As a result, many affected companies turned to financial institutions (FIs), like Citi, to help absorb their trade flows and financing needs. Citi provided support to several major corporates including a telco company, which faced the challenge of onboarding a high spend, strategically large client along with several hundred suppliers across multiple markets. Through regular correspondence, transparency and the company’s close management of its key stakeholders – including its suppliers – the telco’s needs were met within a restricted timeframe, helping to mitigate the risks presented by the fallout. As the COVID-19 pandemic reached Brazil, Citi helped Kimberly-Clark (K-C) ensure that its hygiene products were available to protect families and communities with a distributor finance solution. K-C quickly mobilised resources across its global business services (GBS) division and approached Citi to develop a solution to mutually sustain and grow our business during this difficult period. Our combined team quickly stepped up, often at very antisocial hours, to create and deliver a bespoke solution at pace. The outcome was a strategy helping to drive sales growth and support K-C’s wider distribution ecosystem, whilst helping to address working capital needs in an efficient way. At the height of the pandemic, many supply chains came under severe strain and shifted course, buying behaviour patterns dramatically changed and some businesses experienced credit rating downgrades. U.S. credit downgrades, in dollar terms, during the 2020 pandemic shock were among the largest seen, according to Citi Research. Companies looked for banks close to their clients around the world and which were positioned to help connect clients with multilateral agencies (MLAs), export credit agencies (ECAs) and development agency financing to support them quickly and efficiently. For instance, Citi was recently involved in notable UK Export Finance (UKEF) supported transactions in which a high-end automobile maker accessed a high value loan facility as part of the Export Development Guarantee scheme and a leading engineering client was the beneficiary of a loan that gave it the financial resources to take advantage of green trade opportunities. A global ally with local insights But what makes such institutions so resilient and reliable during a crisis? Scale, for one, can be central. Having global coverage can enable clients to receive consistent support and access to new products – wherever they may be based or do business. Scale can also open up access to vast networks of payables finance investors. The benefits here can be two-fold: first, businesses may be able to leverage a larger, more diverse investment pool; and second, sharing the credit support means those banks may be more diversified to credit risk and therefore may be better positioned to provide additional working capital support to clients. Examples Citi implemented a global supply chain finance (SCF) solution for Halliburton in the pandemic that has helped to unlock an estimated US$150m+ in working capital globally and closed the gap on supply chain neutrality, working to align vendor and supplier terms, while supporting suppliers with competitive financing. The programme has more than 500 suppliers. Citi delivered for Halliburton in countries such as Oman and Iraq, demonstrating our global capabilities, and a truly global platform. Halliburton can see all their in-country financial supply chain activities on a single dashboard. Citi helped Tetra Pak International, the food packaging and processing company, implement a global SCF solution. Tetra Pak wanted to ensure consistency and efficiency and align its SCF programme with the global approach taken by its finance function. Moreover, Tetra Pak’s business model means that suppliers have relationships with multiple global buying entities; to make the SCF programme as straightforward as possible for suppliers, a truly global implementation was required. Tetra Pak developed an IT solution that covers 95% of designated countries and achieves automation via full integration with our ERP and our bank’s platform. Citi’s global digital banking platform coupled with our local knowledge in many markets can be a great help to clients as they navigate complex markets. Helping them with changing buying patterns to minimise supply chain disruptions and helping to ensure timely payment to existing suppliers, coupled with onboarding new sets of suppliers quickly and digitally, is also in our toolkit. Given Citi’s global presence and global platforms, shifting operations from one market to another can help support a seamless experience for our clients. Additionally, larger banks can be more self-sufficient in many of the areas that smaller providers may need to outsource. For instance, having the funding capabilities and experience to develop solutions in-house can be a differentiator. This can enable banks like ours to choose the most effective route for implementing a particular solution, whether creating it internally or through collaboration with technology providers, helping to avoid the risk of disruption driven by business setbacks. Open for innovation Citi’s global network of people, data and relationships fosters a mindset for effectively helping to find opportunities, manage risks and make connections for clients. Being open to various forms of innovation and collaborations is a key requirement. Whatever the path, the destination should be delivering client-centric innovation. Citi is collaborating with multiple leading, carefully selected third parties to help bring enhancements to clients. Leading banks have a responsibility to be an agent for change. Global banks also help shape the global trade landscape in line with client needs. Working closely with multinational industry bodies, such as the International Chamber of Commerce (ICC), is an important way to help promote positive developments. Banks are also working to help drive important developments in the industry. Example: Trade Information Network Some ventures, particularly those involving a significant change in industry practice, in many instances are best executed in collaboration with industry partners. An excellent example is the Trade Information Network, a consortium that Citi helped found in 2018, together with five other banks5. As an inclusive global multi-bank, multi-corporate network in trade finance, it seeks to transform open account trading by digitizing it – creating an inclusive and open industry-standard network that is open to both banks and corporates. It allows corporates to communicate trade information to banks more easily and securely (for instance by digitally submitting and verifying purchase orders and invoices), and to request trade financing directly. Once they join, Buyers and suppliers are in control of their data, designating who can access it. Having reliable information assists banks and can help reduce errors and fraud, while at the same time having information earlier in the supply chain can help unlock earlier financing. By deploying open architecture, standardised connectivity and governance principles modelled on SWIFT, the Network aims for maximum adoption that eases access to trade finance for a wider range of companies, including small-medium size enterprises (SMEs). The fundamental purpose is to address the persistent industry issue of the global trade finance gap, estimated at US$1.5 trillion6, which affects SMEs, thereby helping such businesses and global trade, to reach their full potential. Citi will use the network to offer additional financial support to suppliers earlier in the supply chain cycle. Collaborating for a greener future Moving forward, environmental, social and governance (ESG) sustainability in supply chains is a big hurdle that corporates need to adjust to, with multiple shifts in sourcing policy. The industry appears to be seeing a big push from many clients to use their supply chains as a tool to help improve the ESG sustainability of their businesses – and partnerships are can often be invaluable in this space. Figure 8. Supplier ESG Score vs Company ESG Score Distribution Indeed, as depicted in Figure 8, corporates that have higher ESG scores appear to have suppliers that are deemed to be better ESG performers7. The trend may accelerate further in this space as more corporates strive to coalesce around suppliers that are regarded as more sustainable. Source: Citi Global Data Insights, Truvalue Labs, MSCI, Bloomberg Citi is expanding its global supply chain finance capabilities for clients to include new sustainable finance solutions that are designed to help them meet their sustainability goals, including diversity and inclusion initiatives. Citi’s engagement with a third-party provider of business sustainability ratings is designed to help support Citi’s clients and their suppliers’ efforts to achieve sustainability performance targets and uphold best practice standards. The programme incorporates an incentivized pricing model for suppliers as a motivational tool to align with a company’s procurement sustainability goals, including ESG issues based on data and insights provided by the third-party verifier. Examples Citi recently launched its first Sustainability-linked Supply Chain Finance programme in Asia Pacific for Henkel, aimed at supporting Henkel as it advances its ESG priorities, improves the resilience of its supply chain and manages working capital needs. The programme was first launched with suppliers in Australia and will be expanded to include suppliers in additional markets. The programme is also a first for Henkel in Asia Pacific and it is targeted at existing and new suppliers who demonstrate strong or improving sustainability performance. Qualifying suppliers can access Citi’s supply chain financing at preferential rates on a tiered basis, with rates improving as a supplier’s sustainability score improves. Citi partnered with the International Finance Corporation (IFC) and McCormick & Company, a global leader in flavour, to provide suppliers of McCormick’s herbs and spices with financial incentives linked to improvements in measures of social and environmental sustainability. The programme has started with suppliers in Indonesia and Vietnam and will soon be launched in other countries. By collaborating with experts in ESG solutions, such as ratings platforms (used to assess business sustainability), banks can deliver tools to help support clients’ journeys to green and help meet their ESG sustainability targets. Working with government agencies can further support clients’ sustainability and climate resilience aims. Through working arrangements with organisations such as the IFC and UKEF, for instance, clients may benefit from partial guarantee supply chain finance programmes targeted specifically towards green financing. By providing banks with risk mitigation support, such programmes help to increase the amount of sustainability funding support that may be available to clients. Citi’s aim to support ESG initiatives is not only with our clients and government agencies. This also includes internal practices. For example, the Trade back-office team recently digitised several internal processes to reduce printing paper. In summary Market developments, challenges and – in particular – crises, are often hard to predict, but having a strong financial collaborator and advisor can make a material difference to a corporate’s ability to help address business disruption. As the industry continues to evolve, Citi is committed to building upon our existing capabilities and network – including with clients, fintechs, industry bodies, multilateral agencies and internally – in order to maintain the exceptional level of support we aim to provide to our clients around the world. Helen Krause, Head of Data Science Insights, Citi Global Data Insights Brian Yeung, Data Scientist, Citi Global Data Insights Parvaiz Dalal, Global Head of Payables Finance, Treasury and Trade Solutions, Citi Valeria Sica, Global Head of Trade Product Development, Treasury and Trade Solutions, Citi Adoniro Cestari, Global Head of Trade Product Management, Treasury and Trade Solutions, Citi 1 The width of each pipe represents the total relationship amount between each supplier and customer sector pair. This helps identify the biggest sectors by dollar amount in the supply chain that are crucial to the final product / service the end companies provide. A darker-colour bar indicates a higher concentration means that majority of the transaction flow for a sector is attributed to a small number of companies 2 Using supply chain data of large 40 tech companies globally 3 Contguard is a global monitoring company that offers an end-to-end service for managing goods in transit and helps monitor and track billions of dollars’ worth of shipments across a multitude of global routes. 4 Larger circles in darker colour indicate longer average stop duration at ports. 5 ANZ, BNP Paribas, Deutsche Bank, HSBC and Standard Chartered 6 https://www.adb.org/publications/2019-trade-finance-gaps-jobs-survey 7 Analysis done on MSCI World universe by using Truvalue ESG scores (ranges from 0 to 100) combined with supply chain data from Bloomberg. The green horizontal line in the box plot denotes the median of the score distribution for each ESG score bracket.

Helping to weather the storm with a trade bank for all seasons

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How to Ace Digital Treasury Lessons from Consumer Goods and Retail Leaders

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