@Risk

What’s the biggest headache for corporate finance executives these days?

No surprise –it’s the unpredictable global economy.

According to a recent poll of 435 CFOs, corporate treasurers and other senior finance executives, nearly three-fourths (72 percent) agreed their top concern is managing financial uncertainty, including the risks associated with credit, liquidity, interest rates and currency/foreign exchange.

In addition, more than one-third of respondents are worried about risks associated with:

• macroeconomic conditions, such as the pace of economic growth and inflation (38 percent)
• business/operations, including supply chain and/or production disruptions, litigation, labor and outsourcing (36 percent)

External risks (country, regulatory, natural disaster) and commodity risks (power/heat, crude oil & distillates, agricultural and metals) also emerged as concerns for a significant share of the organizations polled, but to a lesser degree.

And, four in ten respondents (41 percent) said they expect even more earnings uncertainty in the coming years.

The survey results, released last month by the Association for Financial Professionals (AFP), also revealed that: (more…)

Despite concerns about economic recovery in the Eurozone, three-fourths of top European banks still believe growth prospects for supply chain finance remain “strong” or “very strong,” according to Demica’s latest research report on the supply chain finance market.

The research, which involved the top 40 European banks, showed that respondents:

• anticipate annual supply chain finance growth rates between 10 percent and 30 percent per annum in mature markets, and 20-25 percent in emerging markets where the need for financing is particularly pressing to help cope with rapid expansion.

• believe growth over the next few years will primarily be driven by developed economies such as the US and Europe, along with larger emerging economies including China and India.

In addition, survey respondents identified working capital optimization and reduction of supply chain risk as the primary drivers for establishing SCF programs in mature markets.  In emerging economies, access to liquidity and enabling suppliers to keep pace with buyers’ growth are the key motivations.

Significant challenges remain, however. For example, respondents said that, especially in emerging markets, legal and jurisdictional issues and access to technology platforms require further work to accelerate supply chain finance growth. (more…)

How much are operational inefficiencies costing your business?

A new survey from Accenture and Clearstream found that the financial services sector could save more than €4 billion (about $5.5 billion) annually in collateral management costs by addressing operational inefficiencies.

Clearly, collateral management has become a critical industry issue because 1) regulators have set more rigorous capital and liquidity standards, and 2) banks are confronting new cost and growth challenges in the wake of the global financial crisis.  Done right, however, efficient collateral management can free up liquidity for banks, enabling them to meet new regulatory requirements while offering more products and services.

According to the Accenture survey, banks’ key collateral management challenges include:

• An incomplete view of all collateral and an inability to manage holdings centrally
• Suboptimal internal governance leading to a misalignment of objectives
• Inadequate internal transfer-pricing mechanisms
• A lack of optimization engines or the ability to deploy them effectively
• Inability to perform inventory projections
• Excessive staff costs as a result of process complexity

The highest potential cost savings, according to survey respondents, can be achieved by: (more…)

A new report from the National Association for Business Economics (NABE) predicts growth for the US economy this year and throughout 2012.

The February 2011 NABE Outlook, released last week, presents the consensus of a panel of 47 professional economic forecasters, who were surveyed January 25 –February 9. (Keep in mind, this was just as oil prices were beginning to climb.)

Here is a summary from the latest report: (more…)

Changing weather patterns are becoming increasingly relevant to corporate risk assessments, and yet a newly released study found that the current availability of, and access to, climate change information remains insufficient, both in format and quality.

The report, sponsored by the German Federal Ministry of Education and Research, presents the results of an international survey undertaken by the Climate Change Working Group (CCWG) of the United Nations Environment Programme Finance Initiative (UNEP FI) and the Sustainable Business Institute (SBI), Germany. All told, 60 institutions –from both developed and developing countries across six continents –were polled.

The survey focused on financial service providers because these institutions have expressed a need for more and better climate change information so that they can enhance risk management within their industry. In addition, financial service providers also play a key role in accelerating the implementation of adaptation measures by the private sector more broadly.

Only one-third of those polled felt “sufficiently informed” about climate change, and more than 80 percent said what they need most is interpretation of the quality of climate predictions.

According to SBI, the gaps in the availability of information that were identified in the survey can be closed by: (more…)