A New Era of Holistic Working Capital Management

As traditional, single-product offerings prove increasingly ineffective, corporates must challenge their banks to devise holistic solutions that address their working capital needs in totality, says Raphael Barisaac, UniCredit’s Global Co-Head of Trade Finance and Working Capital Management 

The sheer range of working capital products now available to corporates is making traditional methods of bank-corporate interaction unviable. Where once corporates worked with banks on individual products, such as factoring or forfeiting, to address isolated challenges, the prospect of replicating this approach across the huge and growing range of solutions available today no longer offers the most value.

It is therefore imperative that corporates and banks alike adopt a more holistic approach to trade finance and working capital management. At the core of this will be maintaining a single, coherent dialogue on working capital needs, with a view to developing a wholesale plan that can draw on a diverse range of financing tools.

This will be essential for corporates as they look to overcome their challenges while exploring the rapidly evolving landscape of working capital solutions.

Upscaling client interaction

Historically, corporates seeking working capital solutions have met with numerous teams from the same bank to discuss individual solutions – often having to repeat their story to each new team. This typically leads to additional administrative effort on both sides without progressing towards a clear and comprehensive solution. It can also introduce conflicts of interest, with each team pursuing its own product-driven agenda, rather than truly trying to solve the problem at hand for the corporate. The result is often a solution less than ideally suited to their needs, and a lead-in time protracted by numerous meetings.

Of course, there is a better way. Progressive corporates are now engaging in conversation with a single team from a given bank, discussing their specific working capital needs and looking to construct a solution that addresses them all, rather than targeting a single one. This process ensures that the solution is highly targeted and bespoke, while simultaneously cutting down on inefficiencies. This kind of meeting can also add value for corporates in other ways, as bank teams with the right data can carry out analyses of their historical transaction activity ahead of the meeting to identify inefficiencies and factor them into the proposal.

To facilitate this approach, progressive banks will begin setting up dedicated working capital advisory teams, as UniCredit has done over the past few years. Situated in various geographies, these teams can be the single interface between bank and corporate, always on hand to advise on the solutions and products that best suit a company’s specific working capital requirements.

Modern solutions

This streamlined dialogue will be increasingly essential if corporates are to navigate the expansive range of innovative working capital solutions now available. And these are not just available to the biggest corporates anymore. Blockchain-based platform “we.trade”, for example, is a trade platform designed for SMEs, connecting transacting corporates by hosting and formalising their commercial interactions within a single, easy-to-use, digital application.

Once the clauses of a contract are successfully agreed on the we.trade platform, corporates can choose to apply a number of bank-provided working capital services for both sellers and buyers.

Industry innovations such as this stand to simplify trade processes and associated financing instruments, but there are also proprietary working capital solutions emerging within many banks. For instance, UniCredit’s UC Balance brings together mutual clients of the bank with reciprocal payments and collections – promoting strength across the supply chain, freeing-up working capital and reducing payment risk by settling mutually owed payment loops early.

A new role for banks

These, of course, are just a couple of examples of the growing range of innovations available to corporates looking to manage their working capital. Add to these the traditional options, including factoring and forfeiting, along with more sophisticated solutions, such as securitisation, and the landscape quickly becomes one that only experts can tread.

This ever-increasing range of solutions makes it imperative corporates look to their banks for guidance when it comes to the correct working capital management strategy for their business. This makes it all the more important that the out-dated model of setting up multiple meetings – each to pitch separate working capital products – be reviewed and revised. The clear way forward is a single, strategically focused dialogue in which banks can assess the full range of a business’s needs and steer it through the broadening landscape of working capital solutions.