2019 Supply Chain Finance Analyst Report, Interest Rates Adjust

SUPPLY CHAIN FINANCE Technology Solutions

Consultants in Treasury

2019 ANALYST REPORT

 Streamline Cash Conversion Cycles

 Strengthen Supplier Relationships This special edition provides an exclusive look at the solution set offered by Demica.

The Deﬁnitive Guide to Supply Chain Finance Technology Solutions This Report is Part of Strategic Treasurer’s Annual FinTech Analyst Coverage Program. ADVISE ASSIST INFORM

Welcome to the 2019 Supply Chain Finance (SCF) Analyst Report, your definitive guide to smart liquidity management in the Digital Age. Our team created this publication with one overarching goal in mind—to equip our readers with critical information as they seek answers to complex SCF questions.

Should my organization adopt a supply chain finance program? If so, which system offers the functionality mix that my firm requires? Will an implementation be too difficult and disruptive? How do I streamline the process to achieve optimal results? After months of market research and comprehensive data analysis, we’ve compiled this report to help treasury practitioners make more contextually informed decisions regarding technology solutions.

We hope the coverage within, which revolves around current and projected challenges across the industry, will help readers overcome obstacles, enhance treasury operations and improve financial supply chains. Let’s get started!

STRATEGIC TREASURER, LLC CRAIG JEFFERY | Founder & Managing Partner 525 Westpark Drive, Suite 130 [email protected] | +1 678.466.2222 Peachtree City, GA 30269

For inquiries regarding inclusion in this and other BRIAN COCHRUM | Director of Marketing issues of our Analyst Report Series, please contact us at: [email protected] | +1 678.466.2227 [email protected] +1 678.466.2222

Copyright © 2019 by Strategic Treasurer. All Rights Reserved. Reproduction by any means in whole or part without permission is strictly prohibited. The information contained in this report has been prepared by Strategic Treasurer unless otherwise noted. We make no representations, express or implied as to its accuracy or completeness. Opinions expressed herein are subject to change without notice. This is a report meant for informational purposes. It should not be construed as offering legal, financial, or other advice. Table of Contents

04 Supply Chain Finance 101 19 Implementation Considerations ▪ Historical Context www.demica.com ▪ The Only Constant Is Change 20 Where Is SCF Headed? ▪ Guiding Future Decisions ▪ Cloud-Based Platforms PAGES 24-27 ▪ Artificial Intelligence 06 The ABCs of SCF Blockchain ▪ : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 07 The Intersection of Treasury & 21 The SCF Solution Landscape: Supply Chain Finance Current & Future Founded: 09 The SCF Treasury Technology 22 An SCF Checklist 12 Landscape ▪ What Technology Is Available? 23 Putting It All Together ▪ Where to Start ▪ Reverse Factoring 24 Demica: Analyst Coverage CEO: ▪ Dynamic Discounting 28 Works Cited Matt Wreford 13 Notable SCF Perspectives

14 Working Capital Propels Payment Strategy Selections Headuartered: ▪ The SCF-Capital Connection London, ▪ Payment Terms: Buyers & Suppliers

16 Economic Forecast: What Affects SCF? ▪ Fluctuating Interest Rates Onersip: ▪ Compliance Considerations Privately Held ▪ Tax Trends ▪ Trade Conflicts: Deals & Wars STRATEGIC TREASURER | Market Overview

An increasing number of companies are turning to the solutions sets SCF technology provides to bolster liquidity, while optimizing working capital. The emphasis is on financial flexibility. But, it increasingly involves a process view and the goals include improving the efficiency of the cash conversion cycle and partner relationships.

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS Figure 1: Is your company actively involved Supply Chain Finance 101 in supply chain?

id you know that liquidity management and supply chain finance are experiencing a type of D renaissance? Many of today’s treasury thought leaders now consider capital governance the Yes, as both a buyer 44% and supplier cornerstone of sound business operations in today’s digital age. Let’s review some recent history.

HISTORICAL CONTEXT

Yes, as a buyer 24% Before the turn of the century, and then even more so in the wake of 2008’s financial crisis, countless organizations around the world began to emphasize access to additional financing options after seeing the debt markets freeze up. On the heels of global concern, treasurers quickly realized that, while too much idle capital is undesirable, the mismanagement of working capital or a lack of capital margin for difficult times could result in company-specific liquidity threats.

Yes, as a supplier 6% Now, a decade on, the importance of a robust business liquidity administration program has crystallized, and firms of all sizes, including smaller organizations across numerous industries are paying closer attention to such processes. The growing capabilities of supply chain finance (SCF) programs have, in fact, helped entire company ecosystems. With this sustained elevation of working capital’s significance in the corporate priority hierarchy, the value of stable financial supply chains has also intensified. An increasing No 26% number of companies are turning to the solutions sets SCF technology provides to bolster liquidity, while optimizing working capital. The emphasis is on financial flexibility. But, it increasingly involves a process view and the goals include improving the efficiency of the cash conversion cycle and partner relationships. ] . 04

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Copyright © 2019 All Rights Reserved strategictreasurer.com 2019 TECHNOLOGY ANALYST REPORT Supply Chain Finance THE ONLY CONSTANT Some estimate that SCF has a potential worldwide noun IS CHANGE impact on multiple trillions of dollars of trade. Given sup · ply chain fi · nance the scale of opportunities involved, many identify /sə'plī 'chān 'fīnan(t)s/ As organizations pursue innovative SCF initiatives, supply chain finance as the most important area they must also contend with factors that remain for development in global commerce. Supply chain finance (SCF) is in flux. Although the economy has regained some footing over the past ten years, growth is historically defined as the use of financing slow and many threatening economic and GUIDING FUTURE DECISIONS geopolitical clouds are on the horizon. Rumblings of and risk mitigation practices fiscal volatility persist, debt continues to accrue, and In our 2019 Supply Chain Finance Analyst Report, interest rates adjust. New market factors surface we at Strategic Treasurer seek to accurately and techniques to optimize the regularly that shape both the technologies and inform readers about leading technology solutions processes by which organizations transact, trade and unique drivers pushing firms to adopt SCF management of working capital and and communicate with vendors. A nimble approach programs. Our in-depth research and breadth of and flexibility are key. expertise blend with interviews and analysis from liquidity invested in supply chain top industry providers to create a broad knowledge Adding to this complexity, ever evolving forms of base regarding emerging trends and innovations. processes and transactions. SCF, SCF continue to emerge. While these programs have the potential to successfully address cashflow Coverage includes, to name a few, top-line corporate triggered by supply chain events, is and liquidity in global operations, trade and usage data and preferences from a global survey, distribution, they may also lead to some confusion SCF methodology analysis with related impacts on typically applied to open account and overwhelm (more on this later). As such, when working capital, and an examination of leading SCF buyers look to actualize an SCF plan, it is vital that solutions. trade. Visibility of underlying they understand how all related changes—both internal and external—will impact their operations Our goal with this guide is for treasurers, bankers trade flows by finance providers overall. and technologists like you to keep this report handy to use as needed—for enriching SCF awareness, is a necessary component of With so many factors to consider, it’s no wonder alleviating concerns, guiding future decisions, and savvy business leaders are turning to SCF. Clearly, sharing with team members in order to optimize such arrangements, which can be it’s a significant topic and potentially game-changing your financial processes. Enjoy! solution for anyone involved in treasury, international enabled by a technology platform. business, trade finance, banking and everything in between. Source: Euro Banking Association [

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The ABCs of SCF

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS upply chain finance is a term used to describe several facilitating services that improve the transfer Supply Chain Finance Umbrella S of information, value, and liquidity between buyers, suppliers, and financing entities. Buyer-Led Approaches DEFINING CHARACTERISTICS Accounts Payable-Centric: Specifically speaking, supply chain finance involves funding the purchase of goods and products as they  Reverse factoring move from one destination to another and providing discounts on accounts receivable and financing on

accounts payable. Although widely considered a mutually beneficial arrangement for participating parties,  Dynamic discounting confusion persists regarding the precise definition of this terminology.

While some industry experts only place traditional supplier financing (i.e., dynamic discounting, reverse factoring, etc.) into the realm of SCF solutions, others include the full scope of trade finance instruments Supplier-Led Approaches and approaches (i.e., forfaiting, documentary trade finance, asset-based lending, etc.). For this report, Strategic Treasurer uses the aforementioned (Page 5) definition provided by the Euro Banking Association. Accounts Receivable-Centric:

 Factoring Please note that we classify various supply chain finance approaches according to who initiates them. Buyer-led SCF refers to any technique in which the buyer’s payables are used as collateral in a financing  Forfaiting arrangement, while supplier-led SCF refers to any technique in which the supplier’s receivables are used as collateral.  Invoicing discounting

With both arrangement types flourishing, much of the growth witnessed in the past 5-10 years has been  Inventory financing through buyer-led initiatives. As large corporates typically have more available capital to use than smaller suppliers, they tend to be the primary targets of technology vendors and others offering SCF solutions. Therefore, much of the content in this guide is produced from their point of view. ]

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t the crossroads of this discipline and solution set lies a landscape of liquidity optimization. This determination of the best use of cash resources requires A working capital stewardship and near-continuous supervision of all monetary matters to identify any issues that could disrupt or enhance operations.

TREASURY = KEY STAKEHOLDER Organizations are recognizing the advantages As we mentioned earlier, SCF links parties through strategic supplier financing can provide in increasing shared goals: enhancing funds, resources and Simultaneously managing the duties of treasury numbers, and the SCF industry is in a period of efficient end-to-end processes. In the past, and SCF—and seeing first-hand the importance of solid growth and ongoing development. With more however, these programs were typically reserved for financial supply chain stability on business success investors eyeing involvement, the list of available partnerships between banks and large corporates. or failure—leads many industry practitioners to services, technologies and tools continues to grow. Early versions had a manually-oriented technology become key proponents of SCF. To illustrate an For treasury, this means that regardless of specific component (exchanging spreadsheets) and no SCF program’s impact on treasury, consider the working capital objectives, chances are there is a portals existed to view cashflows. Over the last following scenario: solution to address their needs. decade, however, the SCF market has developed, and increased democratization of technology and A corporate buyer with 1,000 global suppliers finance has occurred through new services, greater pays them $30,000 each 15 times per year. Modern SCF technology options scope and a broadened audience. The total cost is $450 million, a consolidation of cashflows that leaves treasury the task differ from traditional supply With this evolution, buyers have been able of managing liquidity and all associated to onboard their financial supply chain to a challenges and opportunities. Every supplier chains in two specific ways: cloud-based platform and manage some aspect of must be paid, with customized schedules and those processes centrally, through a single portal. financing arrangements established. These Connecting transactions to financial This enables firms to automate many operations, individualized payment plans can include early value as they move through the and when combined with early-pay discounts settlement to receive discounts, extended supply chain. or extended terms results in leveraging liquidity terms to shuffle cash to other areas, adoption totaling many millions of dollars between suppliers of e-invoicing or e-payment to streamline Encouraging collaboration and efficiency and buyers. communication and reduce processing costs, between buyers and sellers. and much more. [

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Looking at a standard cash conversion cycle, there in the eyes of corporate practitioners are the ability exist for automation and optimization within the cash are several areas where SCF technology can prove to capture invoices electronically and the ability to conversion cycle, the graphic below pinpoints the advantageous. In analyzing recent industry data, convert manual/physical payments to electronic main areas where SCF functionality can maximize we found that the top two most important benefits methods. To further highlight the opportunities that efficiency.

Cash Conversion Cycle (CCC): Automation Opportunities

Ordering Shipping Invoicing Disbursements Post-Payment Workﬂows & Analysis

Invoice Payment Disputed Sent r Reconciliation Treasury Reports Spend SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS

BUYE R Order Placed Goods Invoice Invoice Funds & G/L & Forecasts Mgmt. & Order-to-Pay Buye with Vendor Received Received Processed Cleared Update Generated Analysis Order-to-Pay IES TION E-Payment, SaaS-Based Supplier MA

UN IT E-Ordering, E-Purchasing, Vendor ERP/TMS Integration, Spend Mgmt, E-Tracking E-Invoicing Financing (Dynamic Discounting,

TO Data Visualization & Reporting RT Management, etc. Reverse Factoring, etc.) OPPO SCF AU

Customer Order Review of Goods Invoice Payment Funds Received Customer Credit Shipped Sent Applied to Available Account Customer Order Goods Invoice Invoice Payment Funds Entered Prepared Cut Disputed Received Deposited SUPPLIER Order-to-collect

Ordering Shipping Invoicing Collections

Please Note: 1) For some opportunities the actual order of select components may differ. 2) Various SCF vendors address different components of the CCC. ]

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Yes, both bank-led and a 19% fintech solution Landscape

Yes, a bank-led solution 15%

Yes, a fintech solution 10% FINTECHS SHAKE UP THE MARKETPLACE hether it’s supporting dynamic discounting or add-on process functionality, technology innovators No, but we are 21% W are transforming work flows and seeing significant traction as a result. considering one

No, and we are not 22% considering one WHAT TECHNOLOGY IS AVAILABLE?

When analyzing specific SCF offerings, it is important to understand the differentiation between services Unsure 14% that exist across the full landscape of providers. Given the broad interpretation of what is considered SCF, the range of available functionalities vary from one vendor to the next. For instance, bank providers or financiers of SCF have historically focused largely on the facilitation of credit/financing terms with a buyer’s suppliers.

Banks Lead SCF Market Share by Narrow Margin In looking at the full range of steps included in a typical order-to-pay cycle, this level of service only covers 44% of corporate respondents indicated use a small margin of the broader process. However, many of today’s financial technology (fintech) vendors of a SCF solution; 34% were using a bank-led have developed solutions that offer additional coverage options, like e-invoicing, e-purchasing and other solution and 29% were using a fintech solution (some respondents used both). associated workflows.

Fintechs Have Gained Ground Rapidly Going a step further, some SCF providers deliver systems that offer connectivity to banks/third-party Banks have historically enjoyed a sizeable portion financing and vendors and act as a central portal for managing the entire scope of supplier interactions. of SCF market share, but fintechs continue to cause massive disruption in the space. These portals tend to easily integrate with back-office enterprise resource planning (ERP)/treasury management systems (TMS) and typically offer e-invoicing and e-payments functionality, along with 1 in 5 Corporates are Considering a Solution data and document management workflows. As of 2019, 1 in 5 corporate respondents were actively considering the use of a SCF solution. In recent years, spend analysis (i.e., examining vendor cash flows and discount rates to determine optimal Data shows that many new implementations center around SaaS-based solutions offered by payment strategies) has been added to many solution sets. Thus, as an organization enters a selection fintechs. However, banks continue to invest process or begins to analyze the market, they must be careful to understand exactly what functionalities heavily in SCF and remain highly relevant players. will be afforded to them through each provider. [

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WHERE TO START funder, while dynamic discounting is typically Today, the fintech landscape consists of hundreds conducted exclusively between a buyer and supplier, of vendors and thousands of available solutions. While there are numerous techniques that can be with no outside funds oversight. While many of these tools are specialized in areas categorized under supply chain finance, the two like compliance or reconciliations, there are other, types we will focus on in this report are reverse Before selecting, treasury should first evaluate their more robust programs that address the full scope factoring and dynamic discounting. These two intended use of the SCF platform and consider of finance or treasury operations. Such technology methods are more prevalent and see greater use how it will fit into their broader technology stack. options may be installed at the client site, hosted within the industry compared to others. Most SCF They must also determine which functionalities externally on the cloud or even downloaded vendors operating in the space offer at least one, if the program will perform relative to existing onto a mobile device. Depending on purchased not both, of these options through their platforms. software. Configuring the capabilities of each functionality, system use may be limited to only a system to function alongside others can be quite few employees, or access could span dozens of Although both approaches are buyer-led and complex, especially considering the broad range of departments and hundreds, multiple employees. payables-centric, it is important to note that reverse technology solutions currently on the market. factoring usually involves a financier or third-party SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS

SCF LANDSCAPE: TECHNOLOGY OFFERINGS CORE SCF FUNCTIONALITY

RECONCILIATION & VENDOR SOURCING PROCUREMENTI NVOICING FINANCINGP AYMENT ACCOUNTING ANALYSIS & MGMT.

 Inventory Mgmt.  BAM  E-Purchasing  E-Invoicing  Facilitation of Credit  E-Payment  Reconciliation  Spend Analysis

 Targeted Spend  Document  Confirmations  Dispute Mgmt.  Term Negotiation  Reports & Alerts  G/L Integration  Cash Forecasts Mgmt.

 Supplier  Contracting  Order Monitoring  Exception Mgmt.  Third-Party/Internal  Bank  Information Reporting Networking Funding Sources Connectivity

SCOPE OF COVERAGE: SUPPLY CHAIN FINANCE PROVIDERS

Financier/Lender Services

Core/Standard SCF Solution

Expanded SCF Solution ]

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Copyright © 2019 All Rights Reserved strategictreasurer.com 2019 REVERSE FACTORING This approach allows buyers to hold onto cash for joining a buyer with a company that extends trade longer periods, while also ensuring that suppliers credit and acts as an intermediary to the supplier. TECHNOLOGY ANALYST REPORT Despite the confusing name, reverse factoring, or have access to capital. Reverse factoring is most Whenever a buyer needs products, they place a “traditional” SCF, is widely considered the most valuable for organizations with identified investment purchase order with the supply finance company, common form of supply chain finance. Through opportunities for their cash and a preference for who in turn orders from the supplier and handles this program, a buyer will leverage a superior credit delaying payment obligations to maximize returns all necessary payments. Once the supplier receives rating (large buyers typically have better access in the market. A buyer may also prefer to leverage the request, they produce and deliver the goods, to capital than suppliers) to provide affordable reverse factoring if they have other upcoming cash and the finance company pays them and issues an financing to vendors, while simultaneously delaying outflows and need additional capital to satisfy them. invoice to the buyer. A step-by-step overview of the the payment of their own invoice (i.e., a bank pays traditional SCF model is provided below. a supplier invoice on the buyer’s behalf—usually at Put another way, reverse factoring allows a discount—and then the buyer pays the bank back manufacturers and distributors to buy raw materials, at a later date). build inventory and fulfill large orders. It works by

REVERSE FACTORING SEQUENCE OF EVENTS

BUYER INCREASED DPO

SUPPLIERREDUCED DSO

Days Outstanding

0510 15 20 25 30 35 40 45 50 55 60 65 70 75

[Early Supplier [Original Supplier [New Buyer Payment Date] Payment Date] Payment Date]

A purchase The buyer The buyer’s The financial institution Original payment Buyer’s payment terms The payment terms is made, and registers and financial pays the supplier early in terms between with the bank extend 30 established between the the supplier approves the institution is exchange for a discounted the buyer and days beyond the payment bank and the buyer allow the submits an invoice notified of rate. The financial supplier called terms established buyer to wait 70 days before invoice to internally. the approved institution can now for payment by between the buyer and payment is required. the buyer. invoice. negotiate new payment day 40. supplier. terms with the buyer. [

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DYNAMIC DISCOUNTING 3 Things You Should Know:

1While the practice of discounting invoices in return for early payment is not altogether new or innovative, the IT’S NOT A LOAN sliding, or dynamic, approach to discounting has only recently begun to see heightened use and adoption. SCF is an extension of a buyer’s accounts This technique for supplier financing differs from the standard “2/10 net 30” payment terms in one primary payable, not a financial debt. way. Using that method, a 2% discount is awarded to buyers who can pay their supplier within ten days, but after that point, buyers have no further opportunities to receive a discount (between days 11-30). This is problematic, because many buyers cannot process an invoice quickly enough to meet the ten-day discount IT’S NOT JUST FOR THE BIG GUYS deadline, and therefore have no further opportunity or motivation to pay suppliers early. SCF gives value to firms of all sizes with varying credit scores. Dynamic discounting solves this problem using a sliding model in which any early payment received can earn a discount—and the earlier the payment, the larger the discount. It is also important to note that dynamic discounting does not require the participation of a third-party financier or bank. IT’S NOT TIED TO A SINGLE BANK, NOR DOES IT REQUIRE ONE

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS Typically, an organization that implements a dynamic discounting program uses their own funds to pay Supply chain finance offers global, suppliers. Until recently, SCF was typically offered by banks to big corporates and their suppliers as reverse multibank capabilities. These programs factoring. With a maturing market, more fintech providers arrived on the scene and created major disruption can be established with self-funding or with new service offerings targeting companies of all sizes. composed of mixed buyer, capital market or financial institution financing. 1Not everyone considers dynamic discounting as part of supply chain financing.

Figure 3: Flexible Financing Options Grow in Popularity

Corporates Using SCF: How is your SCF program funded? Corporates Using SCF: What types of supplier financing programs does (Select all that apply) your company use? (Select all that apply)

Reverse Factoring (Traditional 65% Supply Chain Finance) Our SCF program is funded by third-parties 68% (i.e. banks, FIs, factoring agencies) Dynamic Discounting 39%

Receivables Financing 32% (factoring, forfaiting, etc.) Our SCF program is self-funded 39%

Unsure 3% ]

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Notable SCF Perspectives TECHNOLOGY ANALYST REPORT

BUYER & SUPPLIER

THE SIZE OF THE SUPPLIER NETWORK MATTERS. ▪ Supplier participation is consistently ranked as the most important factor to the success of an SCF program.

▪ Firms must factor in this reality as they begin to evaluate an SCF implementation.

SCF CAN IMPROVE RISK MANAGEMENT FOR TREASURY. ▪ While optimizing liquidity flexibility is a primary driver, mitigating the risk of supplier issues is also important.

▪ Providing small suppliers access to capital while they simultaneously achieve greater operational visibility helps to strengthen the supply chain.

MANY SUPPLIERS STRUGGLE TO OBTAIN CAPITAL. ▪ Due to late payments from buyers, more than one-third of suppliers struggle with liquidity. One in four have been significantly impacted by these delays.

▪ SCF can facilitate easier access to capital for these organizations, improving vendor relationships in the process.

BUYERS MUST WORK TO ENGAGE SUPPLIERS. ▪ With supplier participation essential to these operations, buyers should look to reduce friction and a lack of visibility at every juncture.

▪ By offering suppliers free onboarding, training and other resources, buyers can improve participation and increase success. [

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Figure 4: Corporates: Which of the following best describes your balance Working Capital Propels sheet for working capital requirements?

We are always in an Payment Strategy Selections 21% excess cash position

We are usually in an 31% excess cash position n recent years, a modern, technology-fueled treasury industry has steadily sharpened its focus on Our position moves between internal working capital drivers, thereby simultaneously nurturing a heightened interest in supply borrowing and having 32% I excess cash chain finance.

We are usually in a net 10% borrowing position THE SCF-CAPITAL CONNECTION firm impacts their payment strategies is significant. We are always in a net

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS 6% borrowing position When it comes to making payments, firms with low From a corporate perspective, one element impacts cash reserves may try to delay payments or at least supply chain finance participation and preferences extend payment terms in order to hold onto cash for more than all the rest combined: working capital longer. For firms in a net positive liquidity position, position. While virtually every company wants to the ability to leverage dynamic discounting or other optimize this output, the unique liquidity strategies self-funded SCF options is a major advantage. Figure 5: Corporates Buyers: Regarding employed can differ widely across the full spectrum your payables, which is preferable? of industries and market verticals. For instance, a Through market research, Strategic Treasurer also large, profitable corporate might keep a substantial learned that approximately one-third of buyers have amount of cash in the bank to protect against been short on critical supplies due to a supplier’s Holding onto cash for as long as possible to use in other areas 23% unanticipated outflows or to take advantage of new inadequacy or bankruptcy. This can result in huge of the business market opportunities. losses for firms if supplies are cut off. To mitigate this risk, SCF can be used to provide easy access Depends on the circumstance 52% Conversely, a small firm may not have excess to capital for suppliers, while also gaining greater cash saved for this purpose and could instead be visibility into their cashflows and, therefore, the deploying all available capital simply to maintain ability to spot potential supply shortages before Paying your suppliers early in 20% exchange for discounts daily operations. Companies in financial distress issues arise. may even have to borrow funds during down periods While borrowing funds to support the supply chain or off-seasons to satisfy outflows, a reality that is still the most common financing method, data Unsure 4% would deplete any substantial cash reserves. In a shows nearly 40% of corporates now use in-house recent survey, 52% of corporates said they are often capital. Given this trend, vendors who offer or always in an excess cash position, while 32% multiple financing options through their platforms fluctuated between excess cash and borrowing. are well-positioned to garner market interest and The extent to which the working capital position of a traction moving forward. ]

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Copyright © 2019 All Rights Reserved strategictreasurer.com 2019 PAYMENT TERMS: BUYERS & SUPPLIERS Figure 6: QUICK STATS: of organizations have found TECHNOLOGY ANALYST REPORT In a globalized economy, it is important to understand that many supply chains will consist of hundreds themselves in greater need of or thousands of suppliers dispersed across multiple world regions. In fact, one-third of buyers in a recent liquidity over the past year. survey had more than 1,000 suppliers in their network. Furthermore, at least one-fifth of buyers indicated that they had suppliers operating across a diverse set of regions, including Africa, India and western Europe. of organizations indicate they are often or always in While each vendor relationship is unique, buyers typically look to extend terms for as long as possible an excess cash position. (with the exceptions of early-pay discounts), while suppliers will look to shorten terms to receive funds as quickly as possible. Research has also shown that around half of buyers indicated they took longer than of buying firms have been short of 30 days to pay suppliers, with 10% taking more than 60 days. Interestingly, however, when suppliers were critical supplies due to a supplier asked how long it took them to receive payment from buyers, about 10% more respondents indicated that incapacity in the past 2 years. it took longer than 30 days. of organizations list supplier participation as the most important element impacting the success of a SCF program.

Figure 7: Payment Terms Complexity

16% of corporates 38% of corporates indicated it have 10,000+ suppliers. takes 31-50 days to receive payments from buyers.

13% of corporates have SUPPLIERS PAYMENTS 16% of corporates indicated it 1,001-2,500 suppliers. FROM takes <20 days to receive Payment BUYERS payments from buyers. Terms Complexity

80% of corporates have 10% of corporates take more than 25% of their 51-60 days to pay suppliers. suppliers in North America.

28% of corporates have REGIONS PAYMENTS 16% of corporates take more than 25% of their FROM <20 days to pay suppliers. suppliers in Western Europe. SUPPLIERS [

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Interest rates and the cost of borrowing will always be primary considerations when determining an effective working capital plan. While interest rates have been reduced in 2019, the relative uncertainty of future rate changes in magnitude and direction add to concerns.

Economic Forecast: What Affects SCF? SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS orking capital and supply chains do not exist in a vacuum. In fact, several factors and conditions Figure 8: Corporates: Please select your W in the economy, both domestic and international, impact the strategies organizations choose to top three (3) CONCERNS with regards to optimize liquidity. North America. (Top six responses shown)

FLUCTUATING INTEREST RATES Rising interest rates 56% Interest rates and the cost of borrowing will always be primary considerations when determining an

effective working capital plan. While interest rates have been reduced in 2019, the relative uncertainty of Gridlock in Washington D.C. 38% future rate changes in magnitude and direction add to concerns.

In a low-interest rate environment, both buyers and suppliers are usually able to find cost-effective Increasingly complex 34% regulatory environment borrowing options. Availability of capital is more widespread, and there may be numerous avenues, including bank-lending or other areas, to borrow funds at little to no cost. However, when rates rise, or if investors expect them to rise, these opportunities may start to disappear. When the cost of borrowing Trade reform and conflicts 34% funds is higher, many banks may become more restrictive when deciding on whom to lend.

Potential near-term 32% In these circumstances, it is typically small suppliers who are impacted the most, as they are usually the recession first companies to lose out on bank funding and the ones who need capital the most. In these cases, suppliers are generally more willing to seek out alternative financing options, such as dynamic discounting, Tax reform 30% to access capital. ]

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Copyright © 2019 All Rights Reserved strategictreasurer.com 2019 COMPLIANCE CONSIDERATIONS of suppliers in the region, which often deters banks illegal to transmit data across national borders and financial institutions from financing suppliers or unless strict requirements and approvals are met. TECHNOLOGY ANALYST REPORT Any buyer operating with a globally distributed results in lengthy and costly KYC processes. In Asia, supply chain today knows how complex the local gift-giving—or payment practices that would Where SCF is concerned, this means an compliance landscape has become. While be considered bribery or fraudulent in the U.S.—are organization that implements a global electronic continued regulatory development in North America normal. Similar issues are present in Africa and the solution for SCF would have to comply with all and Europe steadily pushes stricter standards middle east, where OFAC and FCC standards are of sorts of checks and inspections and may even on corporates and banks, disparate compliance concern to ensure local suppliers are not a party to be required to maintain local data servers in each practices across other regions are rarely up to par. known criminal or terrorist organizations. country where suppliers and business partners are As a result, many suppliers operating in emerging located. This would introduce an entirely new set markets do not meet the standards set by U.S. or While each of the above compliance concerns of expenses for companies and have a profound European firms. continues to pose challenges for firms, a broader impact on the cost effectiveness of their programs. issue experienced by companies looking to However, as many of these laws are in flux, much This dilemma is particularly problematic in South implement a global SCF program involves data is still unknown regarding their overall enforcement America and Asia, where regulations can vary protection and privacy policies. In countries like or the penalties associated with non-compliance. widely from one country to the next, and it is very China and even within the EU, new and proposed Given the complicated nature of these laws and challenging to develop a standard set of supplier data localization policies have placed limitations on regulations, any organization looking to implement a financing procedures. For instance, the ongoing how a wide range of information, including financial cross-border supplier financing program is strongly lack of any robust credit structure in South America data, can be transmitted and shared cross-border. encouraged to consult with their legal teams and makes it very difficult to determine creditworthiness In some instances, countries have made it virtually other experts.

Figure 9: Corporates: Arrange the following areas/developments in the order that they will most likely impact your organization's capital spending or cash holdings over the next year: 1 (Highest impactful) - 5 (Lowest impactful)

48% 24% 15% 8% 5% Compliance and regulatory environment

9% 32% 20% 31% 9% Geopolitical environment Compliance Complexities Grow

10% 12% 29% 9% 40% Almost half the respondents in this year’s survey on treasury perspectives named the compliance and regulatory Trade conflict 1 environment the element most likely to impact the liquidity of 25% 18% 13% 37% 7% their business. Where SCF is concerned, organizations using 2 Continued interest rate increases, credit/ 3 lending considerations a global electronic solution for SCF must comply with 4 8% 14% 23% 15% 39% multiple inspections and could even face requirements on data server locations. 5 Cybersercurity needs/reinforcements [

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TAX TRENDS arena in 2019-2020 and beyond have infiltrated parties has not dissipated in the past year, and the the public consciousness and pushed a disrupted U.S. has introduced widespread tariffs under the For almost two years, the first overhaul to the global economy to the brink. These include assertion that trade imbalances are stacked against U.S. tax structure in more than 30 years has been the renegotiation of the NAFTA trade deal, as them. In response, China and the G-7 have enacted in place. This move, along with the temporary well as the escalating trade war with China and tariffs of their own. elimination of the repatriation tax, has provided continued tensions with G7 nations regarding trade advantages for American companies, particularly imbalances, among other issues. While the future of current global trade wars is those with heavy overseas operations. With this unclear—and the outcome far from predictable— government reprieve, many large companies According to the Office of the United States Trade the U.S./China conflict bears watching. Given brought millions of dollars—or even billions—back Representative, the U.S. reached an agreement with the growing animus and China’s large number of into the U.S. at a fraction of the normal cost. Mexico and Canada in the renegotiation of the North suppliers, as well as increasing tariffs on billions American Free Trade Agreement (NAFTA) at the of dollars’ worth of goods from both economies, end of 2018. Although the new United States-Mexi- a continued, high-stakes dispute between the TRADE CONFLICTS: co-Canada Agreement (USMCA) intended to bolster superpowers could force companies to restructure SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS DEALS & WARS reciprocal trade has concluded, NAFTA currently supplier networks or face heavy fees. remains in effect. There may have been a time in the not-so-distant While a full-blown trade war with the EU is less past when most people could navigate the world Looking beyond NAFTA, the more serious global likely, any incremental escalation could mean without giving much thought to free trade among market concerns originate from the ongoing trade organizations with global supply chains would have nations—but no more. Several ongoing trade conflict between the U.S. and China, as well as the to shift business networks to a more domestic scale conflicts that could significantly impact the SCF former’s strained EU ties. Friction between all these and or face higher tariffs and taxes.

Figure 10: Corporates: How has trade conflict (China, G7, NAFTA) impacted your business? (Select all that apply)

68%

62% Small (<$1 Billion) Large (>$1 Billion)

Trade Conﬂict is NOT a Top Corporate Concern Despite significant media coverage regarding 20% 18% the impact of global trade conflicts, a significant 17% 14% 11% majority of organizations remain unimpacted. 10% 9% 5% 4% 5% Alternatively, nearly one-fifth of firms are finding it more expensive to conduct business overall and 1 in 7 have seen an increased cost of the No significant Overall made Increased the Increased the Restricted the Restricted the goods they purchase. impact it more price of price of number of number of expensive for materials/goods goods/materials foreign foreign us to conduct we must we sell suppliers we suppliers we

] business purchase buy from sell too

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Implementation Considerations TECHNOLOGY ANALYST REPORT

upplier participation is regularly ranked as the most important step in ensuring a successful SCF program by corporates who have undergone the S process in the past. Given the critical nature of both parties’ involvement, buyers adopting a supply chain finance solution must be wary of factors that may discourage vendor cooperation.

KEY POINTS IN SECURING SUPPLIER PARTICIPATION Communication: Onboarding: Training & Support: » Be transparent with your suppliers from the » Be proactive in demonstrating the cost- » Ensure the SCF vendor has available beginning regarding the intent to shift effectiveness of the solution to suppliers training courses to assist suppliers with toward an online SCF program. (e.g., reduced float, less manual processing, learning how to use and navigate the online quicker exception handling, etc.). solution.

» Be sure to include details regarding how the » Make sure implementation and onboarding » Check that the solution provider has a shift will benefit supplier operations, not just costs/burdens are not put on the shoulders dedicated customer support program to help your own. of suppliers. suppliers with questions or issues as they arise.

Forming a Working Capital Council

Treasury: Figure 11: Corporates: Do you have a Leads the working capital council. Treasury is typically considered the owner of working capital working capital council or committee? internally but needs buy-in from other departments in order to effectively optimize liquidity.

YES NO UNSURE Accounting: Needs regular, timely reports of cash flow activity to update ledgers, perform reconciliations 18% 65% 16% and generate accurate financial statements. AP/AR: Has direct responsibility over relations with suppliers and vendors and plays a role in developing sales/credit promotions and payment terms.

Working Capital Council Procurement: An internal committee typically overseen by treasury that meets Involved in the purchase of inventory and company supplies and regularly interacts with monthly or quarterly to discuss working capital strategies and key suppliers. metrics for all associated business units. The goal of this committee Legal/Tax: is to promote mutually beneficial working capital initiatives and Ensures regulatory and compliance requirements are met. Can be associated with updating [

eliminate competing KPIs across different departments. supplier payment terms. 19

]

Where Is SCF Headed?

s in all areas of treasury and commerce, evolving technology has changed the supply chain finance space in dramatic ways. The following innovative A solutions, however, are key to the industry’s future.

CLOUD-BASED PLATFORMS ARTIFICIAL INTELLIGENCE BLOCKCHAIN

While software as a service (SaaS) technology, or Although confusion persists over what separates true This solution provides a shared and immutable ledger cloud computing, isn’t new, its entrance into the SCF artificial intelligence (AI) from other machine learning for documenting transactions between buyers, suppliers space is a recent development. Over the past few or predictive analytics solutions, these technologies and financiers, acting as a single source of truth for all

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS years, the landscape trended toward solutions offering have definitely had a profound impact on the SCF participants. By recording transactions this way, each online marketplaces for buyers, suppliers and banks industry. These products work by gathering data from party uses the same data set, thereby streamlining to conduct central-portal commerce. SaaS networks a client’s network and across all parties on the platform communication and ensuring central access to provide easier connectivity options than their older, to ascertain available rates, payment strategies and information for invoicing, payment and documentation. proprietary counterparts, along with cheaper onboarding average DPO/DSO for specific industries and market Because any changes in a shared ledger must be and more efficient communication across supply verticals. The program then applies this data to the verified by all involved before alterations are made, this chains. Most new SCF products sold, therefore, have client’s situation to develop payment terms and strategies methodology introduces stronger controls and greater been SaaS-based platforms. In a 2019 survey, ~75% to match their unique requirements. This year, nearly insight into underlying details. More than one-third of of corporate practitioners said they now use or will use half the respondents in a treasury perspectives survey respondents surveyed recently said they now use or will these innovations in the next five years. indicated they now use or will use AI in the next five years. use this solution in the next five years.

Figure 12: Which of the following technologies are you using/ Figure 13: Rank the following innovative technologies in the interested in using in treasury? order that you think they will have the greatest impact on treasury automation (Rank 1-4) 43% 12% 9% 48% 20% 17% 15% SaaS (Cloud) Solutions APIs 31% 23% 9%

Mobile Banking Apps 19% 40% 25% 17% 17% 21% 14% AI/Machine Learning APIs 5% 12% 21% 15% 29% 38% 17% Blockchain Blockchain/Distributed 7% 18% 22% Ledger 1 (Highest) Artificial Intelligence (AI) 17% 11% 21% 51% 2% 6% 7% Using currently 2 Will use within 2 years Chatbots and In-App 3 Crypto/Digital Currency Help/Wizards ] Will use within 5 years 4 (Lowest) 20

[

The SCF Solution Landscape: TECHNOLOGY ANALYST REPORT Current & Future

FINTECHS WILL CONTINUE TO GAIN GROUND. ▪ Fintech SCF providers continue to push major disruption in the SCF space.

▪ Many fintech providers offer nimble solutions with easy onboarding and flexible financing options, and are expected to continue garnering a greater market share.

KYC IS A SERIOUS IMPEDIMENT TO BANK-LED SCF. ▪ On the bank side, KYC represents a massive barrier compared to fintech offerings.

▪ Issues related to KYC can result in large challenges for both the banks themselves, as well as for the companies being onboarded to their solution.

SCF IS STILL IN A HIGH GROWTH STAGE. ▪ Over 1 in 5 corporates currently part of a supply chain indicate they are interesting in using a SCF solution.

▪ There is room for significant additional growth in the SCF space, especially as the solutions market matures.

SELF-FUNDED SCF IS INCREASINGLY ATTRACTIVE. ▪ Nearly 2 in 5 organizations indicate that their SCF program is self-funded.

▪ Companies with available capital are clearly willing to invest in their supply chains and prefer the flexibility to alter their funding sources as needed. [

]

Plan for the Costs The implementation of a SCF program will have An SCF Checklist far-reaching implications both from a standpoint of costs and potential savings. However, it can be easy for companies to get caught up in the opportunities for savings and fail to consider the or those organizations considering the adoption of a SCF program, there are a number of factors costs it will take to implement and manage the F to consider. Every organization has a unique set of requirements, responsibilities, and objectives. solution. Take time to understand both sides of At the same time, there are multiple supply chain finance solutions and approaches that are available. the equation; what must be spent on properly The following checklist touches on some key items that must be addressed throughout the process of running the solution and what will be gained selecting, implementing, and using a SCF solution. through its use.

Consult or Create a Working Capital Understand Your Suppliers Communicate the Changes & Establish

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS Council Is there a specific region where your suppliers Training After deciding to pursue a SCF program, the are located, or are they globally distributed? Do One of the primary areas where organizations 1st step is to consult your firm’s working capital the regions where your suppliers are located have falter during their SCF implementation is in council. If you do not have one, establish one. This complicated regulations or legislation that could communicating changes and educating both should be done before any important decisions burden your implementation? Would all your internal staff and suppliers on how the new are made, as input from all affected parties suppliers be provided the opportunity to join the solution will work. The success of the program should be considered before action is taken. SCF program? The decision to implement a SCF depends upon participation. Thus, making sure This will help to ensure that all the organizational program will have a direct impact on interactions that both your internal departments and your needs and objectives are addressed and will with suppliers, and it is vital that the supplier suppliers understand the benefits of the solution promote an environment of communication and landscape be properly evaluated to determine and know how to use it is crucial for driving collaboration internally. how its makeup will affect the implementation engagement. and use of the solution.

Establish a Single Set of KPIs & Research ALL the Options Monitor Usage & Refine the Approach Objectives For the SCF Program In many cases, an organization may believe they Once a program has been implemented, use of There must be specific objectives for know which solution is right for them before the solution must be continuously analyzed to implementing a SCF program beyond “reducing conducting any research. However, there are a ensure that there is adequate participation and risk” or “generating profits.” Establish a specific vast range of SCF options available, including that both the organization and their suppliers set of goals to be targeted through the SCF those that involve banks or third-party funders are receiving the proper ROI. This analysis program (e.g. Adopt e-invoicing functionality to or that allow the buyer to put their own cash to should be conducted regularly for as long as the expedite invoice processing timeframe from 1 work. It is important for firms to be open as they program is active. If analysis uncovers a process month to 2 weeks). These objectives should be start their research, as there are usually vendors or component of the program that could be agreed upon by all the departments and groups that are discovered during this stage that match executed more efficiently, steps can be taken to represented in the Working Capital Council. the company’s needs that would have been address the issue. otherwise overlooked. ]

[

What are the key takeaways of this report for treasury practitioners? Here are some points to consider:

SCF IS BECOMING A LEADING PRACTICE FOR OPTIMIZING WC. Using SCF as a vehicle for bolstering liquidity and optimizing working capital is 1 a leading practice currently enjoying mainstream adoption. Companies without programs in place are putting themselves at a disadvantage; streamlining the CCC can provide massive liquidity gains.

FLEXIBLE FINANCING OPTIONS ARE BEING PRIORITIZED. 52% of companies are usually in an excess cash position. Many companies prefer 2 the option to invest in their own supply chains when possible. The ability to choose between borrowing and self-funding a SCF program is a differentiating factor for firms with shifting cash positions or with capital to invest.

SCF SIGNIFICANTLY ENHANCES CASH VISIBILITY. While there are a range of benefits associated with SCF, data shows that gaining 3 predictability and visibility into cash flows is labeled by corporates as the top advantage. SCF can optimize working capital and improve cash forecasts as enhanced insights regarding vendor cash flows are captured.

COMMUNICATIONS SYSTEM INTEGRATION & SUPPLIER ENGAGEMENT. Companies using SCF must learn to communicate across departments and work to 4 streamline integration between the SCF solution and other back-office systems. At the same time, buyers instituting a program need to prioritize supplier engagement so that adequate participation across their network is achieved. [

23 ]

SOLUTIONS & SERVICES MARKET POSITION TOP STATISTICS

SCF Platform (SaaS-based) +500 multinational corporate Relationships with over 150 banks and Automated Invoicing Processing programmes. institutional inventors. Payment Gateways & Syndication

www.demica.com Supplier Onboarding Tool

+44 (0) 207.450.2500 Core Bank Integration Demica’s platform enables over $15 billion of receivables and Over 1 million invoices processed per day. [email protected] payables financing.

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS TRF Platform (SaaS-based) Automated Invoicing Processing

Credit Model (Adv. Rate) +240 interfaces with different ERPs and Demica is comprised of 168 employees Risk Mitigation, Reporting & Analytics P2P providers. Founded: internationally. 1992 Back-Up Servicing

DEMICA CLIENTS Demica:CEO: Supply Chain Technology Best Supply Chain Financier Matt Wreford Solution Provider of Award Recipient Analyst the Year Headquartered: Demica was named ‘Supply Chain Finance Demica is amongst some of the organisations London, UK Coverage Technology Solution Provider of the Year’ at recognised and commended for their contribution to the RFIx 2019 Awards. Winners were carefully the trade sector at the 2019 International Trade selected among companies involved in the Finance Awards. Ownership: receivables finance ecosystem including, Privately Held banks, non-banks, technology companies, WHAT’S ON DECK fintechs, consultancies and legal advisors.

All content was produced by Demica and edited by Strategic Treasurer. ]

[

TECHNOLOGY ANALYST REPORT SOLUTIONS & SERVICES MARKET POSITION TOP STATISTICS

SCF Platform (SaaS-based) +500 multinational corporate Relationships with over 150 banks and Automated Invoicing Processing programmes. institutional inventors. COMPANY OVERVIEW Payment Gateways & Syndication

Supplier Onboarding Tool Demica is an award-winning end-to-end working capital solutions provider, delivering a broad range of receivables and payables finance products for medium to large corporates across industries

Core Bank Integration Demica’s platform enables over and geographies. Demica works closely with its clients to provide financing solutions that fit their $15 billion of receivables and Over 1 million invoices processed per day. business objectives. payables financing. TRF Platform (SaaS-based) Demica has more than tripled its staff in the last 24 months, currently standing at 168 employees, Automated Invoicing Processing with the aim of transforming the company from a software provider to a leading global independent working capital solutions provider. Credit Model (Adv. Rate) +240 interfaces with different ERPs and Demica is comprised of 168 employees Risk Mitigation, Reporting & Analytics P2P providers. Through the hiring and incorporation of senior bankers from leading financial institutions (GE Founded: internationally. Capital, Santander, Lloyds, SocGen, etc.), Demica is now delivering one of the best platforms in 1992 Back-Up Servicing the market. They also provide market leading independent advice, structuring and implementation expertise for any working capital solution related to trade payables and trade receivables, including end-to-end securitisation services. DEMICA CLIENTS CEO: Supply Chain Technology Best Supply Chain Financier In line with Demica’s current mandate, the company has been awarded the following awards in Matt Wreford Solution Provider of Award Recipient 2019: the Year Headquartered: ▪ Best Supply Chain Finance Provider – Global Finance’s Best Trade and Supply Chain Demica was named ‘Supply Chain Finance Demica is amongst some of the organisations Finance Awards 2019. London, UK Technology Solution Provider of the Year’ at recognised and commended for their contribution to the RFIx 2019 Awards. Winners were carefully the trade sector at the 2019 International Trade ▪ Best Supply Chain Financier – TFG international; Trade Finance Awards 2019. selected among companies involved in the Finance Awards. Ownership: receivables finance ecosystem including, ▪ Supply Chain Technology Solution Provider of the Year – RFIx Receivables Finance Privately Held banks, non-banks, technology companies, International Awards 2019. WHAT’S ON DECK fintechs, consultancies and legal advisors. ▪ Non-Bank Supplier of the Year – RFIx Receivables Finance International Awards 2018. [ 25 ]

\ Demica—Unlock Potential: Demica PRODUCT OVERVIEW automates complex working capital finance Our view is that the supply chain finance transactions for large multinationals and financial market will move more towards non-bank Demica offers a full spectrum of working capital institutions using its proprietary technology platforms, enabling buyers to implement solutions, from supply chain finance to a broad platform to simplify the delivery of essential liquidity. one solution globally, with banks providing range of receivables finance products. It currently funding via this platform as per their maintains relationships with over 150 financial It's platform is able to manage all trade finance relevant vendor footprints. We believe partners, from global banks to alternative funders, products, from simple SCF and TRF transactions this will enhance value to our clients (both which fund its working capital programmes. to complex financing structures. Demica acts as buyers and suppliers) through simpler and an advisor alongside your company to identify, quicker integration, legal documentation Demica’s platform and programme structure structure, execute and run working capital solutions and on-boarding. Our future strategy flexibility allows for configuration to suit its client’s that are bespoke to your company; reducing days is therefore to build relationships and demands. For example, the platform is able to sales outstanding and increasing days payables connectivity with providers such as structure a combined product offering of standard outstanding. Demica in order to help generate this

SUPPLYCHAIN FINANCE TECHNOLOGY SOLUTIONS SCF (third-party funded) along with Buyer Funding additional value and choice for our clients. in one platform with the same simple set of legal documentation. Another combination could be WHY DEMICA? James Binns, using a receivables finance programme to free Barclays Global Head of Trade up cash to then automatically fund an SCF buyer WORKING CAPITAL IMPROVEMENT: & Working Capital funding programme to capture supplier early Reduce days sales outstanding and increase days payment discounts. payables outstanding.

Along with its multi-funder platform, Demica can CROSS-BORDER: also offer a full white label experience including the Multiple jurisdictions and operating companies can Demica have built a highly robust look & feel of the customer (colours, fonts, logos be included. and reliable platform that supports etc.) as well as FX solution capabilities where the most complex of supply chain suppliers can collect in a different currency than FUNDING RELATIONS: finance programmes. Demica’s that of the invoice, allowing the buyer and funder to Over 150 banks and institutional investors fund our expertise and understanding of our capture the FX benefit. programmes. business needs are exactly what we look for in a business partner. ACCOUNTING TREATMENT: PRODUCT FEATURES SUPPORTED BY DEMICA: Potential for offbalance sheet treatment (Depending Oliver Petersen, ▪ Standard SCF (and rebates) on product and client’s auditors). ING Commercial Banking ▪ Gross-up SCF structures ▪ Payment Extension (beyond maturity) FLEXIBLE FUNDING: ▪ Buyer Funding Potential to include more than one funder and refinance at minimum costs.

RISK MANAGEMENT: ] Best in class reporting capabilities. 26

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TECHNOLOGY ANALYST REPORT

TO LEARN MORE ABOUT DEMICA

Regulated activities are undertaken by Demica Limited’s affiliate, Demica Finance Limited (DFL), which is authorised and regulated by the UK Financial Conduct Authority (FCA). To the extent that this document constitutes a financial promotion for the purposes of the Financial Services and Markets Act 2000, it is issued by DFL and is intended only for persons who are Professional Clients or Eligible Counterparties for the purposes of the FCA rules. [ 27 ]

Works Cited

▪ Figure 1, Page 4: 2019 Strategic Treasurer ▪ Figure 9, Page 17: 2019 Strategic Treasurer & & Kyriba Supply Chain Finance Survey. TD Bank Treasury Perspectives Survey.

▪ Figure 2, Page 9: 2019 Strategic Treasurer ▪ Figure 10, Page 18: 2019 Strategic Treasurer & Kyriba Supply Chain Finance Survey. & TD Bank Treasury Perspectives Survey.

▪ Figure 3, Page 12: 2019 Strategic Treasurer ▪ Figure 11, Page 19: 2018 B2B Payments & Kyriba Supply Chain Finance Survey. & WCM Strategies Survey. Strategic Treasurer & Bottomline Technologies. ▪ Figures 4-5, Page 14: 2019 Strategic Treasurer & Kyriba Supply Chain Finance Survey. ▪ Figures 12, Page 20: 2019 Strategic Treasurer & TD Bank Treasury Perspectives Survey. ▪ Figure 6, Page 15: 2019 Strategic Treasurer & Kyriba Supply Chain Finance Survey. ▪ Figures 13, Page 20: 2019 Strategic Treasurer Rapid Research Survey. ▪ Figure 7, Page 15: 2019 Strategic Treasurer & Kyriba Supply Chain Finance Survey.

▪ Figure 8, Page 16: 2019 Strategic Treasurer & TD Bank Treasury Perspectives Survey. ]

[

As part of our ongoing market research initiatives, Strategic Treasurer conducts 10+ industry surveys every year on a variety of topics ranging from cash management and payments to fraud and compliance. These surveys are collectively completed by several thousand corporate, banking, non-profit, government, and higher education respondents every year. Below is a list of our current industry research initiatives.

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