1、Citi is one of the worlds largest financial institutions,operating in all major established and emerging markets.Across these world markets,our employees conduct an ongoing multi-disciplinary conversation accessing information,analyzing data,developing insights,and formulating advice.As our premier

2、thought leadership product,Citi GPS is designed to help our readers navigate the global economys most demanding challenges and to anticipate future themes and trends in a fast-changing and interconnected world.Citi GPS accesses the best elements of our global conversation and harvests the thought le

3、adership of a wide range of senior professionals across our firm.This is not a research report and does not constitute advice on investments or a solicitations to buy or sell any financial instruments.For more information on Citi GPS,please visit our website at GPS:Global Perspectives&Solutions Janu

4、ary 2024SUPPLY CHAIN FINANCINGBuilding Resilience as the New Definition of“Global”Emerges Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 Authors Nathan Sheets Global Chief Economist Citi Research +1-212-816-2991| Robert Sockin Global Economist Citi Research +1-212-816-1658| Chris Cox G

5、lobal Head of Trade and Working Capital Solutions Citi Treasury and Trade Solutions +44-20-7986-8611| Andrew Betts Global Head of Trade and Working Capital Sales Citi Treasury and Trade Solutions +44-20-7508-6789| Pauline Kontos Global Head of Trade and Working Capital Advisory Citi Treasury and Tra

6、de Solutions +1-312-876-8498| Gabriel Kimyagarov Managing Director Citi Financial Strategy Group +1-212-816-9031| Parvaiz Hamid Husen Dalal Global Head of Payables Finance Citi Treasury and Trade Solutions +44-20-7986 5817| Erik Rost Global Trade Payables Finance Citi Treasury and Trade Solutions +1

7、-212-816-0782| Ian Kervick-Jimenez Trade Working Capital Advisory Citi Treasury and Trade Solutions +1-212-816-3596| Sanjeev Ganjoo Global Head Trade Receivable Finance and Commercial Bank Trade Products Citi Treasury and Trade Solutions +1-212-816-1622| Gopinath Govindaraj Partnerships&Innovation,G

8、lobal Trade and Working Capital Solutions Citi Treasury and Trade Solutions +353-1-622-6071| Opeyemi Olomo Director,Trade Partnerships and Innovation Citi Treasury and Trade Solutions +353-1-622-4003| Bob Petrie Director,Trade Partnerships and Innovation Citi Treasury and Trade Solutions +1-718-248-

9、1263| Nathalie Louat Global Director,Trade and Supply Chain Finance International Finance Corporation Makiko Toyoda Global Head,Global Trade Finance Program(GTFP)and Global Supply Chain Finance Program(GSCF)International Finance Corporation January 2024 Citi GPS:Citi GPS:Global Perspectives&Solution

10、s 2024 Citigroup 3 SUPPLY CHAIN FINANCING Building Resilience as the New Definition of“Global”Emerges In my position as CEO,I have the privilege of running one of the worlds most global banks.We move$4 trillion in volume equivalent to the GDP of Germany for 5,000 of the most important multinational

11、companies,every single day.This represents a constantly innovating network that helps underpin the global financial system and international trade.With clients operating in nearly 160 countries and jurisdictions,weve had a front-row seat to the evolution of globalization over the course of our banks

12、 more-than-200-year history.Today,we are witnessing a monumental shift towards another new era and trade and supply chains are at the heart of these changes.A year ago,Citi published a comprehensive Citi GPS report examining global supply chains,and many of those elements,especially those focused on

13、 geopolitical and macroeconomic challenges,still ring true today.For the last several decades,there was a strong emphasis on sourcing and moving manufactured goods as efficiently as possible to cut costs.But the geopolitical and macroeconomic shocks of late have upended this approach,and were now re

14、aching a critical tipping point.This latest report,published by Citi experts leading our thinking on the evolution of global supply chains and backed by survey responses from the worlds most complex multinationals and SMEs around the world,highlights the profound challenges many corporates are activ

15、ely navigating.Today,amidst the backdrop of transformative technological innovations,increasing resilience is the clear and resounding call.We see nearly every country and company focused on security be it food,water,energy,cyber,financial,or operational security.And consequently,theyre reconfigurin

16、g supply chains to meet the demands of customers and other stakeholders.It took too long but weve all woken up to the fact that concentrating the sourcing or production of any good let alone essential goods in one part of the world can have dire consequences.This heightened focus on resilience has g

17、iven birth to a new era of diversification,and as businesses and countries adapt to this era,were starting to see clear benefits in economic growth.First,as demand for resilience and diversity grows,so too does the opportunity for smaller players to engage in global trade.That includes last-mile sup

18、pliers in developing countries.Second,increased focus on resilience and investments in supply chains are creating diversified economies.Malaysia,Thailand,and Vietnam are early examples of this in the Indo-Pacific.Elsewhere,in the Middle East,Saudi Arabia,the UAE,and others are undergoing their own t

19、ransformations as they look to diversify from oil.Were also seeing countries and companies diversifying their supply chains in specific sectors.This is particularly evident in Mexico as a result of the United States-Mexico-Canada Agreement.Citi has been supporting clients seeking to reduce risk and

20、increase efficiencies through nearshoring in Mexico.In some cases,its North America-based automakers bringing supply chains closer to home.In other cases,its European and Asian companies moving closer to their end-consumers in North America.Jane Fraser CEO Citi Citi GPS:Citi GPS:Global Perspectives&

21、Solutions January 2024 2024 Citigroup 4 Third,diversification is creating new trade corridors.Brazil is trading more with India and China than it is with Argentina.The Middle East is now more connected to Asia than Europe.And those connections will be further strengthened by a proposed economic corr

22、idor connecting the Middle East to India.Nearly 30%of multinationals surveyed for this years report indicated they were pursuing a“China Plus One”strategy as they build more resilience,with Vietnam and Thailand being the primary countries named for expansion plans.As the old system continues to be d

23、isrupted,the new era of diversification will evolve to meet new demands.But we should be clear-eyed that these changes wont happen overnight.Any significant movement,especially deeper in supply chains,is much easier said than done.Supply chains and trade relationships take years to build.And in some

24、 cases,it will take a decade for new players to achieve the scale and manufacturing quality that traditional production hubs developed over the last half-century.Still,the demand to make these new connections and foster new relationships is palpable.And we anticipate the movement will continue to ga

25、in more and more momentum in the years to come.We are far from the end of globalization,but it is changing.And with those changes,were seeing tremendous opportunities for all our economies to work together to tackle the unique challenges of the 21st century.Resilience doesnt mean retreating to our c

26、orners.In some sectors,national security requires us increasing our domestic production capabilities.But excessive self-reliance,in the name of national security,wont make us more secure.True resilience comes from open markets and robust and diversified supply chains.A decoupling of the worlds domin

27、ant economies is neither possible nor prudent.De-risking or diversification,as we prefer to call it has become the name of the game.The new era of diversification offers a new way forward for globalization,not a reversing of course.We mustnt lose faith in the tools that have enabled growth and progr

28、ess over these past decades.And we should be conscious to avoid policies that swing the pendulum too far towards resilience and away from affordability and economic growth.Security and resilience go hand-in-hand in most cases and we ought to seek enhancements to both through more global cooperation,

29、not less.January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 5 Contents Normalization in Global Supply Chains Raises Questions of Whats Next 6 A Closer Look at the Components of the Index.8 Implications for Goods Inflation.9 Concluding Thoughts:Looking Ahead.10 Working Capita

30、l Across the Supply Chain:Resilience Is Key 12 What Is Happening to Global Flows?.12 Why Working Capital Matters and How to Improve It 15 Boosting Shareholder Returns.15 How to Shorten the Cash Conversion Cycle.16 The Time Is Now.17 2023 Supply Chain Supplier Survey 18 2023 Large Corporate Survey 27

31、 Diversification and Digitalization Are Priorities.27 Boosting Supply Chain Resiliency 38 Working Capital Optimization.38 Supporting Supply Chain Resiliency.38 Facilitating New Trade Opportunities.39 Supporting Sales and Customer Resiliency While Managing DSO.40 Empowering Growth:How to Unlock Suppl

32、y Chain Finance for Emerging Market SMEs.42 Leveraging IFCs Capacity to Mitigate Risk.42 A Transformative Impact on Businesses and Communities.43 How to Expand Credit Capacity and Boost Global Trade 44 Trade Credit Insurance Is Rising to the Challenge.45 Unlocking U.S.Bank Capacity.46 The Role of Fa

33、ctoring.47 Digitalization and Innovation 48 Trade Digitalization:Why Data Reigns Supreme.48 The Data Imperative.48 Navigating Datas Dual-Edged Sword.49 Banks Data Challenges and Opportunities.50 Digital Assets:How Tokenization Can Transform Trade.53 Driving B2B E-Commerce Growth 54 The Role of Trade

34、 Finance.54 Trade Finance Opportunities and Challenges.55 The Best of Both Worlds.55 Conclusion 57 Beyond the Shocks:Navigating Challenges on the Horizon.57 FORTIFYING SUPPLY CHAINS FOR FUTURE OPPORTUNITIESSOLUTIONS TO BOOST SUPPLY CHAIN RESILIENCY3210-1-220002220232024NovDecGL

35、OBAL SUPPLY CHAINS HAVE NORMALIZED WHATS NEXT?Global supply chains look to have normalized,with pressures in 2023 hovering near pre-pandemic levels.Consumer rotation away from goods back to services has helped,as has improvements in shipping costs,global Purchasing Manager Indices,and inventories.Ho

36、wever,debates around supply chain management strategies are still important to avoid disruption and ensure a consistent and reliable production process.Source:Citi Research,BloombergCiti Global Supply Chain Pressure Index 2024 CitigroupAreas of Potential Supply Chain Management ImprovementInventory

37、Management Strategies:Balancing the trade-offs between just-in-time and just-in-case inventory managementDigitalization:Increasing digitalization of monitoring,maneuvering,and maintaining supply chainsGeographical Reconfiguration:Reshoring and nearshoring along with supply chain diversification123Op

38、timize working capital to help preserve and maximize liquiditySupport sales and customer resiliency while managing days sales outstanding with account receivable finance solutions Facilitate new trade opportunities with trade finance solutionsBuyers can implement supply chain finance programs that p

39、rovide suppliers with a channel to access reliable funding at an efficient rate1234THE STATE OF SUPPLY CHAINS:WHAT ARE SUPPLIERS SAYING?A global survey of corporate suppliers participating in Citis supply chain finance programs confirmed an easing of supply chain pressure and challenges globally,but

40、 higher interest rates and inflation continue to create uncertainty,especially for small-and medium-sized enterprises.THE STATE OF SUPPLY CHAINS:WHAT ARE LARGE CORPORATES SAYING?Citi partnered with East&Partners to conduct primary,voice-of-the-corporate research on supply chain challenges,resiliency

41、,and the future of supply chains for the worlds largest and most complex organizations.Most important supply chain decision priorities for suppliers:had debt-linked interest expense rise at least 100%50%Just-in-case vs.just-in-time inventory strategies56%see an increase in export volumes in next 6 m

42、onthsNearshoring/reshoring of downstream manufacturing56%already had or were considering adopting a“China Plus One”strategySupply chain resilience34%expect to increase their number of supply chain partnersDigitalization of paper-based trading48%expect to increase spending allocation on new technolog

43、y,such as generative AIAI and data-driven decision making29%20%12%7%3%stated they had not faced any supply chain challenges,up from 4%in 2022said they were having difficulties forecasting and planning for customer demandnoted shipment delays vs.34%in 2022cited prohibitive financing costs and/or diff

44、iculty accessing financing13%33%14%27%Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 6 Normalization in Global Supply Chains Raises Questions of Whats Next Global supply chains have been on a rollercoaster over the last few years.Early in the pandemic,consumers rotated m

45、uch of their spending towards goods,as many types of services could not be consumed easily.This strong rotation into goods spending also coincided with COVID-19-induced production disruptions.The combination of strong demand and limited supply markedly ratcheted up pressures on global distribution,a

46、nd our own measure of supply chain pressures rose almost without interruption from the onset of the pandemic to mid-2021(see Figure 1).These pressures have subsided significantly over the last couple of years.For much of 2023,pressures in supply chains were hovering near pre-COVID-19 lows.By Decembe

47、r of 2023,pressures had picked up modestly but remained relatively limited,running near the pre-COVID-19 average.We view the normalization in supply chain pressures as largely reflecting an easing in the global consumers demand for goods.As the pandemic receded,consumers rotated their spending away

48、from goods and back towards services.This rotation strengthened services sectors but weighed on manufacturing,as well as hampering global trade and production(Figure 2).Figure 1.Citi Global Supply Chain Pressure Index Figure 2.Global Export Volumes and Industrial Production Growth Source:Citi Resear

49、ch,Bloomberg Source:Citi Research,Netherlands Bureau or Economic Analysis,Haver Analytics The good news is that heightened supply chain pressures were a central driver of price pressures in global goods industries,and the unwinding of these forces has helped quell global goods inflation.As shown in

50、Figure 3,global headline inflation has fallen from a peak of over 7%in 2022 to under 3%in early 2024 as pressures on food,energy,and other goods prices have cooled.Global core goods inflation(i.e.,excluding food and energy)has fallen even more sharply,from over 6.5%to near 1%at the beginning of 2024

51、 not far removed from pre-COVID-19 levels.At current levels,our Supply Chain Pressure Index suggests that goods inflation should hover near or just above pre-pandemic readings.NovDec-2-02020224(St Dev)-6-4-2024682000222023ExportsIndustrial Produ

52、ction(YoY%,3mma)Nathan Sheets Global Chief Economist Citi Research Robert Sockin Global Economist Citi Research January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 7 The easing of goods inflationary pressures has been significant,but the global consumers rotation away from go

53、ods and towards services also intensified pressures on services prices.Post-COVID-19 spending on labor-intensive services has buoyed the demand for workers,which has tightened labor markets and pushed up wage growth.High wage growth has then been passed into services prices.Global services inflation

54、 fell somewhat at the end of 2023 but is still running at nearly double the pre-COVID-19 pace.Following a resilient 2023 where global growth came in at 2.6%,well above our expectations from earlier in the year,we expect a stepdown to just 1.9%in 2024 as high interest rates bite further and services

55、momentum continues to fade(see Figure 4).Growth in most economies is projected to slow,particularly in developed markets we expect several will fall into recession,including the U.S.,in mid-2024.Figure 3.Global Inflation Figure 4.Evolution of Citi Global Growth Forecast Source:Citi Research,National

56、 Statistical Sources,Haver Analytics Source:Citi Research Against this backdrop,major central banks are looking at(or near)peak rates.The U.S.Federal Reserve(the Fed),European Central Bank(ECB),Bank of England(BoE),and Bank of Canada(BoC)all have reached their terminal rates,while the Reserve Bank o

57、f Australia(RBA)and Swedens Riksbank are nearing peaks(Figure 5).The Fed,ECB,and many other developed market central banks are likely to begin easing around mid-2024(Figure 6).The December Fed meeting,however,hinted that cuts could come even sooner.Several emerging markets,such as Brazil,Chile,and P

58、oland,have already started cutting rates.Given high inflation and developed market rates,easing cycles in emerging markets will also likely be gradual.0520023(YoY%)HeadlineCoreCore GoodsServices2.61.92.51.62.02.42.83.2Jan-22May-22Sep-22Jan-23May-23Sep-23(YoY%)202320242025Last F

59、orecast of 2022 Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 8 Figure 5.Developed Market Policy Rates Figure 6.Developed Market Policy Rate Forecasts Source:Citi Research,Haver Analytics Source:Citi Research A Closer Look at the Components of the Index As highlighted i

60、n Figure 7,all three key components of our Supply Chain Pressure Index shipping costs,global purchasing managers indices(PMIs),and inventories have improved markedly since early 2022.Of the three,the relaxation in the PMI component has been particularly pronounced.1 For the PMIs,all components of th

61、e index backlogs of work,suppliers delivery times,and input prices are markedly improved from the pressures observed earlier in this cycle and are running well-below pre-COVID-19 averages(see Figure 8).Figure 7.Citi Global Supply Chain Pressure Sub-Indices Figure 8.Global Manufacturing PMI:Selected

62、Components Source:Citi Research,Bloomberg,Haver Analytics Source:Citi Research,S&P Global,Haver Analytics 1 Our index is the first principal component(PC)of these three sub-indices.Each of the subindices is,in turn,the PC of relevant underlying data series.For more detail regarding the construction

63、of the index,see Citi Research,Global Economics:Global Supply Chains How Intense Are the Pressure?,January 19,2022.-82002220232024USEAJPUKCAAU(%,End of Quarter)CitiForecastsQ3 Q4 Q1 Q2 Q3Q4Q1 Q2 Q3Q4United StatesJapanEuro AreaCanadaAustraliaSwedenUnited KingdomPeak Interest Rat

64、e First Cut202220232024-2-02020224(St Dev)Shipping CostsGlobal PMIsInventories2030405060405060708020002220232024Backlogs of WorkInput PricesSuppliers Delivery Times(RHS)(50+=Expansion)(50+=Contraction)January 2024 Citi GPS:Citi GPS:Global Perspe

65、ctives&Solutions 2024 Citigroup 9 Figure 9 shows some key inventory data that feeds into the Supply Chain Pressure Index.The German Ifo component for finished goods inventories turned positive in mid-2022 and continued to rise for several quarters,suggesting a replenishing of inventories.The most re

66、cent readings are among the highest in the last decade,in line with both the weakness in global goods demand and,relatedly,the ongoing growth struggles in Germany.The U.S.inventory-to-retail sales ratio,meanwhile,is much higher than the pandemic lows but still a fair amount below the pre-COVID-19 no

67、rm.Figure 9.Inventory Indicators Figure 10.Transportation Costs Source:Citi Research,U.S.Census Bureau,Ifo,Haver Analytics Source:Citi Research,Freightos,The Baltic Exchange,Bloomberg,Haver Analytics As for shipping costs(see Figure 10),the cost of shipping a container from China to the U.S.West Coa

68、st which once contributed prominently to supply chain tensions has fallen sharply from its peak of about$20,000 in this cycle back to below$2,000.Other shipping cost data have also improved markedly since their pandemic stresses.More recently,shipping costs have been boosted by disruptions in major

69、canal routes,including conflict in the Red Sea.While it is unclear how long these disruptions will last,shipping costs are still far below levels reached during the pandemic and are not far removed from typical pre-COVID-19 levels.Implications for Goods Inflation In our previous work,we found a stat

70、istically significant relationship between our Supply Chain Pressure Index and core goods inflation(i.e.,excluding food and energy).For data samples including the pandemic,this relationship held both in the U.S.and globally.The relationship was particularly strong with a three-month lag.2 Figure 11

71、shows the results for our U.S.core goods inflation model.The model has tracked the contours of inflation in this episode closely,with the most recent data remarkably consistent with our models output.For global inflation,our model has also tracked developments,although there has been a little more o

72、f a gap between actual inflation and the model(see Figure 12).More recently,the global model and actual global core goods inflation have been closely in sync.Our forecasts suggest that goods inflation is likely to continue running near current levels.For the U.S.,our model looks for core goods infla

73、tion in coming months of roughly 0%on a year-over-year basis.Global core goods inflation is expected to run in the 1%-1.5%range in the coming months,close to the pre-COVID-19 pace.2 For more details on the models,see Citi Research,Global Economics:Global Supply Chain Pressures Ease Further,September

74、 2022.-30-20-1001020301.01.11.21.31.41.51.61.71.820002220232024(%,Bal)(Ratio)U.S.:Inventories/Retail SalesGermany:Ifo Finished Goods Inventories(RHS)020040060080007200224Baltic Exchange Dry IndexContainer:China to U.S.West Coast(Freig

75、htos)Container:China to Europe(Freightos)Baltic Exchange Air Freight Index(Index,Dec-2019=100)Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 10 Figure 11.U.S.Core Goods Inflation:Actual vs.Regression Model Figure 12.Global Core Goods Inflation:Actual vs.Regression Model

76、Source:Citi Research,Bureau of Labor Statistics,Haver Analytics Source:Citi Research,National Statistical Sources,Haver Analytics Concluding Thoughts:Looking Ahead The key takeaway from our Supply Chain Pressure Index is that conditions have largely normalized.Still,firms are unlikely,in our view,to

77、 move back to pre-pandemic business as usual.This cycle has highlighted a range of areas where supply chain management can be improved to avoid disruptions and ensure a consistent and reliable production process.For one,there will be changes to inventory management strategies.Pre-pandemic,firms larg

78、ely held a just-in-time inventory approach,which looked to keep inventories lean to contain costs.Alternatively,just-in-case inventory management focuses on not running out of stock in the event of a sizable pickup in demand or disruptions in input supply and may require larger inventory holdings.Th

79、e pandemic showed the benefits of just-in-case strategies,as many firms were not prepared for the surge in goods demand that followed the initial lockdowns.The trade-offs between the two strategies will be more deeply debated by firms going forward.At a minimum,firms are likely to hold larger invent

80、ories than they did previously for components that are hard to source.Two,digitalization will likely play an increasingly important role in monitoring,maneuvering,and maintaining supply chains.Firms will increasingly collect and harness data at each stage of the supply chain and use tools such as ar

81、tificial intelligence(AI)and machine learning(ML)to improve their processes.The scope for improvements is vast and may include better tracking of goods in transit,improving warehouse operations,and choosing suppliers more effectively.Third,there will be some type of geographical reconfiguration in s

82、upply chains.Firms have seen in this cycle that having far-flung supply chains can come with high risks.Moreover,the current political environment in the U.S.as well as other countries may reinforce incentives to diversify supply chains away from China.Governments will also likely continue to help r

83、edirect supply chains for both domestic economic and security reasons.The U.S.CHIPS Act of 2022,for example,very much underscored this point,as it aims to increase U.S.tech production largely at the expense of China.-303691215Apr-16Jun-17Aug-18Oct-19Dec-20Feb-22Apr-23(YoY%)ActualFitted02468Apr-16Jun

84、-17Aug-18Oct-19Dec-20Feb-22Apr-23(YoY%)ActualFittedJanuary 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 11 Figure 13.U.S.Manufacturing Construction Spending Figure 14.Share of U.S.Trade:China and Mexico *Manufacturing construction spending deflated by PPI:new industrial buildi

85、ng construction.Source:Citi Research,Bureau of the Census,Haver Analytics Source:Citi Research,Bureau of the Census,Haver Analytics There is increasing evidence that reshoring and nearshoring are already occurring at a large scale.For one,U.S.construction of manufacturing facilities has picked up ap

86、preciably over the last year(see Figure 13).Several factors have likely driven this strength,but reshoring clearly looks to be in play.Additionally,Chinas share of U.S.trade has now fallen to a decadal low(see Figure 14).Countries in Latin America,particularly Mexico,as well as other emerging Asian

87、economies such as Vietnam and India,have benefited from this reconfiguration.Asian economies are likely to continue to benefit from“China Plus One”strategies.ASEAN countries look set to gain more prominence in technology supply chains due to strong pre-existing infrastructure.India,meanwhile,has mad

88、e impressive gains in cell phone manufacturing,and its government has policies in place to attract businesses to other sectors including semiconductors,renewable energy,and autos.Latin America,as well as Central and Eastern European(CEE)economies,meanwhile,may continue to reap benefits from nearshor

89、ing and friendshoring.Of note,the value of announced greenfield foreign direct investment(FDI)has fallen sharply in China,while it has picked up notably relative to historical trends in India,Mexico,CEE,and segments of Africa.3 However,these points do not change the fact that China is,and will likel

90、y remain,an integral part of the global supply chain complex a role that took decades to establish.Moreover,there are many reasons that firms moved production to China in the first place,including lower costs and supportive infrastructure,which are still likely to remain factors in the years ahead.A

91、dditionally,there are some spaces,such as autos,where China has been gaining global market share in recent years.Going forward,firms may adopt“China Plus One”or“China Plus Many”strategies,but China is likely to remain a central hub in many production and sourcing chains.Ultimately,the extent to whic

92、h firms implement structural changes in their supply chains will depend on their assessment of the risks of material disruptions in the future.Undoubtably,various firms across different industries will have diverging views about the nature of supply chain risks and will respond in different ways.Sti

93、ll,by our reckoning,the overall direction of travel here for most firms is clear.3 See Citi Research,Emerging Markets Economic Outlook&Strategy:Prospects 2024 Sunny with a(Good)Chance of Showers,December 2023.25507552002252008200022($bn)Manufacturing construction spe

94、ndingReal,2022 Prices*10%11%12%13%14%15%16%17%18%200212023(%)ChinaMexico Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 12 Working Capital Across the Supply Chain:Resilience Is Key In our third Citi GPS Supply Chain Finance report,published in January 2023,pan

95、demic and supply chain disruptions had largely receded as corporates attention shifted to managing higher energy prices and inflation.Credit conditions remained tight throughout 2023 for borrowers of all sizes and levels of creditworthiness.In the U.S.,three high-profile bank failures in the first h

96、alf of the year the first since 2020 highlighted the potential impact of restrictive monetary policy on the marketplace.Simultaneously,geopolitical tensions continued to remain elevated.Resiliency particularly financial resiliency is a topic of interest for many corporates.As in previous periods of

97、stress,working capital is a focus for entire organizations,and boosting efficiency while limiting expenses is on many treasurers strategic agendas.Additionally,as noted in the publication Working Capital Efficiency Generates Significant Value,published by Citi Trade&Treasury Solutions in October 202

98、3,corporates that efficiently manage their working capital can improve total shareholder return(TSR),among other benefits.Supplier resilience remains a key focus,as SMEs and companies in emerging markets face limited access to capital.Solutions such as purchase order financing,deep-tier financing,an

99、d partnerships with government and multilateral agencies can help boost resiliency across the supply chain.Technology is at the heart of many new developments in trade finance.Innovations such as artificial intelligence and the internet of things can enhance corporate operational efficiency,cut cost

100、s,reduce fraud,and augment transparency throughout supply chains.Transparency and mitigation of risk should help improve access to efficient capital for corporates around the world.What Is Happening to Global Flows?Globally,Citis Services division processes an average of more than$4 trillion in paym

101、ent flows daily.Payment and receivable flows through the Citi payment network reveal that despite economic headwinds,global trade flows remain strong and have continued to normalize in 2023 following the pressures experienced in 2022 after the onset of war in Ukraine.Payment Flows in January to Sept

102、ember 2023 vs.January to September 2022 Overall payment flows in the period from January to September 2023 fell by 13%,recovering slightly from the period ending in August(which saw flows down 17%).The Natural Resources and Clean Energy Transition(NRCET)segment exhibited the biggest drop in flows,po

103、sting a decline of 28%for the same period compared to the prior year as the impact of sanctions against Russia began to permeate through markets.Latin America payment flows increased by 29%,benefiting from a growth in flows across all industries.Growth in domestic flows within Mexico and Brazil also

104、 illustrates the economic resilience of both countries.Chris Cox Global Head of Trade and Working Capital Solutions Citi Services January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 13 The Consumer segment showed notable growth,increasing 11%compared to the previous year,foll

105、owed by the Industrials segment,which grew 3%from the prior year.Growth in flows into Mexico(up 40%),Great Britain(up 71%),and Poland(up 108%)accounted for much of the Consumer segment flow growth,while overall growth of flows into EMEA(up 11%)drove much of the growth in Industrials.Communications f

106、lows were up 2%,albeit down nearly 28%in North America.Technology flows were down 8%as a whole,led by a 14%decrease in flows into Asia.The pressure on Technology segment flows stems from inventory challenges the industry continues to face.Healthcare rounds out the industry segments,down 3%,with flow

107、s in all regions(except Latin America)decreasing.Figure 15.Supply Chain Shift Analysis by Sector(%Change in Payment and Receivable Flows YTD 2023 vs.YTD 2022,as of September 2023)Source:Citi Services Figure 16.Supply Chain Shift Analysis by Region(%Change in Payment and Receivable Flows YTD 2023 vs.

108、YTD 2022,as of September 2023)Source:Citi Services Quarterly Analysis(July to September 2023 vs.April to June 2023)Payment flows in the third quarter of 2023 were nearly flat compared to the second quarter,down marginally by 0.4%.There was growth in quarter-over-quarter flows for Communications(up 2

109、0%),Technology(up 3%)and Industrials(up 1%).Decreases in flows were seen in Consumer(down 1%),NRCET(down 4%)and Healthcare(down 5%).Again,Latin America led other regions in growth(up 14%),while Asia and North America increased 5%and 1%,respectively.EMEA posted a decline of 5%on a quarter-over-quarte

110、r basis.Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 14 From the second to the third quarter of 2023,Communications was the only segment to show growth in all four regions,led by growth in Latin America(up 28%),EMEA(up 25%),Asia(up 17%),and North America(up 6%).Additio

111、nally,growth in the Great Britain-to-Ireland corridor and the Great Britain-to-Germany corridor ranked as the most significant.Despite impressive year-to-date growth(January to September 2023)of 11%in the Consumer segment,quarter-over-quarter growth saw a marginal drop of 1%.Decreases in domestic fl

112、ows in Portugal,Lebanon,and Great Britain were responsible for the drag in the third quarter.In the Industrials segment,Latin America was strong,growing 14%from the second to the third quarter.The decrease in domestic flows in Germany,home to a considerable Industrials sector,was the largest single

113、decrease of any country-to-country corridor.Figure 17.Supply Chain Shift Analysis by Region(%Change in Payment and Receivable Flows Q3 vs.Q2,as of September 2023)Source:Citi Services Figure 18.Month-on-Month Growth in Flows Across Regions Source:Citi Services January 2024 Citi GPS:Citi GPS:Global Pe

114、rspectives&Solutions 2024 Citigroup 15 Why Working Capital Matters and How to Improve It While there is speculation that U.S.Federal Reserve interest rates have peaked and may begin declining in mid-2024,rates are currently at a two-decade high,and the landscape faced by corporates is starkly differ

115、ent from 18 months ago.The need for accessible financing during the pandemic highlighted the importance of working capital management for supply chain resilience.For much of 2023,the Feds message was“higher for longer”as it pertained to rates,pivoting later in the year to a message of not holding on

116、to high rates for too long.Since the Global Financial Crisis of 2008 and the subsequent challenges presented by the 2020 global pandemic,working capital management has become a strategic imperative for corporate treasuries.The focus on preserving capital is increasingly paramount,prompting corporati

117、ons to rethink their reliance on commercial paper issuance and revolving credit lines.To counter the current high cost of capital,corporations are seeking to optimize their cash conversion cycle(CCC).Buyers are negotiating to extend payment terms,while sellers are quickening the pace of receivables

118、collection.Improving working capital management not only frees trapped liquidity but also allows companies to fuel operations,invest in strategic plans,and embrace new technologies and sustainability initiatives.At the same time,it delivers a higher total shareholder return(TSR)and return on investe

119、d capital(ROIC),ultimately enhancing a companys valuation.Boosting Shareholder Returns Citis Financial Strategy Group(Citi FSG)analyzed the relationship between working capital management and investor benefits for MSCI All Country World Index(ACWI)constituents.The conclusion was clear:Those companie

120、s that consistently shortened their CCC more than the sector median achieved superior cumulative sector-adjusted total shareholder returns compared to peers that lengthened their CCC.CCC shorteners achieved a TSR of 143%from 2010 to 2022,with a compound annual growth rate(CAGR)of 8%.In contrast,leng

121、theners only managed a TSR of 44%with a CAGR of 3%during the same period.The impact extends to ROIC,where consistent CCC shorteners demonstrated a 0.4%average increase relative to their sector,while lengtheners experienced a 0.4%decrease.Furthermore,companies with shortened CCCs exhibited superior m

122、edian annualized sales growth of 7.4%,outpacing lengtheners at 5.9%.Industries with complex supply chains typically have the greatest opportunity for working capital savings.Within industries,working capital practices vary widely given unique sales cycles and supply chain challenges,particularly in

123、the post-COVID-19 era.This means that many companies have scope for improvement.According to analysis by Citis FSG,in 2022 there was a 91-day difference in the CCC of the top-quartile firms compared to the bottom-quartile firms across all industries.Andrew Betts Global Head of Trade and Working Capi

124、tal Sales Citi Services Pauline Kontos Global Head of Trade and Working Capital Advisory Citi Services Gabriel Kimyagarov Managing Director Citi Financial Strategy Group Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 16 Figure 19.Companies that Reduced CCC had Superior T

125、SR Figure 20.Companies that Reduced CCC Experienced ROIC Outperformance Median cumulative sector-adjusted TSR by change in CCC Average change in ROIC,relative to sector,for companies by change in CCC(%points)Source:FactSet,Citi Financial Strategy Group Source:FactSet,Citi Financial Strategy Group Ho

126、w to Shorten the Cash Conversion Cycle To enhance their CCC,corporations should analyze the components of the cash conversion cycle:days payable outstanding(DPO),days sales outstanding(DSO),and days inventory outstanding(DIO).To better understand how best-in-class corporates have improved their cash

127、 conversion cycles over time,Citi Global Trade Working Capital Advisory examined the evolution of different components of the cash conversion cycle for S&P Global 1200-listed corporates(representing roughly 70%of global market capitalization)that shortened their CCC from 2010-22.4 The leading driver

128、 of shortened CCC is improved DPO,with consistent CCC shorteners showing a median increase of 18 days.To improve DPO,corporates are standardizing payment terms in line with their CCC and industry peers.Many are partnering with banks for supply chain finance(SCF)programs,offering early payment of sup

129、pliers invoices at an attractive rate,leveraging the buyers often higher credit rating,while extending payment terms.Dynamic discounting works in a similar way to SCF but enables the buying company to use its excess short-term cash to fund early payment of approved supplier invoices,rather than usin

130、g the balance sheet of the bank providing the SCF-liquidity management solution.Another lever to aid DPO improvement is letters of credit with extended terms and bank confirmations,which can mitigate counterparty risk as well as maximize working capital.According to Citis Working Capital Advisory Te

131、am,the median DSO for consistent CCC shorteners improved by six days from 2020 to 2022.5 Shortening DSO requires corporates to collect on sales faster.At the same time,customers are seeking ways to extend their payment terms,putting upward pressure on DSO.4 Citigroup is not acting in any advisory ro

132、le in relation to Legal,Tax,or Accounting issues relating to this structure or otherwise.All companies should obtain their own Legal,Tax,or Accounting advice in relation to your evaluation.5 Citi Treasury&Trade Solutions,“Working Capital Efficiency Generates Significant Value,”September 2023 January

133、 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 17 A way to address this dilemma is accounts receivable(AR)financing solutions,which aims to monetize receivables and remove trapped cash from DSO.The availability of trade credit insurance has broadened the range of AR structures

134、available,helping corporates to cut DSO while simultaneously supporting their customers with extended payment terms.Sales finance programs can be structured to help expand sales abroad without tying up capital.Despite pandemic pressures,DIO the time it takes a company to convert its inventory into s

135、ales has improved by two days for S&P Global 1200-listed corporates that shortened their CCC from 2010-22.Sound inventory management is critical to working capital efficiency.Corporates may improve DIO by utilizing deep-tier financing to reach further down the supply chain to support the working cap

136、ital needs of suppliers suppliers.Similarly,purchase order finance supports suppliers through the pre-shipment phase and bolsters their ability to hold inventory on their balance sheets to meet the buyers needs.The Time Is Now In a world of elevated funding costs and growing operational complexity,a

137、 focus on efforts to improve working capital management can reduce dependence on external funding,unlock trapped liquidity,and ultimately give corporations additional strategic flexibility.It can:Boost TSR and ROIC:Maximizing cash flow can benefit investors by supporting superior TSR and ROIC.Improv

138、e liquidity:Better working capital management provides an added buffer against changes in demand by reducing the amount of cash trapped within an organization.Expand dry powder for acquisition finance/capital expenditure:Enabling corporates to be opportunistic when it comes to their growth strategy.

139、Diversify funding sources:Through trade financing arrangements,qualified corporates may add additional sources of capital to their funding mix,reducing reliance on existing sources.Promote supply chain stability:Proactively assess and support the working capital needs of the supply chain and sales c

140、hannels for resilience and growth.To achieve these benefits,corporates should consider:Setting high but realistic working capital goals by designing an optimization strategy based on their business model,capital needs,and industry benchmark.Implementing a working capital program with a best-in-class

141、 governance structure that includes a champion at the senior executive level(such as CFO).Harmonizing payables terms by utilizing solutions such as SCF,virtual cards,and corporate and purchasing cards.Accelerating receivables via sales financing and portfolio AR finance.Citi GPS:Citi GPS:Global Pers

142、pectives&Solutions January 2024 2024 Citigroup 18 2023 Supply Chain Supplier Survey Over the past few years,Citi Treasury&Trade Solutions has worked closely with supply chain finance suppliers to capture their perspectives through several surveys.The objective continues to be to understand the chall

143、enges and opportunities facing suppliers and to develop best-in-class offerings to satisfy their evolving needs.The breadth of Citi Supply Chain Finance(SCF)programs offers the ability to capture perspectives across a diverse global supplier base.In 2022,Citi Treasury&Trade Solutions sent global sur

144、vey to a subset of suppliers enabled on Citi SCF programs.The goal was to understand changes in perspective amid the turmoil that had rattled global supply chains for the prior two years.These results were summarized and published in our January 2023 Citi GPS report titled Supply Chain Finance:Uncer

145、tainty in Global Supply Chains is Going to Stay.One year later in October 2023,we shared a refreshed survey with 29,000 suppliers enrolled in Citi SCF programs,most of whom were SMEs.The survey serves as a pulse check on supply chains,with 2023 largely demonstrating a return to normal for many indus

146、tries,regions,and businesses.Although many questions in the survey were identical to those in the 2022 version,we introduced new questions to capture fresh perspectives and themes,particularly those relating to onshoring and nearshoring,adoption of artificial intelligence(AI)business tools,and the i

147、mpact of rising rates and inflation.Supplier demographics in the 2023 survey largely mirror those from 2022,although there was a noticeable increase of responses from the Africa and Middle East region in 2023(Figure 21).Figure 21.Supplier Headquarters Location Figure 22.Primary Sectors Supplied Sour

148、ce:Citi Treasury&Trade Solutions Source:Citi Treasury&Trade Solutions 11%8%7%16%7%17%6%26%10%12%12%12%7%24%8%15%ChinaIndiaOtherAPACWesternEuropeEasternEuropeAfrica andMiddleEastLatinAmericaNorthAmerica2022 Survey2023 Survey40%16%10%9%5%4%2%2%12%40%19%11%7%7%5%2%1%8%IndustrialsServicesConsumerTechnol

149、ogy,Media,TelecomTransportationMaterials/NaturalResourcesHealthcareUtilitiesOthers2022 Survey2023 SurveyParvaiz Hamid Husen Dalal Global Head of Payables Finance Citi Treasury&Trade Solutions Erik Rost Global Trade Payables Finance Citi Treasury&Trade Solutions January 2024 Citi GPS:Citi GPS:Global

150、Perspectives&Solutions 2024 Citigroup 19 Figure 23.Supplier Revenues Figure 24.Supplier Customer Locations Source:Citi Treasury&Trade Solutions Source:Citi Treasury&Trade Solutions The latest survey confirms our understanding that there has been an easing of supply chain pressures and challenges glo

151、bally.As shown in Figure 25,when asked about the challenges facing their businesses in 2023,13%of respondents stated they have not faced any supply chain challenges over triple the share of respondents answering similarly in 2022.Moreover,14%of respondents listed shipment delays as a challenge in 20

152、23,down from 34%in 2022.Difficulty forecasting and planning for customer demand remained the second-most common challenge faced in 2023,cited by 33%of respondents.While this share is smaller compared to 2022 levels,it remains substantial,as businesses operate with uncertain global economic forecasts

153、,influenced by monetary policy decisions and global geopolitical turmoil.68%14%6%6%2%1%1%1%73%12%4%5%2%1%1%1%$10bn2022 Survey2023 Survey13%13%19%27%15%29%12%38%11%16%24%25%17%35%15%30%ChinaIndiaOtherAPACWesternEuropeEasternEuropeAfricaandMiddleEastLatinAmericaNorthAmerica2022 Survey2023 Survey Citi

154、GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 20 Figure 25.What Challenges Has Your Organization Faced in 2023?Source:Citi Treasury&Trade Solutions In 2023,a higher percentage of suppliers noted they were struggling with prohibitive financing costs and/or were having difficu

155、lty accessing financing.This was mentioned by 27%of suppliers,up from 21%in 2022.We note that in the time between the two surveys,the U.S.Federal Reserve hiked rates six times bringing the federal funds rate up to 5.25%5.5%from 3%3.25%,as well as bringing the total number of rate hikes to 11 since M

156、arch 2022.When asked how rising rates have influenced capital investment decisions,63%of suppliers said they elected to be more cautious.This is particularly true for suppliers based in Asia,excluding India.Companies headquartered in India answered most frequently with“No Change”and“More Aggressive

157、About Capital Expenditure”responses.One potential reason for this regional nuance is discussed later in our examination of regionalization and“China Plus One”strategies.In the January 2023 Citi GPS report Supply Chain Finance,we highlighted the attractiveness of SCF to suppliers from a cost of credi

158、t perspective.Even so,we asked suppliers if they elected to discount more or less in SCF offerings in 2023 compared to 2022.3%13%13%14%23%24%27%33%55%OtherWe have not faced any supply chainchallengesDifficulty procuring from downstreamsuppliersShipment of goods to customerdestination(e.g.,port delay

159、s)Labor shortageForeign currency risk/Devaluationof local currenciesProhibitive financing costs and/ordifficulty accessing financingDifficulty forecasting and planningfor customer demandIncreased costs of goods sold/rawmaterials,components2022 Survey66%39%21%n.a.34%23%4%2%21%January 2024 Citi GPS:Ci

160、ti GPS:Global Perspectives&Solutions 2024 Citigroup 21 Figure 26.Has Your Company Elected to Discount More or Less in Supply Chain Financing Offerings in 2023 vs.2022?Source:Citi Treasury&Trade Solutions Sixty-seven percent of respondents said they discounted more or the same as in 2022(Figure 26).A

161、mong the 14%who indicated discounting less,the most commonly cited reason was higher interest rates,followed by less working capital pressures due to lower order volumes(Figure 27).As observed earlier in the report,suppliers have seen normalization in lead times and ordering cadences.Companies are n

162、ow better capitalized for production and are experiencing fewer“order booms”that can put immense stress on production and working capital,leading to potential backlogs and delays.Figure 27.Why Are You Discounting Less in Supply Chain Financing Offerings in 2023 vs.2022?Source:Citi Treasury&Trade Sol

163、utions Signs of easing pressures were also evident from suppliers comments on their new sales order volumes.In 2023,48%of suppliers indicated new orders were either somewhat or significantly below expectations,compared to 33%in 2022(Figure 28).23%14%44%19%Discount MoreDiscount LessSameDont Know57%40

164、%14%Higher Interest Rates andFinancing CostsLower Order Volume,SoLess Working CapitalPressureOther Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 22 Figure 28.How Do Customer New Sales Order Volumes Compare to Expectations?Source:Citi Treasury&Trade Solutions The effects

165、 of regionalization and nearshoring/onshoring of supply chains are evident when we break down the data by region.As shown in Figure 29,suppliers headquartered in China reported new sales order volumes falling below expectations most often.This comes at a time when the appeal of China as a manufactur

166、ing destination has weakened amid strained Chinese relations with the West,higher interest rates,and lessons from COVID-related supply chain disruptions.Conversely,Latin American suppliers reported the strongest new sales order volumes versus sales expectations,demonstrating the regions increasing p

167、resence in the global trade arena.Figure 29.Customer New Sales Order Volumes vs.Expectations by Region Source:Citi Treasury&Trade Solutions Regionalizing supply chains is a well-documented business practice and a growing priority for many companies in recent years.Over one-third of respondents said

168、their organization has focused on nearshoring and onshoring,with a greater percentage of larger suppliers opting for regionalization.For these suppliers,we asked a series of questions to better understand the perceived benefits and challenges associated with this practice.6%4%16%12%45%36%22%32%11%16

169、%2022 Survey2023 SurveySignificantly BelowExpectationsSomewhat BelowExpectationsAt ExpectationsSomewhat AboveExpectationsSignificantly AboveExpectationsSignificantly Below ExpectationsSomewhat Below ExpectationsAt ExpectationsSomewhat Above ExpectationsSignificantly Above ExpectationsChina13%43%37%6

170、%1%India15%28%40%11%6%Other APAC16%38%30%11%6%Western Europe13%26%45%13%4%Eastern Europe11%35%41%10%3%Africa/Middle East24%31%29%11%4%Latin America10%21%39%23%7%North America16%31%35%16%3%Headquarters LocationJanuary 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 23 Notably,40%o

171、f suppliers perceived regionalization as leading to increased resilience(Figure 30),with 55%of North American suppliers sharing that view.However,a significant portion of suppliers noted there was either“No Change”or“Decreased Resilience”with regionalization.Chinese suppliers were most likely to res

172、pond with“Decreased Resilience”(44%),demonstrating the divergence in views across regions.Figure 30.How Do You Perceive the Impact of Regionalization on Supply Chain Risk and Resilience?Source:Citi Treasury&Trade Solutions When asked how regionalization will impact transportation and logistics costs

173、,respondents gave mixed answers(Figure 31).However,larger suppliers were more likely to say regionalization has led to a reduction in costs,potentially showing their scale,influence on vendor relations,and ability to leverage existing infrastructure and processes.Latin American and North American su

174、ppliers were most likely to say regionalization has increased transportation costs.This highlights the regional differences between areas with established low-cost production-to-shipment infrastructure and areas that historically have imported many goods and services.Increased Resilience40%Decreased

175、 Resilience 26%No Change34%Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 24 Figure 31.How Have Regionalized Supply Chains Impacted Your Logistics and Transportation Costs?Source:Citi Treasury&Trade Solutions An overall increase in costs was the top challenge associated

176、with regionalization,followed by difficulties in forming new supplier relationships and obtaining workforce skills(Figure 32).Figure 32.What Are the Biggest Challenges You Have Faced With Onshoring and Nearshoring?Source:Citi Treasury&Trade Solutions Specifically regarding regionalization,many organ

177、izations are implementing a“China Plus One”strategy to diversify production and supply chain activities across more locations.Figure 33 highlights the countries to which suppliers have either already moved production or considered doing so.India was the most frequently mentioned country.Interestingl

178、y,when Indian-headquartered suppliers were asked about their biggest challenges faced with onshoring,they reported the highest levels of difficulty in finding a workforce with an appropriate skillset.This could potentially foreshadow a tougher-than-expected transition away from China and into India

179、for certain companies,depending on the industry and expertise required for production.More Expensive33%Less Expensive39%No Change28%60%46%29%21%4%Increased costs(e.g.,people,materials,transportation)Forming NewSupplierRelationshipsWorkforceSkillsetCreating NewProduction SitesOtherJanuary 2024 Citi G

180、PS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 25 Figure 33.Countries Selected or Under Consideration as Alternative Locations to China Source:Citi Treasury&Trade Solutions As in 2022,suppliers were asked to rank a number of supply chain-related decisions and themes on a scale from one(mos

181、t important)to six(least important).As shown in Figure 34,just-in-case versus just-in-time inventory was the highest priority among respondents in 2023,whereas resilience was the top priority in 2022.AI and data-driven decision-making proved to be the lowest priority.Figure 34.How Would You Rank the

182、 Following Supply Chain Decisions in Terms of Your Organizations Priorities?Source:Citi Treasury&Trade Solutions South AfricaIndonesiaTanzaniaKenyaSpainAfrican countriesGermanyRomaniaAustraliaPortugalPhilippinesUgandaDRCMalawiTaiwanPanamaIndiaPakistanMexicoUAECambodiaEuropeUruguayMalaysiaHondurasFra

183、ncePeruBulgariaRwandaDubaiItalyNorth AmericaVietnamTurkeyU.S.ColombiaSoutheast AsiaZambiaBrazilThailandCzechiaMyanmarWestern EuropeSouth Korea3%12%7%20%29%3%15%11%28%29%6%14%46%10%16%6%48%13%15%12%11%8%17%13%9%70%3%5%14%5%AI and Data-Driven Decision MakingSupply Chain ResilienceDigitization Instead

184、of Paper-Based TradingNearshoring/Reshoring of DownstreamManufacuturingJust-in-Case vs.Just-in-Time1=Most Important23456=Least Important Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 26 Looking further into technology deployment,only 5%of respondents reported having ado

185、pted some sort of generative AI tool,with 9%saying it was under consideration(Figure 35).2023 proved to be a breakthrough year for generative AI,both in terms of applications and social awareness.We believe this technology will be a key metric to monitor in the coming years as business use cases and

186、 adoption rates continue to grow.Figure 35.Has Your Organization Adopted Any Generative AI Tools?Figure 36.Tools Implemented or Under Consideration Source:Citi Treasury&Trade Solutions Source:Citi Treasury&Trade Solutions 5%9%57%27%YesUnderConsiderationNo Plan to AdoptGenerative AIToolsDont KnowJanu

187、ary 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 27 2023 Large Corporate Survey Diversification and Digitalization Are Priorities In 2022,Citi partnered with East&Partners,a global B2B financial markets research firm,to conduct primary voice-of-the-corporate research on the ch

188、allenges,resiliency,and futures of large companies supply chains.The insights were compelling,providing a view into the challenges corporates faced related to their supply chains.In 2023,Citi continued its partnership with East&Partners,surveying over 700 respondents in December from the worlds larg

189、est and most complex organizations.Some questions were retained from the previous survey to allow for comparison,and new questions were added that were relevant to the current supply chain landscape.More than a quarter of survey respondents in 2022 shared that the war in Ukraine and the U.S.-China r

190、elationship were top of mind.Hence,geopolitical tensions ranked as one of the largest risks to supply chain funding stability.At the same time,having just seen the U.S.Federal Reserve deliver its fourth consecutive jumbo 75-basis-point rate increase,45%of respondents were concerned about economic he

191、adwinds:18%feared the collapse of major suppliers in their supply chain network,17%saw an economic recession as a threat,and 11%identified rising inflation and interest rates as their main concern.One year later,the effects of prolonged elevated rates continue to permeate different areas of operatio

192、ns,particularly interest expense,as preexisting debt continues to mature and corporates have to borrow at higher costs.Debt-linked interest expense has at least doubled or tripled for 50%of global respondents,while interest costs have more than doubled for 60%of respondents across EMEA and the Ameri

193、cas.Asia Pacific stands out as an exception:Only 35%of respondents saw interest costs more than double,as the low-rate environment insulated the region from dramatic debt finance cost increases.Figure 37.How Much Has Your Total Debt-Linked Interest Expense Changed in the Last 6-12 Months?Note:Charts

194、 are for illustrative purposes only,and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Increased by over 200%19%Increased by over 100%31%Increased by over 50%32%Increased by up to 50%11%No change:We have debt tenures longer than 36 months7%Pauline Kontos Global Head

195、 of Working Capital Advisory Citi Services Ian Kervick-Jimenez Trade Working Capital Advisory Citi Services Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 28 When asked about how their total cost of debt was being managed,some corporates responded they were renegotiating

196、 terms with their major lenders(35%)and/or investigating off-balance sheet financing(34%).Larger corporates sometimes seek to pursue one or both of these measures.However,smaller corporates which ordinarily have weaker credit profiles often do not have the same options available to them.Respondents

197、to this years SME supplier survey appeared less optimistic than in the previous year regarding their outlook on sales order volume,with 48%confirming that sales order volume fell slightly below expectations compared to 33%in 2022.Responses from the large corporate survey offer an interesting juxtapo

198、sition,as 56%indicated that they anticipate an increase in export volumes in the next six months,compared to 51%in the year before(Figure 38).Overall,based on survey results,large corporates may be better positioned to weather changes in the economic cycle.Moreover,their optimistic outlook also come

199、s at a time when many believe rates have peaked in the U.S.and in Europe.These findings underpin the importance of buyer-led financing programs and their role in supporting suppliers,especially those with limited access to capital.Figure 38.What Percentage Change in Volume Do You Anticipate in the N

200、ext Six Months For:Note:Charts are for illustrative purposes only,and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Diversification In 2023,we asked large corporate respondents if they were considering adopting a“China Plus One”strategy as a way to diversify their

201、supply chains:56%of global respondents indicated they already had or were considering adopting such a strategy;North America led the other regions with 63%.Outside of China,Vietnam was the preferred secondary destination,except in Latin America,where respondents were more likely than those in other

202、regions to express a preference for bringing production back to their home market.51%9%22%37%13%24%56%7%22%39%13%25%0%10%20%30%40%50%60%Exports:IncreaseExports:DecreaseExports:No ChangeImports:IncreaseImports:DecreaseImports:No Change%of Total 2023%of Total 2022January 2024 Citi GPS:Citi GPS:Global

203、Perspectives&Solutions 2024 Citigroup 29 Figure 39.Has Your Organization Implemented a“China Plus One Strategy(Diversifying Production and Supply Chain Activities Outside China)?Figure 40.If You Answered Yes or Considering,to Which Country?Note:Charts are for illustrative purposes only,and subject t

204、o change.Source:East&Partners Large Corporate Survey 2023,Citi Services Note:Charts are for illustrative purposes only,and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Many corporates appear to be exploring diversification options to increase resiliency while sati

205、sfying new demands.When asked whether they were increasing or decreasing their number of supply chain partners,respondents were more likely to indicate they were decreasing the number of partners(39%)than increasing them(34%).Among those who indicated an increase in supply chain partners,rationales

206、for the action were evenly divided between increasing resilience and expanding product range.For those decreasing their number of supply chain partners,margin compression and funding fragility was the favored reason,followed by general risk mitigation.Yes29%No Current SC Activity in China/Not Applic

207、able36%Considering27%No8%Vietnam44%Other SE Asia25%Back to Home Market11%Thailand20%Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 30 Figure 41.Specifically,Why Are You Planning to Increase/Decrease the Number of Supply Chain Partners in Your Network?Note:Responses sum t

208、o over 100%due to multiple responses being enabled.Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Digitalization This pattern of supply chain diversification comes at a time when global trade participants are increasingl

209、y embracing new technological and digital capabilities.Historically,trade has been a paper-based,labor-intensive process,making the industry an excellent candidate for innovation.As shown in Figure 42,48%of large corporate respondents said that they will increase their spending allocation for newer

210、technologies such as generative AI(with an average intended increase in spend of 26%).The potential rewards derived from generative AI are perceived to be significant:58%of respondents expect better customer interactions,while 57%anticipate improved customer demand forecasting(Figure 43).Interesting

211、ly,in a question where respondents could select multiple answers,only 13%of the total responses indicated an expectation that generative AI would facilitate reductions in headcount.January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 31 Figure 42.Will You Be Increasing Your Sp

212、end Allocation for Newer Technologies,Such as Generative AI?Note:Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Figure 43.What Benefits Are You Hoping to Realize with the Adoption of Generative AI?Note:Responses sum to o

213、ver 100%due to multiple responses being enabled.Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services In 2022,respondents were asked if they were using new digital technologies,such as blockchain,distributed ledger technology(D

214、LT)or marketplaces,for trade:73%indicated they were not.This share dropped to 47%in 2023(Figure 44).Specifically,53%used DLT and blockchain,up from 19%in 2022.Reflecting the paper-based,labor-intensive nature of legacy supply chain financing solutions,smart contracts were selected by the largest sha

215、re of respondents(29%)as the function yielding the greatest bottom-line benefit to large corporates(Figure 45).Smart contracts represent an exciting use of DLT and blockchain within trade.By defining programable business rules,users can codify,inspect,and execute financing 24/7 while simultaneously

216、reducing human error and fraud.Furthermore,internet of things(IoT)capabilities,such as the ability for devices to transmit and receive data,can amplify these benefits by providing information about measurable elements,such as temperature and geolocation,that could determine whether the terms of a co

217、ntract are satisfied.Looking to the future,respondents identified smart contracts as their main investment priority in the coming six to 12 months(62%),as shown in Figure 46.Another important focus for investment was foreign exchange(FX)risk management(31%).FX risk is ever-present in global trade,an

218、d effective management remains a chief area of importance for multinationals,especially as many are considering how they might reconfigure their global supply chains.58%40%57%47%45%45%13%5%0%20%40%60%80%Much better/More targetedcustomerinteraction/OfferingprocessesFaster/Morereponsiveinventorymanage

219、mentImprovedprediction/ForecastingcustomerdemandSignificantimprovementsin our workingcapitalefficienciesRemovingpockets oftrappedliquidityIdentificationof processbottlenecks/InefficienciesLabor/HeadcountresourcingreductionsOther Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citig

220、roup 32 Figure 44.Are You Using New Digital Technologies for Trade,Such as Blockchain,DLT,or Marketplaces?Note:Responses sum to over 100%due to multiple responses being enabled.Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Servi

221、ces Figure 45.What Real-Time Supply Chain Funding Functions Have Had the Greatest Defined Benefit to Your Bottom Line?Note:Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services 73%19%2%4%13%202247%53%10%15%37%2023No,not current

222、ly using these technologiesDLT/BlockchainStablecoinsAIMarketplacesFX Risk Management9%IoT Monitoring/Metrics5%Smart Contracts29%Instant Supplier Communication Network6%Big Data Analysis10%Full Redevelopment of Our Order Platform13%Still Pending/Work in Progress28%January 2024 Citi GPS:Citi GPS:Globa

223、l Perspectives&Solutions 2024 Citigroup 33 Figure 46.What Real-Time Supply Chain Funding/Visibility Functionality Are You Planning to Invest In Over the Next 6-12 Months?Note:Responses sum to over 100%due to multiple responses being enabled.Charts are for illustrative purposes only and subject to ch

224、ange.Source:East&Partners Large Corporate Survey 2023,Citi Services ESG The 2023 UN Climate Change Conference(COP28)closed in Dubai with nations agreeing to an unprecedented transition away from fossil fuels.The agreement,known as the UAE Consensus,calls on countries to contribute to transition effo

225、rts.For large corporates,meeting and progressing on environmental,social,and governance(ESG)goals and standards is a key focus.Eighty-eight percent of respondents globally provided a response when asked about their most pressing climate or sustainability agenda item,with only 12%indicating that they

226、 had no specific or few expectations about the topic(16%of respondents in Asia Pacific gave this answer;perhaps surprisingly given the EUs focus on addressing sustainability,so did 13%of EMEA respondents).Respondents were focused on the need for a globally agreed-upon measurement and standards regim

227、e(24%)and the need for a stronger voice of business to be heard on ESG issues(24%).62%31%20%18%15%13%11%0%20%40%60%80%SmartContractsFX RiskManagementFullRedevelopmentof Our OrderPlatformBig DataAnalysisIoT Monitoring/MetricsNothingSpecificallyPlannedInstant SupplierCommunicationNetwork Citi GPS:Citi

228、 GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 34 Figure 47.With Regards to the UN COP28 Conference in the UAE in November 2023,What Is the Most Pressing Climate/Sustainability Agenda Item Relevant to Your Organization?Note:Charts are for illustrative purposes only and subject to cha

229、nge.Source:East&Partners Large Corporate Survey 2023,Citi Services Integrating ESG measures across supply chains can be challenging for large corporates.In 2022,just 3%of respondents reported they had not encountered issues with this and had fully implemented their ESG measures;in 2023,that percenta

230、ge improved marginally to 5%(Figure 48).The potential main issue preventing greater integration of ESG measures across supply chains in both years is the lack of consistency in ESG definitions(21%).Similarly,an important issue for corporates when incorporating green financing into their funding plan

231、s is the absence of agreed and clear definitions of green finance(35%),as shown in Figure 49.Meanwhile,38%of respondents said they encountered limited availability of suitable debt funding products.In line with these findings,37%of respondents had no sustainability-linked loan(SLL)or similar borrowi

232、ngs planned(Figure 50).Embedding ESG incentives,particularly within supply chain funding structures,remains an important way for corporates to progress their ESG mandates.Export and Agency Finance can be a driver to help corporates finance their transition strategies,enabling both public and private

233、 financing for a defined use of proceeds,which can be green,social,or sustainability-focused.Green-linked supply chain financing was selected by 22%of respondents as a sustainability-linked solution they plan to utilize in the next six to 12 months second only to term secured loans(24%).Large global

234、 relationship banks provide multinational corporates with trade services and potential solutions to meet the organizations needs.January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 35 Figure 48.What Is the Main Issue Preventing Greater Integration of ESG Measures Across Your

235、Supply Chain?Note:Charts are for illustrative purposes only and subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Figure 49.What Issues Have You Faced Incorporating Green Financing in All Its Developing Forms Into Your Corporate Funding Plans?Note:Responses sum to over

236、 100%due to multiple responses being enabled.Charts are for illustrative purposes only and are subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services 12%13%17%14%16%21%5%3%0%10%20%30%40%50%60%70%80%90%100%202215%12%14%13%16%21%4%5%0%10%20%30%40%50%60%70%80%90%100%2023Lack o

237、f internal buy-in/cooperationToo complicated/Unsure where to startImpact cost of compliance on production goodsNot seeing significant customer demand for it yetSuppliers resistant to changeOverly complicated regulatory settingsLack of workable/consistent definitionsNo issues encountered,fully implem

238、ented ESG measures38%35%22%18%18%20%3%37%0%20%40%Availability ofsuitable debtfundingproductsLack ofdefinitionsaround whatgreenfinancingactually isLack ofinternal buy-in/cooperationGreen-relatedpremiums notattractiveenoughLow interestamongst ourexistinglendersOverlycomplicatedregulatory/accountingtre

239、atmentsettingsOtherNo view/Noexperience Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 36 Figure 50.What Sustainability-Linked Loans(SLL)or Financing Are You Planning in the Next 6-12 Months?Note:Responses sum to over 100%due to multiple responses being enabled.Charts ar

240、e for illustrative purposes only and are subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Inventory Management Strategy A resilient financial supply chain is essential to ensure a resilient physical supply chain.Corporates can find value by examining their cash conver

241、sion cycle(CCC)and its components:days sales outstanding(DSO),days inventory outstanding(DIO),and days payable outstanding(DPO).Supply chain disruptions in 2022 had a profound impact on inventory management strategies.Corporates moved from a“just-in-time”to a“just-in-case”inventory strategy by holdi

242、ng additional buffer stock to continue meeting customer demand.In the 2023 survey,31%of respondents indicated plans to rationalize(i.e.,improve the efficiency of)their inventory holdings in the next six to 12 months to relieve cashflow constraints and release trapped liquidity;32%plan on investigati

243、ng DLT and blockchain solutions(Figure 51).DIO metrics have deteriorated for survey respondents,with the percentage of those reporting 40%-60%of working capital tied up in DIO increasing from 23%to 29%(Figure 52).DPO metrics were mixed as corporates,whether successful or not,attempt to manage terms

244、along industry standards.As shown in Figure 53,the percentage of those with 20%-40%of their working capital tied up in DPO decreased by 10 percentage points from 2022,while the number of respondents saying 40%-60%of their working capital is tied up in DPO was five percentage points lower.Those sayin

245、g more than 60%is tied up similarly increased by four percentage points.17%24%8%22%2%37%0%20%40%Issuing greenbond(s)Term securedloan(s)Additionalworking capitalfacilitiesGreen-linkedsupply chainfinancingOtherNo SSL/similarborrowingsplannedJanuary 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions

246、2024 Citigroup 37 Figure 51.What Measures Are You Planning to Undertake to Relieve Cashflow Constraints/Release Trapped Liquidity in the Next 6-12 Months?Note:Responses sum to over 100%due to multiple responses being enabled.Charts are for illustrative purposes only and are subject to change.Source:

247、East&Partners Large Corporate Survey 2023,Citi Services Figure 52.What Percentage of Your Working Capital Is Tied Up in Days Inventory Outstanding(DIO)?Figure 53.What Percentage of Your Working Capital Is Tied Up in Days Payable Outstanding(DPO)?Note:Responses sum to over 100%due to multiple respons

248、es being enabled.Charts are for illustrative purposes only and are subject to change.Note:Responses sum to over 100%due to multiple responses being enabled.Charts are for illustrative purposes only and are subject to change.Source:East&Partners Large Corporate Survey 2023,Citi Services Source:East&P

249、artners Large Corporate Survey 2023,Citi Services 32%16%21%30%31%13%11%0%20%40%InvestigateDLT/BlockchainsolutionsInvest in fasterpaymentprocessingtimesOffer advance/Early paymentdiscounts tosuppliersRationalize oursupply chainnetwork andpartnersRationalizeour inventoryholdingsRationalize ourproduct

250、rangesUnsure/Nospecific plansas yet23%50%23%3%18%47%29%5%DIO1-20%20-40%40-60%60%+2022202312%48%37%4%12%38%42%8%DPO1-20%20-40%40-60%60%+20232022 Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 38 Boosting Supply Chain Resiliency For companies of all sizes,and particularly

251、small and medium-sized enterprises(SMEs),working capital is a key component of holistic treasury management,especially at a time when many corporates are facing elevated borrowing costs.Periodically,and through different periods in the economic cycle,corporates can unlock value by revisiting these s

252、trategies and adopting solutions that are supportive of both their current business and future goals.Working Capital Optimization The intent behind any working capital optimization strategy is the same for both large or small companies to adopt an efficient working capital operating strategy,which i

253、s in line with industry standards,building in resiliency to withstand disruption,and maintain ample liquidity for operations and investment in strategic initiatives for growth.However,SMEs face additional challenges compared to their larger peers.High interest rates have a greater impact on SMEs,whi

254、ch often have more limited access to capital and face higher borrowing costs than larger firms,underscoring the importance of stable access to liquidity for these businesses.As noted by Citis economists earlier in this report,economic growth could slow in 2024 as higher interest rates impact the glo

255、bal economy.Improving the efficiency of inventory holdings will therefore continue to be an area of focus:Certain industries can benefit from maintaining lean inventory holdings;for others,maintaining buffer stock outweighs the opportunity cost of having insufficient inventory to meet customer deman

256、d.There are many well-known tools available to treasurers to formulate a working capital strategy and improve the resiliency of their supply chains.However,corporates large and small are considering working capital solutions in order to maximizing liquidity.Supporting Supply Chain Resiliency Corpora

257、tes with a global presence have been extremely active in managing payment terms as a way to maximize working capital for some time.While organizations are focused on maximizing working capital efficiency,they also appreciate the fragility of their global supply chains and recognize the importance of

258、 maintaining their suppliers resiliency throughout the economic cycle and especially during times of high borrowing costs.Buyers can support suppliers by implementing a supply chain finance(SCF)program.SCF has been available for over 20 years and is the preferred tool of global corporates for suppor

259、ting working capital initiatives while simultaneously embedding resiliency within their supply chains by providing suppliers with a channel to access reliable funding at an efficient rate.Public-sector partners can amplify these programs to reach the most vulnerable suppliers.In the SME supplier sur

260、vey,increased cost of goods sold and raw materials was the number-one challenge faced by respondents.Dynamic discounting is one way that buyers can counteract these margin pressures by enabling suppliers to receive early payment from their customers at a favorable rate,with the buyer realizing the d

261、iscount as a cost reduction.Pauline Kontos Global Head of Trade and Working Capital Advisory Citi Services Parvaiz Hamid Husen Dalal Global Head of Payables Finance Citi Services January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 39 Corporates recognize the detrimental effec

262、ts a supplier collapse would have on their overall supply chains.Product offerings such as purchase order(PO)finance and deep-tier finance focus on extending financing deeper down the supply chain,ensuring capital reaches those companies that need it most.PO finance is growing in popularity to suppo

263、rt the needs of SME suppliers by providing financing at the purchase order stage.It offers pre-shipment financing to support suppliers upfront working capital needs and their ability to fulfill larger buyers orders.PO finance is helpful in this environment,as suppliers are tasked with holding higher

264、 levels of inventory.Deep-tier finance can support the needs of tier 2 and tier 3 suppliers to ensure that they are able to access financing at an efficient rate.Aligning ESG and Trade Finance Objectives Making meaningful progress on sustainability issues remains both a challenge and opportunity for

265、 global corporates large and small.As corporates consider their overall working capital strategy,it is important to recognize that trade finance solutions can play a key role.Corporates can partner with a large global relationship bank,such as Citi,to tailor a potential solution that meets their spe

266、cific goals.Trade services such as supply chain finance and trade and working capital loans are flexible and well suited for sustainability-related adaptations.Third-party providers can help corporates define the criteria that matters most to them and devise a framework to enable them and their supp

267、liers to gauge their position and progress on these measures.For example,when a European industrial and consumer conglomerate wanted to accelerate its sustainability journey in Asia,it realized that it needed to join forces with its suppliers,which can also impact relevant sustainability metrics of

268、the producer.The solution was a sustainable supply chain finance program aimed to increase and incentivize sustainability practices across the ecosystem.Under this system,the buyer worked with Citi to build out a second program for suppliers that could meet its sustainability metrics to apply for an

269、d potentially qualify for financing at a preferential rate.The buyer partnered with a sustainability rating provider to provide independent assessments,which are reviewed accordingly.Facilitating New Trade Opportunities As corporates reexamine their global supply chain footprint and devise new offer

270、ings,SMEs have an opportunity to insert themselves into new and existing global trade corridors.Selecting the right working capital strategy can be accretive to corporates cross-border ambitions.For corporates operating across borders,trade finance solutions are an important component of a companys

271、holistic financing and risk mitigation structure.Sovereign governments have long helped manufacturers export goods to the rest of the world.Increasingly,they also play a role in helping their home countries secure access to critical components and materials.Export credit agencies(ECAs)are an importa

272、nt partner to global corporations;many are now embracing new applications for their offerings.As global trade patterns are revaluated,companies are trading with new suppliers and new customers.To help mitigate cross-border risk and counterparty risk,letters of credit(LCs),one of trade financings old

273、est tools,are an important solution for corporates of any size to facilitate trading activities.Through features such as extended payment terms and LC discounting,these traditional trade financing products can also enhance the efficiency of working capital management.Citi GPS:Citi GPS:Global Perspec

274、tives&Solutions January 2024 2024 Citigroup 40 ECA Financing Supports Groundbreaking Manufacturing Facility To help meet the fast-growing demand for electric vehicles(EVs)in North America,Solus,a major producer of copper foil used in EV batteries,sought to build a copper foil manufacturing facility

275、in Canada,the first of its kind in North America.To bring Solus ambition to fruition,it wanted to employ an export credit agency(ECA)financing structure.The transaction was supported by a consortium of financial services firms and was unique in that it involved a partnership between Korea Trade Insu

276、rance Corporation(K-SURE)and Export Development Canada(EDC),a first for the two ECAs.In Canada,copper foil is a key component in EV battery production and the plant provides a stable supply of an essential component with growing demand.The transaction also resulted in substantial foreign direct inve

277、stment in Canada and will support the creation of high-skill and high-wage jobs.Supporting Sales and Customer Resiliency While Managing DSO Companies are looking for ways to satisfy their customers requests for longer payment terms while simultaneously limiting the impact to days sales outstanding(D

278、SO).Treasurers place a premium on liquidity given the uncertain economic outlook and are keen to collect on sales faster.Enhancing liquidity can not only help organizations weather volatility,but it also allows them to exploit opportunities as they emerge.Accounts receivable(AR)finance solutions are

279、 already utilized by corporates of all sizes around the world as a way to supplement liquidity while managing DSO.Increasingly,savvy treasurers are using structured solutions,such as portfolio accounts receivable finance,which can be tailored to a corporates specific needs and offers an efficient me

280、chanism for infusing sales channels with liquidity.Trade credit insurance has existed for some time and has been an effective tool to mitigate risk on a single customer and portfolio basis.Governments in many countries,including India and Bahrain,have adapted their trade credit insurance policies to

281、 enable their local corporates to seize opportunities.6 By securing insurance coverage and digitalizing the receivables monetization process,global corporates and their banks have been able to reshape AR finance into a modern offering that provides efficient funding.Where jurisdictions permit,corpor

282、ates are enhancing their AR finance programs through the inclusion of tax receivables,such as the ones offered by countries research and development(R&D)incentives.7 The windfall from the monetized tax receivables can give organizations,especially smaller ones,an important source of liquidity,especi

283、ally when looking for ways to finance R&D and strategic investments.6 IRDAI Issues Revised Trade Credit Insurance Guidelines,The Times of India,September 10,2021;Export Bahrain Signs MoU with ICIEC to Broaden Export Credit Insurance Solutions,Bahrain News Agency,June 5,2022.7 Citigroup is not acting

284、 in an any advisory role in relation to Legal,Tax,or Accounting issues relating to this structure or otherwise.All companies should obtain their own Legal,Tax,or Accounting advice in relation to your evaluation.January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 41 For corpor

285、ates operating in jurisdictions with restrictive capital controls,rather than committing their own capital to a region,trade and working capital eLoans offer a valuable alternative that can help organizations avoid cash pooling in jurisdictions with strict currency controls.By using a lenders capita

286、l for working capital as opposed to their own,corporates can avoid having to inject liquidity into countries where they cannot easily repatriate funds.AR Solution Leverages R&D Inventive to Provide Cost Efficient Liquidity For many corporates,research and development(R&D)accounts for a significant p

287、ortion of their capital expenditure.For governments,incentivizing R&D can be a significant contributor to economic activity,yielding quality jobs within their country,among other benefits.While several countries offer some form of R&D tax incentive,few are as generous as France.For one major global

288、original equipment manufacturer(OEM),Frances R&D tax incentive programs yield a refund in excess of 100 million annually.To prevent these medium-term receivables from pooling on its balance sheet,the OEM chose to partner with a financial services intermediary and discount these receivables in the ma

289、rket.Since the obligor is the French government,Citi was able to structure an accounts receivable financing arrangement that provides the OEM with a cost-efficient diversified source of liquidity.The transition enables the clients to tap an efficient source of liquidity that it can then reinvest bac

290、k into its business.Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 42 Empowering Growth:How to Unlock Supply Chain Finance for Emerging Market SMEs International Finance Corporation(IFC),a member of the World Bank Group,supports the private sector in developing countries

291、 with the goal of promoting sustainable economic development by encouraging private investment and entrepreneurship.8 It launched a Global Trade Finance Program to facilitate bank trade financing in 2004,and a Global Trade Supplier Finance Program to provide short-term,post-shipment capital to emerg

292、ing market suppliers in 2010.Despite the availability of these programs,suppliers in emerging markets continue to face a number of challenges in accessing cost-effective finance as well as a number of perceived high risks.In addition,there is often insufficient company financial performance data,whi

293、ch makes risk assessment and compliance difficult for financial institutions.A third challenge is the high cost of supplier onboarding by banks.Buyers encounter similar problems in accessing stable liquidity because of limited credit information and concerns about macro risk and country ratings.The

294、confluence of these factors creates an environment where banks and other financial institutions are unwilling or unable to provide finance.Due to high interest rates,finance options are limited for many small and medium-sized enterprises(SMEs)in emerging markets.As a result,these companies may not b

295、e able to obtain the financing needed for new business opportunities(such as the reconfiguration of trade corridors now underway),and increased growth to spread prosperity.Leveraging IFCs Capacity to Mitigate Risk Supply chain finance(SCF)is based on a simple principle:By using the(stronger)credit r

296、ating of the buyer,suppliers have the option to access liquidity based on agreed-upon pricing.This model works well in developed markets,but it is still uncommon in developing markets.As a result,while the potential market for SCF is estimated to be worth around$17 trillion globally,most of this is

297、untapped.9 Many emerging market banks barely engage in SCF.For example,a recent joint 2023 ICF-World Trade Organization report found that SCF currently supplied by local banks in Cambodia and Vietnam accounts for just 2%available trade finance.10 IFC estimates that globally,as much as 80%of eligible

298、 SCF assets could be financed by banks.11 But for this to happen,especially in emerging markets,a risk mitigation mechanism is required.IFC is well-placed to provide that mechanism.Over the past year,it has been working on overcoming some of the hurdles associated with channeling finance to SMEs in

299、emerging markets.8 International Finance Corporation,“Who We Are,”Accessed January 11,2024.9 International Finance Corporation,“Supply Chain Knowledge Guide,”December 22,2019.10 International Finance Corporation and World Trade Organization,“Trade Finance in Mekong Region,”December 13,2023.11 Intern

300、ational Finance Corporation,“Supply Chain Knowledge Guide,”December 22,2019.Nathalie Louat Global Director,Trade and Supply Chain Finance International Finance Corporation Makiko Toyoda Global Head,Global Trade Finance Program(GTFP)and Global Supply Chain Finance Program(GSCF)International Finance C

301、orporation Parvaiz Hamid Husen Dalal Global Head of Payables Finance Citi Services January 2024 Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 43“As so much economic activity in emerging markets is linked to global supply chains,extending our risk mitigation support to facilitate sup

302、ply chain finance was a natural next step for IFC,”says Nathalie Louat,Global Director of Trade and Supply Chain Finance at IFC.To this end,IFC has now established a Global Supply Chain Finance Program(GSCF)for suppliers and buyers in emerging markets.As well as having a broad focus on SMEs in emerg

303、ing markets,the GSCF specifically seeks to support women-owned businesses,which typically find it harder to access finance.In addition,the program will support suppliers committed to improving their sustainability credentials(which count towards buying companies Scope 3 targets in the case of carbon

304、 emissions)by offering preferential access to financing.Suppliers seeking to qualify must have their sustainability commitments independently verified on a regular basis.IFC is leveraging the power of the private sector and amplifying the impact of its financial commitment to developing countries.Ho

305、wever,there are thousands of suppliers and buyers around the world.IFC therefore needs partners to bring the GSCF to life,enabling buyers to build relationships with reliable suppliers and aiding suppliers to source dependable financing.Citi supports IFC in its objectives to incentivize sustainable

306、supply chain financing and the diversification of economic activity.The GSCF leverages Citis supply chain finance leadership and global network to support business origination from Citi clients supply chains.“Our strategic partnership with IFC will facilitate last mile financing to the smallest supp

307、liers in the most difficult markets,”says Parvaiz Hamid Husen Dalal,Global Head of Payables Finance at Citi.“It will enable Citi clients to grow their supply chains in emerging markets all over the world by leveraging IFCs emerging market expertise and ability to mitigate the risks associated with t

308、hese suppliers.”A Transformative Impact on Businesses and Communities IFC has now launched a$300 million GSCF pilot with Citi(initially in Mexico)to test the concept;this is expected to be expanded to other countries in Latin America and also in Asia shortly.“The program will cover both investment g

309、rade buyers and non-investment grade buyers,”says Makiko Toyoda,Global Head of the Global Trade Finance Program and the Global Supply Chain Finance Program at IFC.“In addition to working with large providers of supply chain finance such as Citi,we would also like to introduce the product to smaller

310、banks that currently have no supply chain offering or knowledge of the product,”adds Toyoda.“To enable this to happen,we are working with regulators worldwide to help develop rules that would facilitate supply chain finance.”Ultimately,IFC believes this program could be as sizeable as its traditiona

311、l trade finance programs,which reached$10 billion in the past year.In todays environment of high interest rates,low credit availability,and economic uncertainty,the support offered by GSCF could be monumental in the immediate term,says Louat.“But in the longer term,by enabling these small suppliers

312、to play a more significant role in the global economy and enhancing their resilience,it could have a transformative effect on businesses and communities in developing countries around the world.The GSCF can aid job creation and poverty reduction,and boost efforts to improve sustainability and reduce

313、 the worst impacts of climate change.”Citi GPS:Citi GPS:Global Perspectives&Solutions January 2024 2024 Citigroup 44 How to Expand Credit Capacity and Boost Global Trade As the world emerges from the unprecedented disruption of the pandemic,geopolitical tensions are rising.The broader macroeconomic

314、landscape has also become more complex.Many of the certainties associated with the international order of the post-World War II era,such as open markets and free trade,have been challenged.A backlash against globalization combined with U.S.-China trade tensions has resulted in a more fragmented econ

315、omic system.While fragmentation is an ongoing process,there has already been a substantial reallocation of trade flows between the U.S.and China,with the U.S.becoming less reliant on imports from China following the imposition of bilateral tariffs in 2018.At the same time,the share of Chinese import

316、s sourced from the U.S.has fallen.It is important to note,however,that trade patterns are dynamic:The EU has increased its reliance on China over the same period,as measured by import share.12 Nevertheless,the long-term costs of these trends could be significant.The International Monetary Fund(IMF)c

317、alculates that new trade barriers introduced annually nearly tripled since 2019 to almost 3,000 in 2022.13 It estimates that international trade restrictions could reduce global GDP by as much as 7%in the long run,or about$7.4 trillion in current dollars.14 In response to this increasingly complex a

318、nd challenging environment,companies of all sizes are seeking tools to facilitate trade and mitigate risk.Around 80%to 90%of global trade volumes of$25.3 trillion in 2022 mitigated risk in some way,either through the use of letters of credit(LCs),factoring,credit default swaps(CDSs),or trade credit

319、insurance.15 Many of these tools have long existed LCs were first used in the 18th century,and factoring began in England as far back as the 13th century.However,some are not applicable in all circumstances.For instance,LCs are only available for short tenors,while CDSs cover only a limited range of

320、 buyers.Tools and markets that have broader applicability have therefore flourished.Most notably,trade credit insurance volumes are soaring and the market is rapidly innovating;the factoring market is also evolving in response to global demand.Ultimately,these developments are likely to benefit the

321、broader trade industry and global economy.12 Justin R.Pierce and David Yu,“Assessing the Extent of Trade Fragmentation,”Board of Governors of the Federal Reserve System,FEDS Note,November 2,2023.13 IMF,“The High Cost of Global Economic Fragmentation,”The IMF Blog,August 28,2023.14 Ibid.15 Antoine Gi

322、llioz and Arnaud Vanolli,Credit and Surety in the Age of Economic Uncertainty,Swiss Re Institute,September 2023;World Trade Organization,Global Trade Outlook and Statistics,April 5,2023.Sanjeev Ganjoo Global Head Trade Receivable Finance and Commercial Bank Trade Products Citi Services January 2024

323、Citi GPS:Citi GPS:Global Perspectives&Solutions 2024 Citigroup 45 Trade Credit Insurance Is Rising to the Challenge In the years before the pandemic,the use of trade credit insurance was primarily focused on single names that were perceived to pose a particular risk.During the pandemic itself,trade

324、credit insurance dwindled as widespread government intervention and support largely replaced credit insurances risk mitigation role in trade.Since the pandemic ended,trade credit insurance has once again come to the forefront but in a different form.Rather than a focus on risk defeasance for single

325、names,there is now widespread adoption of portfolio-based solutions.The reasons for this are many and varied.First,the disruption to trade patterns caused by the pandemic and geopolitical tensions have prompted a reconfiguration of trade routes and roles as many corporates reconsider regional and gl

326、obal opportunities.Faced with political and other risks they have potentially never encountered before including the growing risk of counterparty insolvency in many countries as rates have risen corporates have sought more widespread risk mitigation.They are now considering monetizing their entire p

327、ortfolio by using trade credit insurance.The changing treasury environment may also be encouraging CFOs and treasurers to seek off-balance sheet solutions to mitigate risk and potentially improve their financial metrics.Second,insurance companies have considered offsetting their high fixed costs by

328、ramping up business in the wake of the pandemic.Many insurance companies have significant amounts of capital that they are eager to deploy.They are therefore considering insurance coverage across a wider range of industries than in the past(e.g.,including retail and airlines,which were previously of

329、f limits).They have also extended their horizons when it comes to tenors.In the past,insurance generally only covered shorter tenor receivables,but long tenor receivables are now becoming more common.Third,most banks have sought to maintain wallet share as their clients have expanded regionally and

330、globally.However,banks credit capacity is generally regulated and therefore limited.Consequently,they have turned to the trade credit insurance market,which as described above now covers a wider range of industries and tenors.Consequently,certain banks have deployed structures such as synthetic secu

331、ritization that use portfolio-based approaches.For banks,these structures may significantly lower risk.Typically,an insurance wrap will offer indemnity coverage of 90%-95%across a mixed portfolio of investment-grade and non-investment grade names,resulting in more attractive blended pricing for clie

332、nts.Ordinarily,the seller has a small percentage as a so-called deductible(representing the first loss on the portfolio).As the market has evolved,banks have also become increasingly innovative.In 2022,Citi became the first bank to launch a long-tenor insurance policy facilitating longer-term busine

333、ss contracts,which may extend to four or five years.Citi has also developed multi-seller insurance policies so that rather than a policy being created for each individual seller which is not viable for small sellers an umbrella portfolio groups together multiple small-ticket sellers.16 16 These products are subject to Citis internal requirements and available to qualified institutional clients.Cit