When it comes to rising interest rates, it’s a question of when, not if.
The UK has just announced its lowest inflation in four years while interest rates remain at an all time low. Junk bond spreads are also at record lows, and the delay in implementation of the Volker rule until 2017 means that banks are happy to snap up lower quality re-packaged debt securities (hmm, sounds familiar?). The big western governments don’t seem interested in raising interest rates for now for fear of slowing down a fragile economy.
But, large corporations are still holding on to their cash tightly, so what happens when interest rates inevitably rise? The government printing machines will eventually need to slow, and the cost of cash will rise. Smaller firms will have a hard time raising money, and raising it at reasonable rates – many today also have a difficult time because of direct bank lending standards that have created a market of “haves” and “have nots.”
No doubt, even looking ahead, large firms will want to continue to enjoy low input costs, and since cash is an input cost, something will need to give. But are you prepared for it?
This is a question we’re currently running as a snap poll in conjunction with ISM. It’s a super short survey and will take five to 10 minutes maximum. It’s a perceptual study, so you can just take it without any data gathering. It simply asks which supply chain financial issues are most critical and how prepared you are for them.
The study is aimed at helping bridging procurement, supply chain, and finance from taking a cash-centric view about how liquidity drives supply. Our focus is on understanding perceptions on recent inflationary trends and the increasing cost of finance capital, among other areas.
The results of the analysis will help you understand how your organization can better:
- turn supply-side working capital into cash without hurting suppliers
- lower cost of capital to smaller suppliers and partners
- monitor supplier financial risk and risk/compliance, satisfying increasing government and tax regulations
- get better value from all financial services partners
- use the P2P process to help secure trade credit, serve as savings and profit generator, and build internal supplier intelligence
Study participants will receive the quantitative study results, but will also receive additional research currently being performed on what some leading companies are doing in these areas. For an extra little incentive, participants will also have a chance to win a $100 Amazon gift card, and with only a few dozen responses so far, your chances are good!
All data is strictly confidential and will only be presented in aggregate form. The study survey can be found here. We will be closing the study on April 25, with study results available in late May. If you have any additional questions, please contact Paul Lee at ISM or Pierre Mitchell at Spend Matters.
So here is the link: Procurement's Role in the Financial Supply Chain.