De-risking the Supply Chain — and Doing the Right Thing

By Freddy Boom, Greensill Regional Head, Americas

The Covid-19 pandemic has been tremendously challenging for businesses of all sizes, but it’s a particularly difficult path forward for smaller suppliers, who may not have quick, affordable or fair access to cash that will allow them to bridge the gap and emerge from the other side of this global health crisis.

At Greensill, we specialize in working capital finance structures that allow businesses to get paid earlier. For small- and medium-size enterprises, this makes a big difference, allowing suppliers to meet payroll or make investments. For an SME it is far more important to have cash now, versus getting paid for your goods and services in a couple of months.

These crucial working capital solutions were detailed in an excellent piece this month in the Harvard Business Review entitled “A Financial Crisis is Looming for Smaller Suppliers”. In it, authors Frederico Caniato, Antonella Moretto and James B. Rice, Jr., noted while the ongoing Covid-19 pandemic has put numerous major corporations out of business, it has also created a “less visible crisis deep within supply chains,” affecting small and medium-size enterprises that are the lifeblood of the global economy.

“… innovative supply-chain-finance solutions, including a new generation of digital solutions, can play a key role in providing sources of credit for SMEs,” the HBR piece states. “These solutions must be applied as soon as possible. If SMEs fail en masse, the ripple effects will hit larger economies and could further compromise a global financial system already stressed by the pandemic.”

At Greensill, we help companies of all sizes, from the largest corporates, to small suppliers. In today’s world one cannot exist without the other.

Consider a major auto manufacturer. Yes, they have numerous very large suppliers. But if you look closely at their sprawling supply chain, you can see that the size of suppliers drops rather sharply the further down the chain you go.

The supplier who provides car seats might be a major corporation, but they rely on a very small supplier that makes the foam inside those seats. If that SME goes out of business, the car manufacturer will have major problems.

It’s very easy to stick by your clients when the sun is shining, but it’s extremely important to also stand with them when the clouds gather.

It’s the right thing to do.