A&RF ’21: Prudent risk management, ESG, standardisation and digitisation are crucial   

BCR’s 7th Alternative Receivables Finance Forum (A&RF) which took place last Thursday in London, brought together a large number of participants eager to share the most important developments and challenges that alternative receivables finance industry is facing today.

Here there are some sound bites from the event:   

Gabriella Kindert: “We have not priced the value of the resources properly”.

Giovanni Saladino on SCF: “We are under big scrutiny of regulators”.

Betul Kurtulus: “Greensill was not a supplier finance solution, only unsecured finance”

Andrej Dikouchine on regulation: “To handle client money is challenging, so I can see an increase of regulation here”.

Sabih Ali: “Alternative data sets, holders of data, will create a change for SMEs”.

Lawrence Wood: “The banks do a lot of innovation, but when it is about unfunded solutions, innovation is not there”.

Harold Brako (Addleshaw Goddard): “Now is a perfect storm for fraudsters. During the pandemic a lot of frauds went undetected, and the figures are eye watering. We are just scratching the top of the iceberg now”.

John Davis (Kompli-Global): “Data is the key, but publicly available data is not complete - Companies House is just a registry. You still have to be on your feet to verify all the data”. “Fraud is a problem of all of us. If you can’t see the full picture of your client, you are at great risk”.

Simon Mills (Five Paper): “In receivables finance we are dealing with three main risks: debtor credit risk, performance and dilution risk, and seller risk – where actually the fraud takes place. Fresh air invoicing, carousel invoicing, Ponzi schemes are all still prevailing types of fraud.

Nasrin Nourizadeh (FCIA) on credit insurance: “Market is vibrant, very strong pipeline now. We did not see a change in credit insurance demand and Greensill has not affected us in a negative way”.

Gary Lowe (Standard Chartered Bank): “We think there is several hundred billion of business out there, so what is needed from credit insurers is more cover. “You need people to understand the value chain end-to-end. “I am for standardised documents which brings more credibility to the market”.

Chris Hall (Willis Towers Watson): “The insurance companies are allowed to ask as many questions as they want. In the case of Greensill, I wonder if the right questions were asked”. “I would like to see the government support extended”. “Standardisation helps reducing friction in doing business”.

Frederique Bourgeois (Coface): “If you rely on credit insurance only for payment of the claim it is not the right approach. You need to see credit insurance as a database which is helping you – this is how you should look at it”.

Martin Ofermann (Allianz Global Investors): “For an investor, it is not clear what is the dominant instrument to use. Different products have different risks. We want to be able to trade with everybody and with every instrument. Diversification and selectivity are the key”. “We try to obtain our ESG data from other sources and follow the demands of our investor base”. “We are looking for yield but need time to dive into due diligence”.

Martin Ofermann (Allianz Global Investors) on transparency: “Basic information that any investor wants to know is not possible to share”.

Alistair Sewell (Fitch Ratings) on risk: “One of the key risks in trade finance is liquidity risk”.

Alistair Sewell (Fitch Ratings) on ESG: “When I think of ESG, this is very exciting. Mutual funds have to do a lot for ESG especially in Europe. ESG is of major significance to all fund providers. Regulation and reputational risk are very important for mutual funds”.

Alistair Sewell (Fitch Ratings) on information sharing: “I don’t know if it is possible or not, but transparency is needed to catalyse the growth of the industry”.

Marc Bajer (Petra Trade Finance) on what could be done to increase investor’s appetite: “Keep working hard in educating investors. This is a new asset class for them”.

Shiona Davies (SME Finance Monitor) on SMEs: “The latest survey done by SME Finance Monitor shows that Q2 of 2020 was a real shock to SMEs, 6 in 10 expected a significant reduction in income, 47% saw the economic climate as a major barrier. We saw as well that the bigger the business the greater the mood about their business is. One in five SMEs using external finance are worried about their ability to repay. However, the sentiment is generally improving, and we have more SMEs using finance than before”.

Shiona Davies (SME Finance Monitor) on the future of SME finance: “Lots of things changed with the injection of funds last year, but it is going to be tricky time. We are not sure how the things will turn out”.

Thomas DeLuca (SME Finance Forum) on government support measures: “The government reacted quite quickly than ten years before. However, in some markets their reaction was not so fast. In some markets, electronic KYC, e-signatures do not exist and there is still luck of digitalisation.

Thomas DeLuca (SME Finance Forum) on key challenges of delivering digital solutions to SMEs: “Financial education of SMEs is a particularly powerful investment. Investments in financial education pay very well”.

Pushkar Mukewar (Drip Capital) about the prospects for SME finance – “First trend is going more digital. Second – more partnerships between banks and fintechs, and third – lots more action in the field of e-commerce”.

Gabriella Kindert (Mizuho Bank) on SME finance: “We need to see a massive revolution in the way we finance, how we reduce the costs for SMEs. We need to standardise and centralise data to be able to offer finance for SMEs”.

Amid Mallick (Accenture) on open banking: “I think we see a lot of innovation in many areas. I do not need to ask my bank to provide everything, I can go to a new provider”.

Simon Cureton (Finding Options): “Open banking helps avoid fraud and improve credit risk”.

Monica Coca (Funding Xchange): “New products coming into the market gives the lender more information in real time”.

Andy Dodd (Hitachi Capital Invoice Finance) on SMEs’ future: “I see a lot of initiatives helping SMEs finding their way. The future of SME finance is digital, greener, fairer and uncertain, without doubt”.

In closing the event, Michael Bickers (BCR Publishing) said: “The UK Macmillan report identified a major funding gap for SMEs, nearly 100 years ago, so this problem has needed a solution for a long time. However, I do think that current initiatives do have the strongest chance of significantly narrowing that gap”.