In this roundtable discussion, industry leaders share their insights on managing and improving working capital strategies in a dynamic financial climate. They highlight the importance of financiers understanding companies’ operational considerations and deploying strategically relevant funding solutions, as well as the need for greater transparency, including when working with fintech partners.


Roundtable participants:

  • Chris Hawes, managing director, debt and capital advisory, PwC
  • Divyesh Modi, managing director, trade and working capital, Barclays
  • Mike Rowe, group treasurer, Haleon
  • Shannon Manders, editorial director, GTR (moderator)


GTR: What have been some of the notable shifts in the industry’s, or your company’s, approach to working capital management over the past year, given the fluctuations in the financial landscape?

Hawes: There are several key points to address from a PwC perspective. Firstly, our clients are increasingly seeking operational guidance, requiring help and advice with optimising their working capital. Secondly, we have noticed a growing interest among large companies in exploring additional sources of liquidity beyond their existing banking facilities, with receivables finance on a non-recourse basis emerging as a prominent option. Thirdly, the reverberating impacts of past events like the Suez Canal blockage and the Covid-19 pandemic continue to manifest, leading to an inventory overhang for certain clients, especially in sectors with seasonal or fashion-related dynamics. This situation has resulted in diminished inventory values and increased operational complexities for several clients. Lastly, as outlined in our recent ‘Working Capital Study’, while larger companies have experienced improvements in net working capital, small and medium-sized companies have observed a deterioration of these conditions.

Rowe: Haleon is a large company; we’re fairly new and highly leveraged. As such, we are very much focused on efficient cash generation and management.

The focus on operational improvements that Chris mentions resonates with us. In a low interest rate environment, there may have been a tendency for some companies to utilise financing sporadically to manage specific aspects of the balance sheet. Our agenda has certainly been to prioritise the operational side in the first instance.

The idea of developing working capital solutions and diverse funding sources has also been a driving force for us. While we have established committed bank facilities and other funding channels, we recognise the importance of building out varied funding options in a coordinated manner. We view these programmes not just as working capital solutions but as alternative funding levers at a strategic level.

Modi: There is a notable disparity between large corporations and small to medium-sized enterprises in the current landscape. This contrast is particularly evident in the rising adoption of financial products such as receivables discounting, invoice discounting and asset-based lending (ABL). Traditionally, the first two were more popular with smaller firms or highly leveraged firms, but we’re increasingly engaging in discussions with larger corporations with low leverage. This shift is a direct response to the mounting pressure on working capital, prompting treasurers to explore all available avenues for optimising their financial resources. We’re observing a significant transformation in that regard.

Interestingly, in terms of inventory, if we examine some of the UK’s statistics over the past 12 months, overall inventory levels across UK plc have actually experienced a decrease. This trend runs counter to expectations – considering the prevailing disruptions – that inventory levels should rise. This observation highlights a dichotomy where larger corporations are maintaining significantly higher inventory levels, while smaller companies appear to be grappling with declining growth rates and related challenges. I think this shift is evident in the inclination of larger companies towards expanding their inventory, seeking additional working capital finance, and even exploring more warehouse space. This pattern appears to be a trend across various sectors.

Regarding the operational aspect, a recent survey by the European Association of Corporate Treasurers found that extending payment terms is a key focus for treasurers. No surprises there, but there are, of course, limitations to this approach. This prompts discussions about supply chain finance, as companies must support the extension of payment terms for their supply chains with the necessary tools. We’ve certainly seen an increase in discussions about supply chain finance compared to this time last year.

Rowe: With regard to supply chains, many large corporations are focusing on cost savings and margin management, often opting to work with smaller suppliers rather than bigger counterparts while still maintaining quality standards.

Something I’m very conscious of is how supply chain financing can provide an avenue for large corporations to support smaller businesses and foster corporate social responsibility. This approach enables businesses to not only manage their operations but also their partnerships and contributes to the growth and sustainability of small and midsize companies. That corporate citizenship is really important; it’s not just about the cash.

On the inventory front, the buildup in stocks for larger corporations may stem from operational challenges related to complex supply chains.

Some of this can also be attributed to corporates aiming to enhance their demand planning and implement strategic measures to bolster network resilience.

However, I believe that with inventory financing, there are numerous steps that companies can take to streamline their internal operations and processes in the first instance, leading to a significant reduction before resorting to financing.


GTR: Has Haleon experienced any noticeable shifts in its supply chains, such as nearshoring or reshoring?

Rowe: Our primary focus is on building supply chain resilience. We’re a bit unique in that our manufacturing sites are regionally structured, providing support within specific regions rather than being overly centralised. Anecdotally, companies that previously adopted highly centralised supply chains are reconsidering their approach, although this transition is not without its challenges. Boards are actively exploring this, especially in light of the impacts of the pandemic.

I believe corporates can build their resilience not only by making these structural changes but also by fostering strong partnerships with their suppliers.

As I was saying before, this is where financing – specifically supply chain finance – can play a role. Our focus has been more on providing this as a tool for small to midsize suppliers, offering an alternative source of liquidity while simultaneously maintaining their engagement with us.


GTR: We’ve discussed significant trends and changes; how do you anticipate these developments shaping the trajectory of working capital strategies over the next year, especially leading up to refinancings in 2024/25?

Hawes: It’s hard to overlook the prevailing interest rate environment. We’ve seen the Fed and the Bank of England hold their rates, and analogies involving Table Mountain are often used to depict the interest rate plateau, which, although not currently exceedingly high, remains so compared to the past 15 years.

Certainly, there’s still a lot of nervousness across the market about the level of interest rates right now.

While the forward curves suggest eventual rate decreases, the timing remains uncertain. This overarching interest rate scenario is prompting companies to focus on optimising their balance sheets, as we’ve already discussed, encompassing solutions such as accounts receivable, accounts payable and inventory management.

Moreover, clearly, debt and leverage now incur higher costs than in previous periods. The escalating cost of leverage is exerting a considerable impact on the permissible leverage levels within businesses, purely from a mathematical perspective. This increased cost of financing is a key driver behind the behaviours we discussed earlier, including the search for alternative liquidity sources and the pursuit of working capital optimisation.

Additionally, environmental factors, along with the supply chain resilience that Mike emphasised, will play a crucial role in shaping working capital strategies. Elsewhere, the intersection of geopolitics with supply chain resilience adds another layer of complexity to the overall dynamic.

Rowe: You need to be smart. The key strategic point around this is that there’s no one-size-fits-all solution. With the current interest rate environment in mind, implementing a factoring programme, for example, will demand an approach that ensures swift access to cash without any delays in the process. The situation prompts careful deliberation on the potential tactical or strategic use of the programme within the organisation.

Without being too flippant, these considerations likely should have been at the forefront of all our thinking a long time ago. They serve as a reminder of the fundamental financial principles we all learned decades ago. Nonetheless, it’s a situation that is forcing us and our banking partners to be smarter, which is a good thing.

Modi: That’s an excellent way to put it – the current circumstances are indeed pushing us to be more smart. When you consider a couple of additional factors, it becomes even more apparent. The higher interest rate environment is expected to continue. There’s also a significant amount of geopolitical uncertainty, with ongoing issues in Ukraine and the recent developments in the Middle East. Additionally, the UK is likely to experience low or even zero growth in the foreseeable future. All these factors indicate a challenging credit environment for many companies.

Ensuring balance sheet strength and management is going to be critical for corporates to be able to access the necessary financing for day-to-day operations, as well as then think about potential business expansion. Consequently, solutions that aid in optimising the assets on the balance sheet, like receivables finance and ABL, are likely to garner increased attention and discussion.

With the challenging interest rate environment, there’s probably going to be more onus on larger corporates to support their smaller suppliers, as Mike has outlined. Supply chain finance programmes will continue to be of paramount importance.

Finally, the focus on operational efficiency-related projects is poised to gain traction among treasurers and is likely to feature prominently in conversations between banks and treasurers.

Hawes: It’s clear that certain operational considerations, perhaps previously sidelined in the low interest rate environment, are now gaining attention. In terms of the work that we’ve been doing with companies recently, this includes things like working capital operating model design, cash culture implementation and training, and even things like commercial negotiation in terms optimisation and the selection and integration of financial technologies.

Clients are also increasingly seeking assistance in short-term cash sprints, and we’re being asked to support clients in terms of surge capacity.

Another noteworthy aspect that has come to my attention is the apparent scarcity of working capital professionals in the field. It seems that this area hasn’t received the level of emphasis it required in the past, leading to a shortage of experienced individuals proficient in working capital management.


GTR: Is there a potential talent or skills gap in the working capital space?

Modi: I think the emergence of a skills gap in the context of analytics within the working capital space is a challenge.

The low interest rate environment for many years led to a lack of focus on areas like data analytics and insights into working capital. It’s now important for organisations to invest in training and building the necessary capabilities to address this gap and adapt to the changing financial landscape.

Rowe: The way I see it, the challenge lies not only in skills but also in the knowledge and understanding of customers’ operational complexities. Relevance is crucial, and service providers should aim to align their solutions strategically with the specific needs and setups of the companies they serve. Simplifying solutions and clearly outlining the implementation challenges can build trust and foster a deeper understanding of the practical aspects of integrating these solutions within organisations. In my mind, this approach can lead to more effective and meaningful partnerships.

One thing we haven’t talked about today is the external lens, especially in the context of the current higher interest rate environment, where there’s going to be greater scrutiny of balance sheets and the ways in which companies are managing debt and debt capacity.

Striking a balance between working capital management and external stakeholder management, particularly with regard to potential disclosures and investor communication, is crucial. It is essential to consider the external narrative and the message conveyed to investors when implementing these kinds of strategies.

For financiers and advisors, there’s a definite need to enhance the understanding of organisational operations and strategy, along with a stronger focus on the external lens.


GTR: Drawing from your practical experiences, what working capital solutions have proven to be most successful? Are there any shortcomings or gaps in the available solutions?

Hawes: At PwC, we are seeing an increase in activity within the ABL space, which, for us, in terms of debt advisory, includes the senior secured aspects of receivables and inventory, as well as non-recourse receivables purchase programmes. Over the last two years, we have been incredibly busy on all aspects of that, with clients seeking our assistance due to the growing complexity of the market.

Mike raises a good point in that while some of this is fairly simple, the complexity in terms of choice has certainly increased. This complexity not only concerns structural considerations but also the actual operational aspects of the business.

Just to pick up on Mike’s other point, in addition to the critical focus on the balance sheet, effective stakeholder management – including external stakeholders – holds equal significance. This is a complex environment in both large private and public companies and requires careful navigation to ensure the appropriate messages are conveyed. We have seen a surge in enquiries in this space, and our contribution lies in our ability to unravel this complexity, going the extra mile to address the intricacies associated with stakeholder dynamics.

Rowe: I believe that prioritisation of these solutions should be based on what is most relevant to each individual organisation. Strategic alignment and the intended utilisation of these solutions will drive the focus areas.

Considering our strategic objectives, focusing on the receivables and supply chain side appears to be the more relevant solution for us.

Modi: If we consider the solutions that are currently driving the most conversations for Barclays, two prominent areas stand out. Firstly, ABL, which encompasses inventory, receivables and other assets – including plants and machinery in some cases – and aims to utilise assets on the balance sheet strength in order to free up working capital. Secondly, supply chain finance, which, as I have said, has seen a surge in enquiries and discussions in the last year.

These are the two broad areas where I think solutions will gain popularity in the coming years.


GTR: With the increasing involvement of fintech companies in working capital solutions and their partnerships with traditional banks, how do you see them impacting this space in the future?

Modi: We firmly believe that fintechs have a promising future, and we are committed to continuing to foster a symbiotic relationship with them. What we find is that they are very innovative and agile in bringing solutions to the market. What we have done on our part is to create an infrastructure within Barclays which allows us to now start plugging into fintechs very efficiently.

We have just upgraded our core trade platform with a new system, which boasts full API integration and cloud-based functionality. Our aim in adopting this approach is to swiftly deliver cutting-edge solutions to our clients as soon as they emerge in the industry. By blending the agility of fintechs with the traditional core strengths of a bank, we strive to provide the most optimal solutions to our clients. This strategy has proven to be highly effective for us.

Supply chain finance is a good example where we’ve made the call not to develop our own core platform but rather partner with other providers. We believe that this fusion of our robust balance sheet and understanding of clients’ needs, together with an established technology platform, offers the best possible solution.

Rowe: What I’ve seen is a clear division among banks. Some invested heavily in several of these platforms, while others, like Barclays, are taking a more strategic approach. Personally, if I were in the banking industry, I would likely follow Barclays’ lead.

Through my interactions with fintechs, I’ve witnessed their remarkable innovation, often ahead of regulatory frameworks in some regions. This puts traditional institutions in a position where they may not be able to match the same level of agility and innovation. The banking industry should actively collaborate with fintechs to not only leverage their technology but also use their influence to advocate for regulatory and accounting changes that align with these innovative solutions.

For us, it’s critical that we carefully evaluate the strategic relevance of each solution. For instance, while a fintech-led supply chain financing solution has aligned well with our partnership-building and banking relationship goals, a global factoring programme didn’t align with our existing infrastructure and engagement requirements.

One concern I have with certain technology and fintech solutions is the frequent involvement of special purpose vehicles (SPVs), which often obscure the flow of funds and introduce ambiguity regarding the true counterparty risk. As a treasurer, this lack of clarity makes me uneasy, especially when solutions are presented as straightforward while the actual flow involves intricate structures and SPVs governed by specific accounting and legislative requirements.

Despite my appreciation for technology and partnerships, I believe there is still room for improvement in terms of transparency surrounding the workings of these systems and the entities involved.

Hawes: Digitisation is undoubtedly a crucial and permanent aspect of our business landscape. As Mike mentioned, the challenge lies in selecting the most appropriate solutions and fintech partners. I echo Divyesh’s point about the collaborative potential between financial institutions with substantial balance sheets and agile fintech companies, which is an important trend that is likely to continue.

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