What We're Reading:
July 5, 2021
Era ends, war looms as US forces quit main base in Afghanistan. American troops pulled out of their main military base in Afghanistan on Friday, leaving behind a piece of the World Trade Center they buried 20 years ago in a country that the top U.S. commander has warned may descend into civil war without them. (Reuters)
Why Nigeria is still experiencing forex scarcity despite high oil prices. Although oil prices have ticked upwards in the last four months, Nigeria still has a crunching forex crisis. Oil accounts for 90% of Nigeria’s foreign earnings, so why has the country’s currency crisis worsened? (Nairametrics)
Britain could face food shortages due to lorry driver crisis. Britain could face gaps on supermarket shelves this summer because of a shortage of more than 100,000 heavy goods vehicle (HGV) drivers, caused by a combination of fallout from the COVID-19 pandemic and Brexit, industry leaders have warned. (EurActiv)
France elections: Far-right National Rally fails in key regional battles. France has held its second round of regional elections, with Marine Le Pen's far-right National Rally (RN) again failing to take power anywhere. (BBC)
COVID outbreak at China's Yantian port threatens global trade. A recent coronavirus outbreak at the Chinese port of Yantian is set to cause a bigger disruption than the Suez Canal blockage in March. The subsequent shortages could spike already rising inflation. (DW)
Lebanon hikes fuel prices to shore up forex reserves. Lebanon hiked fuel prices by more than 30 percent Tuesday as it reduced subsidies that have eaten away at the central bank's foreign currency reserves amid a painful economic crisis. (France24)
Supply chain finance set for new disclosure rules. Companies that use supply chain finance (SCF) products will be required to disclose them in financial statements under new standards being prepared by a global accounting standards body. (Global Trade Review)
Beat deadline drama by tackling the LIBOR transition today. The end date for LIBOR is just months away. For those treasurers who haven’t acted already, now is the time to identify LIBOR exposures, have a contingency plan for accidental oversights, and understand the different challenges presented by the new market risk-free rates. (TMI)
World Economic Forum’s Chief Economists Outlook. The June edition of the Chief Economists Outlook comes out amid improving aggregate recovery momentum, yet in a profoundly uncertain environment with widely diverging trajectories. (World Economic Forum)
Vaccine rollout could improve the economic outlook in the South Pacific, While an outside power-struggle lingers. Pacific Island Countries (PICs) are on the road to economic recovery as vaccine programs begin, potentially reviving tourism and trade in the region. However, the region’s economy remains the subject of external influence. (Global Risk Insights)
Beware the chilling effects of hot desking. A hot desk system is a practical solution, but it can alienate some employees. (Quartz)
Brazil beef exports to U.S. rise amid China-Australia trade spat. Strained trade relations between China and Australia have prompted Chinese importers to buy more U.S. beef, making room for Brazil to increase exports to the United States, trade data show. (US News & World Report)
Getting the Perfect Automation Fit
for Your Credit Department’s Scoring Model
Annacaroline Caruso, editorial associate
Creating a strong risk assessment model is like trying to find the perfect pair of jeans. It is not always easy since there are so many different options and there is no one-size-fits-all approach. But once you find the model (or pair of jeans) that works best, it becomes clear just how essential it is for success.
So, credit managers should always be on the lookout for ways to improve risk assessment models because they help make weighty credit decisions. One way to do that is through automation.
Automation is a key player when it comes to keeping defaults as low as possible, said Peter Wahnschaffe, credit risk manager with BASF (Ludwigshafen, Germany), during an automation workshop sponsored by FCIB.
Currently, BASF has a fully automated scorecard for smaller customers (credit limits up to roughly $1 million), and a partially automated process for larger customers. But, Wahnschaffe said they are working to increase automation and improve the accuracy and efficiency of the models. “This is always a work in progress, working on the next generation of our assessment models,” he explained.
Automated scoring models will look different for every company, depending on the size and industry of its customers. The most successful models are created by credit managers who have a clear objective. “These are tailormade models,” Wahnschaffe said. “You need to set up a model that really reflects your setup and portfolio in order to reach good results.”
Automation can help companies transition from the traditional risk assessment to more forward-thinking analytics, said Wibke Kuhnert, corporate director of finance with Henkel (Düsseldorf, Germany). “Our predictive scoring model is superior to models based on historical data by giving more realistic scores.”
Unlike BASF, Henkel uses its internal scoring model for larger customers. “The goal is to predict the probability of default,” explained Ivana Blaskova, global process manager finance OTC at Henkel.
The model is fed more than 200 factors, some of the most important being payment delays, credit limit values and invoiced amounts. “These components are the most meaningful and can continue to change as the model continues training each quarter,” Blaskova said.
The scorecard takes those factors and spits out a number reflecting probability of default, which then allows the credit manager to place the customer into one of Henkel’s five risk categories. “The reflection of the risk has significantly improved compared to our deterministic model,” she said.
Automating risk assessment not only increases accuracy, but also frees up time for more value-added tasks, said Jarno Saario, CICP, director of credit at UPM (Helsinki, Finland). Automated credit limit setting is done for the smaller and more low-risk customers at UPM. “This allows our team more time to focus on assessing the larger customers and more high-risk customers,” he said.
Their automated scorecard uses external data from multiple platforms and puts 100% of weight on financial statements, which has been successful in helping manage more than 13,000 customers, Saario said. “We have 8 FTE’s [full time employees] per roughly EUR 8.6 billion in revenue. That’s something we couldn’t really do without this rather high level of automation.”
A lot of trust is put into these models to help predict risk as accurately as possible. KPIs are crucial to ensuring the scorecards are effective and doing its job. Saario recommended measuring credit limit total vs balance, overdues and credit losses to track the efficacy of your model.
Credit Congress Spotlight Session: Take Your Game
to the Next Level—Using Emotional Intelligence to Advance Your Career
Speaker: Jake Hillemeyer, Dolese Bros. Co.
Duration: 60 minutes
Credit Congress Spotlight Session:
When and If to Help a Distressed Customer
Moderator: Chris Ring, Panelists: D'Ann Johnson, CCE, A-Core Concrete Cutting, Inc. and Eve Sahnow, CCE, OrePac Building Products
Duration: 60 minutes
Get Yourself Ready for 2024 - Goal Setting & Future Planning
Speaker: Hailey Zureich, zHailey Coaching
Duration: 60 minutes
Global Expert Briefings: Trade Credit Risks
Speaker: Jay Tenney, Trade Risk Group
Duration: 30 minutes
Iran’s Threat is Internal
Chris Kuehl, Ph.D., NACM economist
The election of Ebrahim Raisi may well have set into motion the ultimate demise of the regime. That is the assessment of the intelligence community as they examine the situation.
The elections were deeply flawed and manipulated with the regime forcing the withdrawal of any candidate that was not supported by the supreme leader, Ayatollah Khameini. This even meant that mild moderates like the former leader, Hassan Rouhani, were banned.
The result was an extremely low voter turnout. The lowest turnout was in urban areas and among the young. It has been estimated that no more than 10% of those under the age of 30 voted. The population of Iran is heavily skewed to the young with more than 60% of it under the age of 30.
The majority of the Iranian population is angry and disaffected, and does not support the current government. To the degree that anyone can get an accurate read on what the issues are for this population, they are mostly economic and social.
The young are unemployed or underemployed. They are demanding jobs and economic security, and are frustrated by social norms that punish modes of dress and behavior. The younger population has lost all confidence in the system.
One of two things are expected to happen. Either this frustration explodes into some kind of violence or the regime finds a way to mollify the young population; that would revolve around trying to get the economy in shape. The latter will demand better relations with the U.S. and Europe.
50 Top Execs on
the Connected Economy's Great Leap Forward
“Never let a crisis go to waste.”
It’s an expression we’ve all heard a lot over the course of the last year. Most commonly attributed to Winston Churchill, reportedly referring to the formation of the United Nations out of the ashes of World War II, it’s a reminder in bad times that big problems often beget opportunities to do things differently — and better — next time around.
And while it's not fair to say the pandemic created the Connected Economy, which has been under construction for the better part of the last decade, it is fair to say that the global crisis created an opportunity to dramatically accelerate its development.
Merchants and business owners worldwide suddenly had a very good reason to raise the level of their digital game about a half-decade ahead of schedule, and the developing Connected Economy has been the beneficiary. The global rush to better optimize the consumer journey across digital and physical channels has put the Connected Economy into overdrive as it has infiltrated every element of consumers' lives.
That was the consensus of the dozens of C-Suite execs, corporate leaders, innovators, and entrepreneurs PYMNTS talked to for its latest "Creating The Connected Economy" eBook — a ground-level look at the accelerated construction of the connected economy during a global crisis from the perspective of those who were there and lived it in real time.
There is no going backward, they all agreed — consumer preferences have simply evolved too far, and a connected, smooth, multichannel journey isn’t just what consumers want — it’s what they expect.
The pandemic will fade, but consumers’ desire for a series of digital doorways that make it easy to complete their tasks will not, as the appeal of seamlessly moving between channels to get their business done is fully entrenched.
How we shop, how we pay, how we interact and want to transact with each other has changed fundamentally — and for the better — experts agreed, as consumers have a range of choices they’ve never had before, and businesses have an ability to customize and curate users' experiences and offerings that they never have before. And the exciting part of the story is yet to come. Because the Connected Economy has advanced dramatically in a year. As technology advances and connections become more myriad — the combinations and offers the connected economy will be able to create will evolve and expand in ways that are hard to predict, but easy to get excited about.
And the exciting part of the story is yet to come. Because the Connected Economy has advanced dramatically in a year. As technology advances and connections become more myriad — the combinations and offers the connected economy will be able to create will evolve and expand in ways that are hard to predict, but easy to get excited about.
Reprinted with permission from PYMNTS.com.
Week in Review Editorial Team:
Diana Mota, Editor in Chief and David Anderson, Member Relations