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Operating in the Consumer and Retail space means that your business is probably constantly evolving to cater to consumers’ changing expectations, behaviors, and preferences. This could involve creating new sales channels or products, investing in new technologies, focusing on sustainability or entering new markets, all while contending with the impacts of supply chain disruption, higher prices and macro-economic pressures. These challenges require a bank that can enable platform-based businesses to thrive. A bank that can provide financial solutions and local advice around the world. Citi Commercial Bank can enable your progress; we understand the common objectives of Consumer & Retail companies and are here to help you achieve your goals.

Operating in the Consumer and Retail space means that your business is probably constantly evolving to cater to consumers&rsquo; changing expectations, behaviors, and preferences.
This could involve creating new sales channels or products, investing in new technologies, focusing on sustainability or entering new markets, all while contending with the impacts of supply chain disruption, higher prices and macro-economic pressures.
These challenges require a bank that can enable platform-based businesses to thrive. A bank that can provide financial solutions and local advice around the world. Citi Commercial Bank can enable your progress; we understand the common objectives of Consumer &amp; Retail companies and are here to help you achieve your goals.
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Helping Lukfook Jewellery grow digitally

Operating in the Consumer and Retail space means that your business is probably constantly evolving to cater to consumers’ changing expectations, behaviors, and preferences.  This could involve creating new sales channels or products, investing in new technologies, focusing on sustainability or entering new markets, all while contending with the impacts of supply chain disruption, higher prices and macro-economic pressures.

Our Solutions for Consumer & Retail Companies

Hear from the CFO of Coats Group plc, a leading UK manufacturer of threads, about how Citi Commercial Bank has helped them expand their business internationally.

Helping Coats plc to Grow Globally

Disruptions prompted by the pandemic and geopolitical tensions have created a shift in buyer/supplier relationships. Companies need to develop relationships with new buyers and suppliers as part of a more sophisticated approach to risk management. Investment in skills and technology is required, as well as a reassessment of how trade is conducted (letters of credit may become more important, for instance) and consideration of supply chain finance and account receivables programs. For mid-sized companies growing internationally, the last few years have been turbulent. Disruption caused by the pandemic and geopolitical tensions have highlighted the vulnerability of trade flows. Companies are also having to contend with higher inflation, rising interest rates, a liquidity squeeze (in some markets), and increasing FX volatility. Against this uncertain backdrop, mid-cap companies are having to retool their businesses. Relationships with buyers and suppliers, including payment terms and methods, are changing. To succeed, companies should consider the following actions.

1. Broaden your buyer base and consider “near-shoring” In the past, many companies have been dependent on one or two large buyers. But the pandemic and geopolitical tensions may have weakened relationships. As part of a recent Citi GPS <a target="_blank" name="_Hlk127953292" data-link-source="tiny"></a><a href="https://ir.citi.com/gps/1Ta_t4vY4ookG2HCGLTPq2akENBxm_5zIfxYrhB1sl8bpWiAVrz582a_c0sF9vxCNbXJ-ZTMvao2qa4c9azLTkUSjvJJ9OPQ" target="_blank" rel="noopener" data-link-source="tiny">Supply Chain Finance report</a>, Citi Research recently surveyed 1,169 companies that participate as suppliers in Citi-managed supply chain finance programs. We will share highlights in this article.
Suppliers need to broaden the range of buyers they work with. Selling to additional buyers, in a wider range of geographies, can lessen risk and improve resilience. For companies in some sectors, it might even be possible to enter the business to consumer (B2C) market by using online marketplaces.
Suppliers also need to be aware of the trend towards &ldquo;near-shoring&rdquo; supply chains to avoid long distance logistical disruption. It is yet to be seen if &ldquo;near-shoring&rdquo; will change production patterns, but it is understandable companies across many sectors are considering this.
<h3 style="margin: 2pt 0in 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">50% of companies surveyed with revenues over $20m had difficulty shipping goods to customers.*</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">&nbsp;</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">45% of companies surveyed with revenues over $20 million had difficulty forecasting and planning for customer demand.*&nbsp;</h3>

In the past, many companies have been dependent on one or two large buyers. But the pandemic and geopolitical tensions may have weakened relationships. As part of a recent Citi GPS <a target="_blank" name="_Hlk127953292" data-link-source="tiny"></a><a href="https://ir.citi.com/gps/1Ta_t4vY4ookG2HCGLTPq2akENBxm_5zIfxYrhB1sl8bpWiAVrz582a_c0sF9vxCNbXJ-ZTMvao2qa4c9azLTkUSjvJJ9OPQ" target="_blank" rel="noopener" data-link-source="tiny">Supply Chain Finance report</a>, Citi Research recently surveyed 1,169 companies that participate as suppliers in Citi-managed supply chain finance programs. We will share highlights in this article.
Suppliers need to broaden the range of buyers they work with. Selling to additional buyers, in a wider range of geographies, can lessen risk and improve resilience. For companies in some sectors, it might even be possible to enter the business to consumer (B2C) market by using online marketplaces.
Suppliers also need to be aware of the trend towards &ldquo;near-shoring&rdquo; supply chains to avoid long distance logistical disruption. It is yet to be seen if &ldquo;near-shoring&rdquo; will change production patterns, but it is understandable companies across many sectors are considering this.
<h3 style="margin: 2pt 0in 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">50% of companies surveyed with revenues over $20m had difficulty shipping goods to customers.*</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">&nbsp;</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">45% of companies surveyed with revenues over $20 million had difficulty forecasting and planning for customer demand.*&nbsp;</h3>

1. Broaden your buyer base and consider “near-shoring”

2. Diversify your supply chain While mid-cap companies are suppliers to larger corporates, many also have complex supply chains of their own. For instance, contract manufacturers depend on suppliers for key components or raw materials. In Citi&rsquo;s supplier survey, more than a fifth of respondents have difficulty procuring from downstream suppliers.
Therefore, diversifying suppliers may reduce the impact of disruption caused by one or two suppliers. It&rsquo;s important to build relationships with suppliers in multiple geographies to mitigate exposure to geopolitical risk and regulatory change. Companies should also assess the potential for insourcing or vertical integration for critical components to reduce risk.

While mid-cap companies are suppliers to larger corporates, many also have complex supply chains of their own. For instance, contract manufacturers depend on suppliers for key components or raw materials. In Citi&rsquo;s supplier survey, more than a fifth of respondents have difficulty procuring from downstream suppliers.
Therefore, diversifying suppliers may reduce the impact of disruption caused by one or two suppliers. It&rsquo;s important to build relationships with suppliers in multiple geographies to mitigate exposure to geopolitical risk and regulatory change. Companies should also assess the potential for insourcing or vertical integration for critical components to reduce risk.

2. Diversify your supply chain

3. Think strategically about payment terms and finance While diversification of suppliers and buyers is critical, it&rsquo;s also important to protect existing business relationships. Mid-cap companies should assess and consider implementing preferential payment terms (such as higher pricing or shorter tenors) for major suppliers or suppliers of critical components. Larger companies may be able to establish supply chain finance (SCF) programs as part of such efforts.
However, not all mid-cap companies will have the credit capacity to establish SCF programs. Instead, where possible, companies could seek to join their buyers&rsquo; SCF programs. Alternatively, companies should investigate receivables financing solutions, such as insurance-backed, portfolio or bilateral programs. Receivables financing solutions aim to improve liquidity and working capital by enabling you to collect funds more quickly and on mutually beneficial terms. Over 40% of respondents to Citi&rsquo;s supplier survey are seeking financing earlier in the commercial cycle, such as at the purchase order stage.
<h3 style="margin: 6pt 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">23%&nbsp;of companies surveyed with annual revenues less than $20m have an issue with prohibitive financing costs / difficulty accessing financing.*</h3>

While diversification of suppliers and buyers is critical, it&rsquo;s also important to protect existing business relationships. Mid-cap companies should assess and consider implementing preferential payment terms (such as higher pricing or shorter tenors) for major suppliers or suppliers of critical components. Larger companies may be able to establish supply chain finance (SCF) programs as part of such efforts.
However, not all mid-cap companies will have the credit capacity to establish SCF programs. Instead, where possible, companies could seek to join their buyers&rsquo; SCF programs. Alternatively, companies should investigate receivables financing solutions, such as insurance-backed, portfolio or bilateral programs. Receivables financing solutions aim to improve liquidity and working capital by enabling you to collect funds more quickly and on mutually beneficial terms. Over 40% of respondents to Citi&rsquo;s supplier survey are seeking financing earlier in the commercial cycle, such as at the purchase order stage.
<h3 style="margin: 6pt 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">23%&nbsp;of companies surveyed with annual revenues less than $20m have an issue with prohibitive financing costs / difficulty accessing financing.*</h3>

3. Think strategically about payment terms and finance

4. Develop a risk management plan and resource it properly Diversifying the range of buyers that companies work with is the first step in managing the risks associated with changing buyer behavior. Mid-cap companies should also identify potential risks and develop a plan to mitigate them so they can respond effectively should disruption occur.
One risk is the potential for the credit profile of a buyer to deteriorate. Suppliers should consider building a credit risk management framework to minimize losses and processes to monitor payment patterns. Banks and factoring companies may help mitigate this credit risk to an extent by purchasing the obligations of the buyer and suppliers. This transfers risk at a low cost while optimizing cash flows.
A risk management approach is likely to require investment in people. While the company owner may have established relationships with buyers a while ago, the imperative to diversify buyers and suppliers and the complexity of today&rsquo;s environment requires risk management specialists.
Similarly, suppliers may benefit by using technology designed to manage risk. Automation and digital payment solutions &ndash; provided by banks, FinTech's or other partners &ndash; may help companies to monitor disruption in near real time and respond more effectively by raising red flags about late payments from buyers or disruption to critical components.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">71%&nbsp;of companies surveyed with annual revenues over $20m have difficulty with increased costs of goods / raw materials.*</h3>

Diversifying the range of buyers that companies work with is the first step in managing the risks associated with changing buyer behavior. Mid-cap companies should also identify potential risks and develop a plan to mitigate them so they can respond effectively should disruption occur.
One risk is the potential for the credit profile of a buyer to deteriorate. Suppliers should consider building a credit risk management framework to minimize losses and processes to monitor payment patterns. Banks and factoring companies may help mitigate this credit risk to an extent by purchasing the obligations of the buyer and suppliers. This transfers risk at a low cost while optimizing cash flows.
A risk management approach is likely to require investment in people. While the company owner may have established relationships with buyers a while ago, the imperative to diversify buyers and suppliers and the complexity of today&rsquo;s environment requires risk management specialists.
Similarly, suppliers may benefit by using technology designed to manage risk. Automation and digital payment solutions &ndash; provided by banks, FinTech's or other partners &ndash; may help companies to monitor disruption in near real time and respond more effectively by raising red flags about late payments from buyers or disruption to critical components.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">71%&nbsp;of companies surveyed with annual revenues over $20m have difficulty with increased costs of goods / raw materials.*</h3>

4. Develop a risk management plan and resource it properly

5. Expand your network: you don’t have to do everything yourself Many mid-cap companies have limited human resources and investment budgets. They should consider working with industry associations, multi-lateral associations, chambers of commerce and government organizations such as export agencies when developing a risk management strategy. Often these entities can provide access to technology that helps to better manage risk. Government organizations such as export agencies may help companies to gain access to a wider range of buyer and supplier relationships.
These organizations have programs that support the development of economies by promoting trade in certain goods and services. They are usually backed by the sovereign and can either fund these projects directly or provide guarantees via other financial institutions. Citi works with many of these agencies to help clients.

Many mid-cap companies have limited human resources and investment budgets. They should consider working with industry associations, multi-lateral associations, chambers of commerce and government organizations such as export agencies when developing a risk management strategy. Often these entities can provide access to technology that helps to better manage risk. Government organizations such as export agencies may help companies to gain access to a wider range of buyer and supplier relationships.
These organizations have programs that support the development of economies by promoting trade in certain goods and services. They are usually backed by the sovereign and can either fund these projects directly or provide guarantees via other financial institutions. Citi works with many of these agencies to help clients.

5. Expand your network: you don’t have to do everything yourself

6. Reconsider how you pay and get paid As companies begin to work with new buyers and suppliers, it is essential they rethink their payment terms and ways to ensure they match their risk appetite. While most trade remains on open account, the use of trade finance instruments, including documentary collections, letters of credit (LCs), and guarantees or standby letters of credit has surged in recent years as risk has increased through the need of new trading partners. In Asia documentary services remains 85% of bank intermediated trade finance at $7.7 trillion and globally LCs increased 2% from 2018 - 2021**.&nbsp;

As companies begin to work with new buyers and suppliers, it is essential they rethink their payment terms and ways to ensure they match their risk appetite. While most trade remains on open account, the use of trade finance instruments, including documentary collections, letters of credit (LCs), and guarantees or standby letters of credit has surged in recent years as risk has increased through the need of new trading partners. In Asia documentary services remains 85% of bank intermediated trade finance at $7.7 trillion and globally LCs increased 2% from 2018 - 2021**.&nbsp;

6. Reconsider how you pay and get paid

7. Think carefully about how you manage your inventory The changing marketplace means that companies should carefully assess their inventory and segregate it into critical and non-critical categories. More than 50% of respondents to Citi&rsquo;s supplier survey anticipate ongoing disruption in 2023. &nbsp;Companies may need to be more proactive in their inventory management which could result in stockpiling critical components.
Higher inventory levels tie up working capital. However, banks may be able to leverage critical components or raw materials as additional collateral for asset-based lending or inventory financing to prevent cash flow being drained. At the same time, companies may need to implement &ldquo;just-in-time&rdquo; inventory management for non-critical components to lower their working capital requirements.

The changing marketplace means that companies should carefully assess their inventory and segregate it into critical and non-critical categories. More than 50% of respondents to Citi&rsquo;s supplier survey anticipate ongoing disruption in 2023. &nbsp;Companies may need to be more proactive in their inventory management which could result in stockpiling critical components.
Higher inventory levels tie up working capital. However, banks may be able to leverage critical components or raw materials as additional collateral for asset-based lending or inventory financing to prevent cash flow being drained. At the same time, companies may need to implement &ldquo;just-in-time&rdquo; inventory management for non-critical components to lower their working capital requirements.

7. Think carefully about how you manage your inventory

8. Consider ESG initiatives and strengthen your downstream supply chain ESG has become a board level agenda item. &nbsp;To be competitive and relevant, mid-cap companies are increasingly thinking about ensuring compliance with disclosure requirements with external benchmarks which make them eligible for various ESG incentives. While this can could require initial investment, the opportunities make it worthwhile &ndash; perhaps even essential &ndash; for survival. In reference to point 5, there are plenty of multi-lateral agencies that can provide support and incentives here. It is also important to provide incentives for downstream suppliers so the whole ecosystem is sustainable.
Mid-cap companies should consider how their own suppliers could be equally or more exposed to market uncertainty and disruptions. Strengthening the downstream supply chain is as crucial as the upstream. One of the ways which banks like Citi are helping is via the introduction of deep-tier sustainable supply chain finance programs in which downstream suppliers are reviewed for their ESG credentials and provide access to liquidity at preferential rates using the credit of the ultimate buyers.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">62% of suppliers surveyed are expanding second-tier supplier networks to increase resiliency.*</h3>

ESG has become a board level agenda item. &nbsp;To be competitive and relevant, mid-cap companies are increasingly thinking about ensuring compliance with disclosure requirements with external benchmarks which make them eligible for various ESG incentives. While this can could require initial investment, the opportunities make it worthwhile &ndash; perhaps even essential &ndash; for survival. In reference to point 5, there are plenty of multi-lateral agencies that can provide support and incentives here. It is also important to provide incentives for downstream suppliers so the whole ecosystem is sustainable.
Mid-cap companies should consider how their own suppliers could be equally or more exposed to market uncertainty and disruptions. Strengthening the downstream supply chain is as crucial as the upstream. One of the ways which banks like Citi are helping is via the introduction of deep-tier sustainable supply chain finance programs in which downstream suppliers are reviewed for their ESG credentials and provide access to liquidity at preferential rates using the credit of the ultimate buyers.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">62% of suppliers surveyed are expanding second-tier supplier networks to increase resiliency.*</h3>

8. Consider ESG initiatives and strengthen your downstream supply chain

Citi&rsquo;s Solutions for Commercial Trade
<a title="EXPANDED TRADE PLACEMAT" href="/rcs/citigpa/storage/public/icpublic/Trade%20Solutions%20Placemat%202023.jpg" target="_blank" rel="noopener" data-link-source="tiny"><img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/6408a99d7f880b38d666f460.png" alt="Trade" width="549" height="388" /></a>
<a href="/rcs/citigpa/storage/public/icpublic/Trade%20Solutions%20Placemat%202023.jpg" target="_blank" rel="noopener" data-link-source="tiny">(click to expand)</a>

<h3>We hope these suggestions are useful. Whichever approach you decide to take, ensuring there is a close relationship between you and your buyers and suppliers is crucial. </h3>
<h3><a style="text-decoration: underline; color: #ecf0f1;" href="https://www.citigroup.com/global/businesses/banking/commercial-bank/contact-us" target="_blank" rel="noopener" data-link-source="tiny">Contact us</a>&nbsp;today to find out how we can help you with your international trade and support your business growth</h3>
&nbsp;
*Full survey results in Citi GPS <a style="text-decoration: underline;" href="https://ir.citi.com/gps/1Ta_t4vY4ookG2HCGLTPq2akENBxm_5zIfxYrhB1sl8bpWiAVrz582a_c0sF9vxCNbXJ-ZTMvao2qa4c9azLTkUSjvJJ9OPQ" target="_blank" rel="noopener" data-link-source="tiny">Supply Chain Finance Report</a>
&nbsp;
**Source: Citi SWIFT data and ADB. 2022. Toward Inclusive Access to Trade Finance Lessons from THE Trade Finance Gaps, Growth, and Jobs Survey. Manila: ADB. &copy; ADB. https://www.adb.org/sites/default/files/publication/819856/inclusive-access-trade-finance.pdf CC-BY 3.0 IGO.

Disruptions prompted by the pandemic and geopolitical tensions have created a shift in buyer/supplier relationships. Companies need to develop relationships with new buyers and suppliers as part of a more sophisticated approach to risk management. Investment in skills and technology is required, as well as a reassessment of how trade is conducted (letters of credit may become more important, for instance) and consideration of supply chain finance and account receivables programs. For mid-sized companies growing internationally, the last few years have been turbulent. Disruption caused by the pandemic and geopolitical tensions have highlighted the vulnerability of trade flows. Companies are also having to contend with higher inflation, rising interest rates, a liquidity squeeze (in some markets), and increasing FX volatility. Against this uncertain backdrop, mid-cap companies are having to retool their businesses. Relationships with buyers and suppliers, including payment terms and methods, are changing. To succeed, companies should consider the following actions. 1. Broaden your buyer base and consider “near-shoring” In the past, many companies have been dependent on one or two large buyers. But the pandemic and geopolitical tensions may have weakened relationships. As part of a recent Citi GPS <a target="_blank" name="_Hlk127953292" data-link-source="tiny"></a><a href="https://ir.citi.com/gps/1Ta_t4vY4ookG2HCGLTPq2akENBxm_5zIfxYrhB1sl8bpWiAVrz582a_c0sF9vxCNbXJ-ZTMvao2qa4c9azLTkUSjvJJ9OPQ" target="_blank" rel="noopener" data-link-source="tiny">Supply Chain Finance report</a>, Citi Research recently surveyed 1,169 companies that participate as suppliers in Citi-managed supply chain finance programs. We will share highlights in this article.
Suppliers need to broaden the range of buyers they work with. Selling to additional buyers, in a wider range of geographies, can lessen risk and improve resilience. For companies in some sectors, it might even be possible to enter the business to consumer (B2C) market by using online marketplaces.
Suppliers also need to be aware of the trend towards &ldquo;near-shoring&rdquo; supply chains to avoid long distance logistical disruption. It is yet to be seen if &ldquo;near-shoring&rdquo; will change production patterns, but it is understandable companies across many sectors are considering this.
<h3 style="margin: 2pt 0in 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">50% of companies surveyed with revenues over $20m had difficulty shipping goods to customers.*</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">&nbsp;</h3>
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">45% of companies surveyed with revenues over $20 million had difficulty forecasting and planning for customer demand.*&nbsp;</h3> 2. Diversify your supply chain While mid-cap companies are suppliers to larger corporates, many also have complex supply chains of their own. For instance, contract manufacturers depend on suppliers for key components or raw materials. In Citi&rsquo;s supplier survey, more than a fifth of respondents have difficulty procuring from downstream suppliers.
Therefore, diversifying suppliers may reduce the impact of disruption caused by one or two suppliers. It&rsquo;s important to build relationships with suppliers in multiple geographies to mitigate exposure to geopolitical risk and regulatory change. Companies should also assess the potential for insourcing or vertical integration for critical components to reduce risk. 3. Think strategically about payment terms and finance While diversification of suppliers and buyers is critical, it&rsquo;s also important to protect existing business relationships. Mid-cap companies should assess and consider implementing preferential payment terms (such as higher pricing or shorter tenors) for major suppliers or suppliers of critical components. Larger companies may be able to establish supply chain finance (SCF) programs as part of such efforts.
However, not all mid-cap companies will have the credit capacity to establish SCF programs. Instead, where possible, companies could seek to join their buyers&rsquo; SCF programs. Alternatively, companies should investigate receivables financing solutions, such as insurance-backed, portfolio or bilateral programs. Receivables financing solutions aim to improve liquidity and working capital by enabling you to collect funds more quickly and on mutually beneficial terms. Over 40% of respondents to Citi&rsquo;s supplier survey are seeking financing earlier in the commercial cycle, such as at the purchase order stage.
<h3 style="margin: 6pt 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">23%&nbsp;of companies surveyed with annual revenues less than $20m have an issue with prohibitive financing costs / difficulty accessing financing.*</h3> 4. Develop a risk management plan and resource it properly Diversifying the range of buyers that companies work with is the first step in managing the risks associated with changing buyer behavior. Mid-cap companies should also identify potential risks and develop a plan to mitigate them so they can respond effectively should disruption occur.
One risk is the potential for the credit profile of a buyer to deteriorate. Suppliers should consider building a credit risk management framework to minimize losses and processes to monitor payment patterns. Banks and factoring companies may help mitigate this credit risk to an extent by purchasing the obligations of the buyer and suppliers. This transfers risk at a low cost while optimizing cash flows.
A risk management approach is likely to require investment in people. While the company owner may have established relationships with buyers a while ago, the imperative to diversify buyers and suppliers and the complexity of today&rsquo;s environment requires risk management specialists.
Similarly, suppliers may benefit by using technology designed to manage risk. Automation and digital payment solutions &ndash; provided by banks, FinTech's or other partners &ndash; may help companies to monitor disruption in near real time and respond more effectively by raising red flags about late payments from buyers or disruption to critical components.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">71%&nbsp;of companies surveyed with annual revenues over $20m have difficulty with increased costs of goods / raw materials.*</h3> 5. Expand your network: you don’t have to do everything yourself Many mid-cap companies have limited human resources and investment budgets. They should consider working with industry associations, multi-lateral associations, chambers of commerce and government organizations such as export agencies when developing a risk management strategy. Often these entities can provide access to technology that helps to better manage risk. Government organizations such as export agencies may help companies to gain access to a wider range of buyer and supplier relationships.
These organizations have programs that support the development of economies by promoting trade in certain goods and services. They are usually backed by the sovereign and can either fund these projects directly or provide guarantees via other financial institutions. Citi works with many of these agencies to help clients. 6. Reconsider how you pay and get paid As companies begin to work with new buyers and suppliers, it is essential they rethink their payment terms and ways to ensure they match their risk appetite. While most trade remains on open account, the use of trade finance instruments, including documentary collections, letters of credit (LCs), and guarantees or standby letters of credit has surged in recent years as risk has increased through the need of new trading partners. In Asia documentary services remains 85% of bank intermediated trade finance at $7.7 trillion and globally LCs increased 2% from 2018 - 2021**.&nbsp; 7. Think carefully about how you manage your inventory The changing marketplace means that companies should carefully assess their inventory and segregate it into critical and non-critical categories. More than 50% of respondents to Citi&rsquo;s supplier survey anticipate ongoing disruption in 2023. &nbsp;Companies may need to be more proactive in their inventory management which could result in stockpiling critical components.
Higher inventory levels tie up working capital. However, banks may be able to leverage critical components or raw materials as additional collateral for asset-based lending or inventory financing to prevent cash flow being drained. At the same time, companies may need to implement &ldquo;just-in-time&rdquo; inventory management for non-critical components to lower their working capital requirements. 8. Consider ESG initiatives and strengthen your downstream supply chain ESG has become a board level agenda item. &nbsp;To be competitive and relevant, mid-cap companies are increasingly thinking about ensuring compliance with disclosure requirements with external benchmarks which make them eligible for various ESG incentives. While this can could require initial investment, the opportunities make it worthwhile &ndash; perhaps even essential &ndash; for survival. In reference to point 5, there are plenty of multi-lateral agencies that can provide support and incentives here. It is also important to provide incentives for downstream suppliers so the whole ecosystem is sustainable.
Mid-cap companies should consider how their own suppliers could be equally or more exposed to market uncertainty and disruptions. Strengthening the downstream supply chain is as crucial as the upstream. One of the ways which banks like Citi are helping is via the introduction of deep-tier sustainable supply chain finance programs in which downstream suppliers are reviewed for their ESG credentials and provide access to liquidity at preferential rates using the credit of the ultimate buyers.
<h3 style="margin: 0in; break-after: avoid; font-size: 12pt; font-family: 'Calibri Light', sans-serif; color: #1f3763; font-weight: normal;">62% of suppliers surveyed are expanding second-tier supplier networks to increase resiliency.*</h3> Citi&rsquo;s Solutions for Commercial Trade
<a title="EXPANDED TRADE PLACEMAT" href="/rcs/citigpa/storage/public/icpublic/Trade%20Solutions%20Placemat%202023.jpg" target="_blank" rel="noopener" data-link-source="tiny"><img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/6408a99d7f880b38d666f460.png" alt="Trade" width="549" height="388" /></a>
<a href="/rcs/citigpa/storage/public/icpublic/Trade%20Solutions%20Placemat%202023.jpg" target="_blank" rel="noopener" data-link-source="tiny">(click to expand)</a> <h3>We hope these suggestions are useful. Whichever approach you decide to take, ensuring there is a close relationship between you and your buyers and suppliers is crucial. </h3>
<h3><a style="text-decoration: underline; color: #ecf0f1;" href="https://www.citigroup.com/global/businesses/banking/commercial-bank/contact-us" target="_blank" rel="noopener" data-link-source="tiny">Contact us</a>&nbsp;today to find out how we can help you with your international trade and support your business growth</h3>
&nbsp;
*Full survey results in Citi GPS <a style="text-decoration: underline;" href="https://ir.citi.com/gps/1Ta_t4vY4ookG2HCGLTPq2akENBxm_5zIfxYrhB1sl8bpWiAVrz582a_c0sF9vxCNbXJ-ZTMvao2qa4c9azLTkUSjvJJ9OPQ" target="_blank" rel="noopener" data-link-source="tiny">Supply Chain Finance Report</a>
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**Source: Citi SWIFT data and ADB. 2022. Toward Inclusive Access to Trade Finance Lessons from THE Trade Finance Gaps, Growth, and Jobs Survey. Manila: ADB. &copy; ADB. https://www.adb.org/sites/default/files/publication/819856/inclusive-access-trade-finance.pdf CC-BY 3.0 IGO. <a title="VIEW ALL INSIGHTS" href="https://www.citigroup.com/global/insights/commercial-bank?pk_campaign=view_all_insights" data-link-source="tiny"><img style="float: left;" src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/63f661c2bcbcdf129897ab7b.png" alt="VIEW" /></a>

Disruptions prompted by the pandemic and geopolitical tensions have created a permanent shift in buyer/supplier relationships.

Supply chain disruption:  eight actions for mid-sized companies 

Hong Kong-based company, Lukfook Jewellery, wanted to enhance payment efficiency to its suppliers to help it expand. Working with Citi Commercial Bank enabled Lukfook Jewellery to get advice and access a variety of payment solutions via a single portal. This helps Lukfook Jewellery to be more digital and opens up new growth opportunities.

Hong Kong-based company, Lukfook Jewellery, wanted to enhance payment efficiency to its suppliers to help it expand. Working with Citi Commercial Bank enabled Lukfook Jewellery to get advice and access a variety of payment solutions via a single portal. &nbsp;This helps Lukfook Jewellery to be more digital and opens up new growth opportunities.
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Working capital in an evolving environment Staying nimble amid rising interest rates and an evolving inflationary environment means vigilant working capital management and ensuring ready access to liquidity at efficient rates. Managing rising interest rates and high inflation has been top of mind for treasurers and corporate treasury teams as many seek solutions to minimize the impacts of margin compression. The Fed increased rates by 25bps on March 22 with the Bank of England following suit on March 23. In his March 22, 2023 press conference, Federal Reserve Chairman Jerome Powell stated, “The process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy” and had the view that tightening credit conditions could quell the need for future hikes1. Amid a decrease in consumer spending, inventory management has become less efficient over the last two years due to a shift from “just in time” to “just in case” as a tool for countering supply chain disruption. Sellers are tasked with holding more inventory financed at their own cost of capital on behalf of their customers. Credit spreads between investment grade (IG) and high yield (HY) rated companies widened at the outset of the Fed’s hiking cycle and underscored the importance of sellers having access to liquidity at efficient rates. Corporates have focused on working capital for the last 15+ years and are very active in managing payment terms. Days Payable Outstanding (DPO) has lengthened by an average of nine days since 2014 for S&P 1500 listed companies (see chart below). Exiting the pandemic, companies have found ways to lower Days Sales Outstanding (DSO) by launching receivable finance programs and participating in supply chain finance programs to counter buyers requesting longer payment terms. 1 FRB, Chair Powell’s Press Conference, 2023 How Citi can support sales and customer resiliency while managing DSO & credit exposure With the varied financial conditions over the last three years, customers are seeking flexible and longer payment terms. Sellers can leverage accounts receivable financing to potentially inject liquidity into sales distribution channels while managing DSO. For example, today a large consumer and industrial goods manufacturer utilizes a structured AR finance program in addition to commercial paper to provide their business with liquidity. Structured accounts receivable (AR) portfolio financing could be an efficient working capital optimization tool to reduce DSO, while allowing longer payment terms for strategic customers. Continued management of working capital As noted after the 2008 Financial Crisis, remaining vigilant with working capital will help stabilize operations during periods of crisis and accelerate recovery and growth post crisis. Today, Citi has many mature Trade and Working Capital solutions already in place and is well positioned to help corporates navigate these turbulent times. IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose of avoiding any tax penalties and (ii) may have been written in connection with the “promotion or marketing” of any transaction contemplated hereby (“Transaction”). Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor. This communication is provided for informational purposes only and may not represent the views or opinions of Citigroup Inc. or its affiliates (collectively, “Citi”), employees or officers. The information contained herein does not constitute and shall not be construed to constitute legal, investment, tax and/or accounting advice by Citi. Citi makes no representation as to the accuracy, completeness or timeliness of such information. This communication and any documents provided pursuant hereto should not be used or relied upon by any person/entity (i) for the purpose of making regulatory decisions or (ii) to provide regulatory advice to another person/entity based on matter(s) discussed herein. Recipients of this communication should obtain guidance and/or advice, based on their own particular circumstances, from their own legal, investment, tax or accounting advisor. Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate definitive written agreements. This presentation is not a commitment or firm offer and does not obligate us to enter into such a commitment, nor are we acting as a fiduciary to you. By accepting this presentation, subject to applicable law or regulation, you agree to keep confidential the information contained herein and the existence of and proposed terms for any Transaction. We are required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with us. We will ask for your complete name, street address, and taxpayer ID number. We may also request corporate formation documents, or other forms of identification, to verify information provided. Certain Services and/or products mentioned in this communication may contain provisions that refer to a reference or benchmark rate which may change, ceases to be published or be in customary market usage, become unavailable, have its use restricted and/or be calculated in a different way. As a result, those reference or benchmark rates that are the subject of such changes may cease to be appropriate for the services and/or products mentioned in this communication. The services and/or products mentioned in this communication reflect Citi’s service and/or product offering at the date of communication but this may be subject to change from time to time. We encourage you to keep up to date with the latest industry developments in relation to benchmark transitioning and to consider its impact on your business. You should consider, and continue to keep under review, the potential impact of benchmark transitioning on any existing services and/or product you may have with Citi, or any new services (you avail) and/or product you enter into with Citi. Citi does not provide advice, or recommendations on the suitability of your service and/or product choice including with respect to any benchmark transitioning on any existing service and/or product you have with Citi. You should obtain professional independent advice (tax, accounting, regulatory, legal, financial or otherwise) in respect of the suitability of your service and/or products in light of benchmark transitioning as you consider necessary. The services and/or products mentioned in this communication reflect Citi’s service and/or product offering at the date of communication, but this may be subject to change from time to time.

How companies are using receivable finance to support sales while shortening days outstanding

In today's episode we speak with Shayna Teh, co-founder of Food Market Hub. Shayna is a female entrepreneur who stems from a family of entrepreneurs, BUT that doesn't mean her journey has been smooth sailing.

In today's episode we speak with Shayna Teh, co-founder of Food Market Hub.&nbsp; Shayna is a female entrepreneur who stems from a family of entrepreneurs, BUT that doesn't mean her journey has been smooth sailing.&nbsp;
&nbsp;
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MONEY FM Podcast, presented by Citi Commercial Bank. INSPIRING ENTREPRENEURS: Is being an entrepreneur a result of nurture or nature?

*This partner content was produced by the Financial Times on behalf of Citi Commercial Bank No successful company in history ever prospered without taking risks; juggling with potential jeopardy is a part of doing business. But lately, many leaders might agree that turbulent times are creating some of the thorniest challenges they’ve experienced to date. In a 2022 McKinsey report, executives responding to its annual Global Survey cited geopolitical conflict and inflation as the most pressing economic risks. Digging deeper into the data, supply chain challenges and currency fluctuation also loom large as ongoing concerns. Currency fluctuation is a particularly acute problem associated with inflation. Simply put, when inflation increases, the money in the economy will tend to depreciate relative to other currencies – this influences how competitive an affected company can be, and creates potentially expensive headaches when it comes to sending and receiving international payments. One brand that’s familiar with the vagaries of foreign exchange is Tramontina, a Brazilian cookware, cutlery and home appliances company with 10,000 employees, which manufactures 22,000 items and exports to more than 120 countries. Citi Commercial Bank is a global partner of Tramontina and supports the company across continents. “However, when you’re operating in regions like Latin America and Asia, currency fluctuations can be hard to predict. We can’t pass those costs onto customers whose prices we’ve locked in, so we may have to eat those losses for a while but clearly this is unsustainable” says Marcelo Borges, Tramontina’s US CEO Hedging to address volatility Businesses such as Tramontina often employ hedging strategies to protect against potential losses caused by adverse currency movements. These may include forward contracts, options and other financial instruments. A close monitoring of related influencing factors can also help anticipate forthcoming currency movements – looking at elements such as interest rate differentials, inflation rates, geopolitical events and government policies. However, this level of oversight requires specialist attention and analysis and, crucially, deep knowledge of local markets. Borges points to Argentina as one country where currency changes can be challenging: “Only by working with an experienced bank, with a local presence and intimate understanding of the market, can we make the right decisions about product pricing and about buying the commodities to make those products” says Borges. Tramontina’s key banking relationship is with Citi Commercial Bank. Citi has operated internationally for over 200 years, and that has been helping Tramontina navigate in different markets, from Canada to India. Timicka Anderson, Global Head of Consumer & Retail at Citi Commercial Bank, explains that local currency fluctuations can be managed in several ways. “First, we can provide local currency financing – working capital, so they can make payments in the local currency, thus avoiding the additional costs that would come from using money from outside that country,” she says. “We also help with short-term hedging and can use a number of proprietary tools – such as our Citi Velocity digital content, data and analytics platform – to provide a detailed analysis of potential risks across a number of markets in different regions.” A global view for an interconnected analysis Anderson points out that, for manufacturing companies such as Tramontina, it’s not simply Citi’s role to advise on currency challenges, but to look at the interplay of other factors, too. As a company that buys a lot of aluminium, for example, Tramontina must hedge not just its currencies but also its commodities costs. “Our global presence helps us take a macro view across all markets,” says Anderson. “In Tramontina’s case, it could be how aluminium has historically performed against the dollar.” As the US CEO of a company that’s been operating successfully for more than 100 years, Borges has some simple words of advice for those looking to expand internationally: “Play it safe.” He adds that Citi provides him with the sort of detailed local information that isn’t easy to access and which, together with the bank’s financial tools, allows Tramontina to make the most informed decisions possible – and mitigate risk. “We play it safe every day,” he smiles. “Perhaps we don’t grow as quickly as some other companies because of this, but we are in very good shape.” Global commerce is, by its nature, an uncertain affair. But for Tramontina, by putting in place a well-devised risk strategy to address currency fluctuation and commodity costs, it shields itself from volatility and also seizes business opportunities – ensuring this century-old firm could still be supplying the world with products 100 years from now. All opinions expressed by the participants in this article are their own and do not necessarily represent the opinions of Citi Commercial Bank

*This partner content was produced by the Financial Times on behalf of Citi Commercial Bank
No successful company in history ever prospered without taking risks; juggling with potential jeopardy is a part of doing business. But lately, many leaders might agree that turbulent times are creating some of the thorniest challenges they&rsquo;ve experienced to date. In a&nbsp;<a style="box-sizing: inherit; font-weight: bold; text-decoration-line: underline;" href="https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/economic-conditions-outlook-2022?sp=true" target="_blank" rel="noopener" data-link-source="tiny">2022 McKinsey report</a>, executives responding to its annual Global Survey cited geopolitical conflict and inflation as the most pressing economic risks. Digging deeper into the data, supply chain challenges and currency fluctuation also loom large as ongoing concerns.
Currency fluctuation is a particularly acute problem associated with inflation. Simply put, when inflation increases, the money in the economy will tend to depreciate relative to other currencies &ndash; this influences how competitive an affected company can be, and creates potentially expensive headaches when it comes to sending and receiving international payments. One brand that&rsquo;s familiar with the vagaries of foreign exchange is Tramontina, a Brazilian cookware, cutlery and home appliances company with 10,000 employees, which manufactures 22,000 items and exports to more than 120 countries. Citi Commercial Bank is a global partner of Tramontina and supports the company across continents.
&ldquo;However, when you&rsquo;re operating in regions like Latin America and Asia, currency fluctuations can be hard to predict. We can&rsquo;t pass those costs onto customers whose prices we&rsquo;ve locked in, so we may have to eat those losses for a while but clearly this is unsustainable&rdquo;&nbsp;says Marcelo Borges, Tramontina&rsquo;s US CEO
<h3 style="box-sizing: inherit; line-height: 1.2; font-size: 36px; margin-bottom: 10px; white-space: normal;">Hedging to address volatility</h3>
Businesses such as Tramontina often employ hedging strategies to protect against potential losses caused by adverse currency movements. These may include forward contracts, options and other financial instruments. A close monitoring of related influencing factors can also help anticipate forthcoming currency movements &ndash; looking at elements such as interest rate differentials, inflation rates, geopolitical events and government policies.&nbsp;
However, this level of oversight requires specialist attention and analysis and, crucially, deep knowledge of local markets. Borges points to Argentina as one country where currency changes can be challenging:
&ldquo;Only by working with an experienced bank, with a local presence and intimate understanding of the market, can we make the right decisions about product pricing and about buying the commodities to make those products&rdquo; says Borges.
Tramontina&rsquo;s key banking relationship is with Citi Commercial Bank. Citi has operated internationally for over 200 years, and that has been helping Tramontina navigate in different markets, from Canada to India. Timicka Anderson, Global Head of Consumer &amp; Retail at Citi Commercial Bank, explains that local currency fluctuations can be managed in several ways. &ldquo;First, we can provide local currency financing &ndash; working capital, so they can make payments in the local currency, thus avoiding the additional costs that would come from using money from outside that country,&rdquo; she says. &ldquo;We also help with short-term hedging and can use a number of proprietary tools &ndash; such as our Citi Velocity digital content, data and analytics platform &ndash; to provide a detailed analysis of potential risks across a number of markets in different regions.&rdquo;
<h3 style="box-sizing: inherit; line-height: 1.2; font-size: 36px; margin-bottom: 10px; white-space: normal;">A global view for an interconnected analysis</h3>
Anderson points out that, for manufacturing companies such as Tramontina, it&rsquo;s not simply Citi&rsquo;s role to advise on currency challenges, but to look at the interplay of other factors, too. As a company that buys a lot of aluminium, for example, Tramontina must hedge not just its currencies but also its commodities costs. &ldquo;Our global presence helps us take a macro view across all markets,&rdquo; says Anderson. &ldquo;In Tramontina&rsquo;s case, it could be how aluminium has historically performed against the dollar.&rdquo;&nbsp;
As the US CEO of a company that&rsquo;s been operating successfully for more than 100 years, Borges has some simple words of advice for those looking to expand internationally: &ldquo;Play it safe.&rdquo; He adds that Citi provides him with the sort of detailed local information that isn&rsquo;t easy to access and which, together with the bank&rsquo;s financial tools, allows Tramontina to make the most informed decisions possible &ndash; and mitigate risk.
&ldquo;We play it safe every day,&rdquo; he smiles. &ldquo;Perhaps we don&rsquo;t grow as quickly as some other companies because of this, but we are in very good shape.&rdquo; Global commerce is, by its nature, an uncertain affair. But for Tramontina, by putting in place a well-devised risk strategy to address currency fluctuation and commodity costs, it shields itself from volatility and also seizes business opportunities &ndash; ensuring this century-old firm could still be supplying the world with products 100 years from now.
All opinions expressed by the participants in this article are their own and do not necessarily represent the opinions of Citi Commercial Bank
&nbsp;
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Global manufacturers can deploy deep local knowledge and working capital to hedge against FX volatility

Steady solutions: how to navigate currency fluctuations

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The risks and opportunities surrounding sustainability and environmental, social and governance matters, or “ESG,” are increasingly becoming part of every company’s journey. Regulation, customer preferences, societal shifts, and net zero commitments by many governments, corporations, and financial institutions, are changing the business landscape for many companies, including privately held companies. Currently, we are seeing more and more companies establish net zero commitments and taking steps to promote diversity and inclusivity across their workforce. In turn, this is incentivizing privately held companies to integrate ESG and sustainability into decision making earlier and earlier in their growth trajectory. In this brief note, we highlight the importance of integrating ESG issues into a company’s strategy and discuss the opportunities that can arise from having a coherent ESG strategy as part of a company’s growth journey. The Rise of ESG What started as a trend in ESG and sustainability-linked capital markets is now expanding into other financial services, allowing companies to incorporate ESG considerations throughout their treasury management, capital raising, trade finance and deposits. There has been a sharp increase in capital being raised with sustainable financial instruments. There has been an extraordinary growth in the issuance of green bonds, social, sustainability bonds and sustainability-linked bonds as shown in the diagram on page 2. Sustainability-linked loans and revolving credit facilities, where interest rates can change depending on achievements in sustainability targets, are also becoming well-established, and Sustainable Supply Chain Finance is a growing opportunity for companies. We are also seeing a growing number of companies making net zero commitments and developing transition strategies, which will have impacts across their value chains. Some companies also find it useful to join the Science Based Targets initiative, which is an organization that works with companies to define and promote best practice in emission reductions and net zero targets in line with climate science. As of September 2023, over 6000 companies have either committed to net zero or set science-based targets to reduce their emissions through this initiative*. Many financial institutions, including Citi, have also committed to net zero which will lead to reductions in financed emissions across their lending portfolios over time. This means lenders will seek more detailed ESG and climate disclosures about emissions and business strategies over time from their borrowing clients and their clients’ value chain. New regulations can also create increased demands for companies to calculate and disclose ESG metrics. Much regulation has impacted primarily larger or publicly listed companies. For example, the Corporate Sustainable Reporting Directive (CSRD) in the EU will make businesses more accountable by obliging them to disclose both how sustainability issues affect their performance and their own impacts on people and planet. This directive applies to European companies with any two of the following: over 250 employees, 40 million Euros in turnover and a balance sheet of over 20 million Euros. The directive may also apply to certain parent companies of non EU groups that include a European subsidiary or branch or that are listed in the EU. Another example is the proposed rule by the U.S. Securities and Exchange Committee (SEC) called ‘The Enhancement and Standardization of Climate Related Disclosures for Investors’. While a final rule is expected to be announced later in 2023, the proposal currently has a clause that would ask firms to make climate related disclosures at the time of an initial public offering. These regulations can also affect private companies indirectly who are embedded in the ecosystem as suppliers to public listed companies that will need to provide climate-related disclosures. It is not only the ‘E’ in ESG that is growing, we are also seeing the dramatic ‘Rise of S’, which captures everything from gender diversity to poverty and hunger, with focus not only on a company’s own operations, but also throughout its supply chains. This is a huge opportunity for mid-sized companies to show how their activities impact not only the planet but also people. The ESG landscape mid sized companies are navigating is becoming increasingly complex, with evolving disclosure frameworks in different jurisdictions, as well as escalating expectations from stakeholders. The Opportunities of ESG At Citi, helping our clients navigate the challenges and embrace the opportunities of our rapidly changing world is fundamental to our mission of enabling growth and economic progress. This work is central to how we help our clients fortify themselves for the future. Opportunities that can arise from incorporating ESG into a company’s business strategy include: Improved access to capital – Simply by assessing ESG risks and making improvements – such as becoming more resource and water efficient and using less packaging – companies may be able to lower their cost base and develop more resilient business models. In addition, a well-conceived and communicated ESG strategy that improves strategic opportunities and reduces risk, can help make a company more attractive to ESG-focused investors thus potentially both improving access to capital and reducing the cost of that capital. Increased consumer engagement – The influence of consumers is growing, as they consider what to buy, why they buy it, and where they purchase their goods. Consumers are increasingly demanding to know and understand what ingredients are going into their food products as well as where their products are sourced from2. Understanding how important consumers view ESG is essential for B2C companies. Growth opportunities – A business which commits to become net zero usually will need to ensure that its supply chain and distribution network are also heading toward net zero. In essence, this means companies committed to net zero will often either work with their current suppliers to help them reduce their emissions (with potentially positive pricing/volume/trade finance terms to do so), or at the other extreme, those that will work with them3. A private company that supplies goods and services to these large companies will ultimately need to calculate and disclose their emissions and other ESG issues that are material, if they want to maintain these clients. Incorporating ESG issues early into business strategies also has an added advantage of potentially attracting new clients to their business as these clients look for sustainable suppliers. Attracting and retaining talent – Having a clear purpose, above and beyond maximizing profits, is increasingly an expectation of employees, especially millennials and Gen Z. Embracing ESG can be an important way to bring a significant sense of purpose to employees’ lives, helping to ensure companies can hire the best talent and retain them. ESG is expanding in its complexity, and whilst measuring and disclosing ESG issues might seem daunting at first, it can make business sense to do so. It should be seen as a fundamental part of running a successful business where returns are sustainable in the long-term. Guidance For companies, ESG is a process and a journey which can entail longer-term strategic targets, shorter-term milestones (and reporting on the same), on which they can take all stakeholders, from the providers of capital to customers, consumers, suppliers, and employees. Companies don’t have to do this alone. Citi Commercial Bank has the practical experience of helping clients implement many of the changes including how to embed ESG into an organization’s operational, financing and treasury strategies. In Conclusion It can be advantageous for privately held companies, especially those with global operations or ambitions, to integrate ESG into their business decision making and start early for several reasons. Companies can: Position themselves for new regulations and requirements as they come Benefit from the weight of capital now linked to ESG strategies Adapt to changing consumer preferences to stay attractive to customers and competitive to peers, both public and private Improve business resilience Attract new clients that are looking for sustainable suppliers If privately held companies put in the work and embrace sustainability and ESG into their business strategy, it can help them to build a business with premium returns which are sustainable for the long term, with strong corporate purpose, and a demonstrably positive effect on the environment around us, and on society as a whole. For more information about how Citi Commercial Bank can assist you and your team, please contact us below. Sources: 1. Citi GPS report – Climate Finance 2. Citi GPS report – Food and Climate Change 3. Citi Global Insights – Sustainable Tipping Points — The ‘net zero club’: when sustainability meets margins & supply chains

The risks and opportunities surrounding sustainability and environmental, social and governance matters, or &ldquo;ESG,&rdquo; are increasingly becoming part of every company&rsquo;s journey. Regulation, customer preferences, societal shifts, and net zero commitments by many governments, corporations, and financial institutions, are changing the business landscape for many companies, including privately held companies.
Currently, we are seeing more and more companies establish net zero commitments and taking steps to promote diversity and inclusivity across their workforce. In turn, this is incentivizing privately held companies to integrate ESG and sustainability into decision making earlier and earlier in their growth trajectory. In this brief note, we highlight the importance of integrating ESG issues into a company&rsquo;s strategy and discuss the opportunities that can arise from having a coherent ESG strategy as part of a company&rsquo;s growth journey.
<h4>The Rise of ESG</h4>
What started as a trend in ESG and sustainability-linked capital markets is now expanding into other financial services, allowing companies to incorporate ESG considerations throughout their treasury management, capital raising, trade finance and deposits. There has been a sharp increase in capital being raised with sustainable financial instruments. There has been an extraordinary growth in the issuance of green bonds, social, sustainability bonds and sustainability-linked bonds as shown in the diagram on page 2.
Sustainability-linked loans and revolving credit facilities, where interest rates can change depending on achievements in sustainability targets, are also becoming well-established, and Sustainable Supply Chain Finance is a growing opportunity for companies.
We are also seeing a growing number of companies making net zero commitments and developing transition strategies, which will have impacts across their value chains. Some companies also find it useful to join the Science Based Targets initiative, which is an organization that works with companies to define and promote best practice in emission reductions and net zero targets in line with climate science. As of September 2023, over 6000 companies have either committed to net zero or set science-based targets to reduce their emissions through this initiative*.
<div>Many financial institutions, including Citi, have also committed to net zero which will lead to reductions in financed emissions across their lending portfolios over time. This means lenders will seek more detailed ESG and climate disclosures about emissions and business strategies over time from their borrowing clients and their clients&rsquo; value chain.</div>
<div>&nbsp;</div>
<div>New regulations can also create increased demands for companies to calculate and disclose ESG metrics. Much regulation has impacted primarily larger or publicly listed companies. For example, the Corporate Sustainable Reporting Directive (CSRD) in the EU will make businesses more accountable by obliging them to disclose both how sustainability issues affect their performance and their own impacts on people and planet. This directive applies to European companies with any two of the following: over 250 employees, 40 million Euros in turnover and a balance sheet of over 20 million Euros. The directive may also apply to certain parent companies of non EU groups that include a European subsidiary or branch or that are listed in the EU. Another example is the proposed rule by the U.S. Securities and Exchange Committee (SEC) called &lsquo;The Enhancement and Standardization of Climate Related Disclosures for Investors&rsquo;. While a final rule is expected to be announced later in 2023, the proposal currently has a clause that would ask firms to make climate related disclosures at the time of an initial public offering. These regulations can also affect private companies indirectly who are embedded in the ecosystem as suppliers to public listed companies that will need to provide climate-related disclosures.</div>
<div>&nbsp;</div>
<div>It is not only the &lsquo;E&rsquo; in ESG that is growing, we are also seeing the dramatic &lsquo;Rise of S&rsquo;, which captures everything from gender diversity to poverty and hunger, with focus not only on a company&rsquo;s own operations, but also throughout its supply chains. This is a huge opportunity for mid-sized companies to show how their activities impact not only the planet but also people.</div>
<div>&nbsp;</div>
<div>The ESG landscape mid sized companies are navigating is becoming increasingly complex, with evolving disclosure frameworks in different jurisdictions, as well as escalating expectations from stakeholders.</div>
<div>&nbsp;</div>
<div><img style="display: block; margin-left: auto; margin-right: auto;" src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/6528454df22be5320e4541d1.png" alt="Starting" /></div>
<div>
<h4>&nbsp;</h4>
<h4>The Opportunities of ESG</h4>
At Citi, helping our clients navigate the challenges and embrace the opportunities of our rapidly changing world is fundamental to our mission of enabling growth and economic progress. This work is central to how we help our clients fortify themselves for the future. Opportunities that can arise from incorporating ESG into a company&rsquo;s business strategy include:
<div>
<ul>
<li>Improved access to capital &ndash; Simply by assessing ESG risks and making improvements &ndash; such as becoming more resource and water efficient and using less packaging &ndash; companies may be able to lower their cost base and develop more resilient business models. In addition, a well-conceived and communicated ESG strategy that improves strategic opportunities and reduces risk, can help make a company more attractive to ESG-focused investors thus potentially both improving access to capital and reducing the cost of that capital.</li>
</ul>
<div>
<ul>
<li>Increased consumer engagement &ndash; The influence of consumers is growing, as they consider what to buy, why they buy it, and where they purchase their goods. Consumers are increasingly demanding to know and understand what ingredients are going into their food products as well as where their products are sourced from2. Understanding how important consumers view ESG is essential for B2C companies.</li>
</ul>
<div>
<ul>
<li>Growth opportunities &ndash; A business which commits to become net zero usually will need to ensure that its supply chain and distribution network are also heading toward net zero. In essence, this means companies committed to net zero will often either work with their current suppliers to help them reduce their emissions (with potentially positive pricing/volume/trade finance terms to do so), or at the other extreme, those that will work with them3. A private company that supplies goods and services to these large companies will ultimately need to calculate and disclose their emissions and other ESG issues that are material, if they want to maintain these clients. Incorporating ESG issues early into business strategies also has an added advantage of potentially attracting new clients to their business as these clients look for sustainable suppliers.</li>
</ul>
<div>
<ul>
<li>Attracting and retaining talent &ndash; Having a clear purpose, above and beyond maximizing profits, is increasingly an expectation of employees, especially millennials and Gen Z. Embracing ESG can be an important way to bring a significant sense of purpose to employees&rsquo; lives, helping to ensure companies can hire the best talent and retain them. ESG is expanding in its complexity, and whilst measuring and disclosing ESG issues might seem daunting at first, it can make business sense to do so. It should be seen as a fundamental part of running a successful business where returns are sustainable in the long-term.</li>
</ul>
<h4>Guidance</h4>
For companies, ESG is a process and a journey which can entail longer-term strategic targets, shorter-term milestones (and reporting on the same), on which they can take all stakeholders, from the providers of capital to customers, consumers, suppliers, and employees. Companies don&rsquo;t have to do this alone.
Citi Commercial Bank has the practical experience of helping clients implement many of the changes including how to embed ESG into an organization&rsquo;s operational, financing and treasury strategies.
<h4>In Conclusion</h4>
</div>
</div>
</div>
</div>
</div>
It can be advantageous for privately held companies, especially those with global operations or ambitions, to integrate ESG into their business decision making and start early for several reasons.
Companies can:
<ol style="list-style-type: upper-roman;">
<li>Position themselves for new regulations and requirements as they come</li>
<li>Benefit from the weight of capital now linked to ESG strategies</li>
<li>Adapt to changing consumer preferences to stay attractive to customers and competitive to peers, both public and private</li>
<li>Improve business resilience</li>
<li>Attract new clients that are looking for sustainable suppliers</li>
</ol>
If privately held companies put in the work and embrace sustainability and ESG into their business strategy, it can help them to build a business with premium returns which are sustainable for the long term, with strong corporate purpose, and a demonstrably positive effect on the environment around us, and on society as a whole.
For more information about how Citi Commercial Bank can assist you and your team, please contact us below.
<img style="display: block; margin-left: auto; margin-right: auto;" src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/652d673c0b80f04617f1c231.png" />
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<div>
<div>Sources:</div>
<div>1. Citi GPS report &ndash; <a href="https://www.citigroup.com/global/insights/citigps/climate-finance" target="_blank" rel="noopener" data-link-source="tiny">Climate Finance</a></div>
<div>2. Citi GPS report &ndash;<a href="https://www.citigroup.com/global/insights/citigps/food-and-climate_20220719" target="_blank" rel="noopener" data-link-source="tiny"> Food and Climate Change</a></div>
<div>3. Citi Global Insights &ndash; <a href="https://www.citivelocity.com/rendition/authfilelinksvcs/eppublic/V1/file?paramData=ZmlsZU5hbWU9L2dsaW4vUEpUQi1aQjc4LTY2R1YtUzRNVy1SNUEwX0NDTV8xNTk3MzQ4MDgwOTM5LnBkZiZwbGF0Zm9ybUlkPTc4JmRvY0lkPWdpY29udGVudC9QREYxMzYzNjgyNzg4ODI0NjU0NjQyMg" target="_blank" rel="noopener" data-link-source="tiny">Sustainable Tipping Points &mdash;</a></div>
<div><a href="https://www.citivelocity.com/rendition/authfilelinksvcs/eppublic/V1/file?paramData=ZmlsZU5hbWU9L2dsaW4vUEpUQi1aQjc4LTY2R1YtUzRNVy1SNUEwX0NDTV8xNTk3MzQ4MDgwOTM5LnBkZiZwbGF0Zm9ybUlkPTc4JmRvY0lkPWdpY29udGVudC9QREYxMzYzNjgyNzg4ODI0NjU0NjQyMg" target="_blank" rel="noopener" data-link-source="tiny">The &lsquo;net zero club&rsquo;: when sustainability meets margins &amp; supply chains</a></div>
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