Collateral Mobilization: Bridging Supply Chain and Financial Intelligence with SAP Business Network & FPSL

Introduction: The Perfect Storm of Capital Scarcity The global economic landscape is navigating a genuine perfect storm: a convergence of structural shifts and systemic pressures that are fundamentally redefining the availability, cost, and strategic value of capital. As the global economy moves deeper into the second half of the 2020s, two forces collide with unprecedented intensity—the mandatory energy transition and an extraordinary accumulation of global debt. The transition toward sustainable energy is an existential imperative. Yet it is also profoundly capital-intensive, requiring massive, front-loaded investment at a time when legacy energy systems are being decommissioned faster than green infrastructure can fully scale. The result is a prolonged period of constrained and less predictable energy availability. This energy bottleneck acts as a structural brake on industrial output, dampening economic growth and limiting the organic generation of new capital. At the same time, the global financial system is burdened by a debt overhang without historical precedent. According to the OECD Global Debt Report 2025, total sovereign and corporate bond debt has surpassed USD 100 trillion, with sovereign issuance in OECD economies alone projected to reach a record USD 17 trillion in 2025. This scale of issuance produces a classic crowding-out effect: capital is increasingly absorbed by debt servicing and public borrowing, leaving less available for private innovation and industrial expansion. As growth slows—potentially marking the weakest decade since the 1960s, according to World Bank projections—capital ceases to behave like an abundant commodity and instead becomes a scarce, strategic resource. In this environment, traditional approaches to financial management are no longer sufficient. Both financial institutions and corporates are being forced into a paradigm shift: away from growth driven by balance-sheet expansion and toward a discipline defined by Capital Optimization. This shift demands that every existing asset—physical, digital, or financial—become more visible, more efficient, and more readily deployable for productive use. Achieving this requires dismantling the historical divide between the physical reality of the supply chain and the financial intelligence embedded in the balance sheet. The Financial Mandate: From Static Allocation to Dynamic Optimization Capital optimization is no longer a discretionary strategy; it is increasingly mandated by regulation and systemic risk constraints. Central clearing requirements for derivatives and the tightening of Basel III/IV capital standards are placing unprecedented pressure on collateral management functions. For every loan, trade, or derivative exposure, institutions must demonstrate sufficient levels of High-Quality Liquid Assets (HQLA) or eligible collateral to absorb risk. Yet collateral optimization remains underdeveloped as a discipline. It has traditionally been viewed through two narrow lenses: Transactional management, focused on the legal and administrative enforcement of collateral rights. Utilization and distribution, concerned with allocating collateral to satisfy obligations at minimum cost. Historically, collateral allocation has been static and manual. Assets were identified, assigned, and left idle until contract maturity. In an era of abundant capital, this inefficiency was tolerated. In an era of scarcity, it becomes a structural weakness. True optimization requires continuous, real-time re-evaluation of the entire collateral universe—rebalancing allocations dynamically as market conditions, counterparty risk, and asset valuations evolve. Executing this vision requires a robust financial architecture capable of acting as a unified system of record for all assets. SAP Financial Product Subledger (FPSL) and the Integrated Financial and Risk Architecture (IFRA) provide this foundation by enabling consolidated visibility, valuation, and risk alignment across financial silos. Yet even with these tools, a vast share of global wealth remains effectively invisible to the financial system: capital embedded in Work-in-Process (WIP) and Stock-in-Transit (SIT). SAP Business Network: The Engine of Physical Transparency The most persistent obstacle to capital optimization has always been the opacity of global logistics. Capital cannot be optimized if it cannot be seen. This is where SAP Business Network becomes decisive. Far beyond a messaging platform, SAP Business Network functions as a multi-enterprise collaboration layer that connects organizations, logistics providers, suppliers, and financial institutions into a single, trusted ecosystem. In the context of collateral mobilization, it delivers three critical capabilities: Real-Time Logistics Visibility – End-to-end tracking of goods in motion, aggregating data from carriers, GPS, and telematics to provide a continuous, precise view of Stock-in-Transit. Process Orchestration – Synchronization of physical events (shipment notices, proof of delivery, quality milestones) with financial events (invoicing, payment terms), ensuring permanent alignment between operational reality and financial records. Asset Intelligence – Continuous monitoring of Work-in-Process, including assets located at third-party manufacturers, validating existence, status, and value for financial use. By replacing fragmented communications with a shared source of truth, SAP Business Network generates the level of data integrity required for financial systems such as SAP FPSL to treat moving goods as economically meaningful, auditable collateral. In an era of capital scarcity, assets are not scarce—visibility is. Visibility as a Financial Catalyst Banks excel at valuing cash, securities, and listed instruments. They have historically struggled, however, with assets that are in motion. High-value goods crossing oceans or partially assembled on factory floors represent substantial economic value, yet to financiers they remain dark assets: uncertain in location, condition, and time-to-liquidity. As a result, they are excluded from collateral pools or heavily discounted through punitive haircuts, forcing companies to immobilize cash or liquid securities instead. The integration of SAP Business Network fundamentally changes this equation. By delivering granular, real-time, end-to-end visibility, it transforms physical assets into transparent financial instruments—bridging the supply chain with the balance sheet and enabling WIP and SIT to function as high-velocity collateral. This transformation rests on three pillars: Continuous Valuation – Collateral value evolves in real time as goods advance through production, transit borders, or quality checkpoints, replacing static book values with dynamic, evidence-based valuation. Structural Risk Reduction – IoT-enabled monitoring of condition and custody collapses uncertainty, reducing degradation risk and materially lowering risk premiums. Balance-Sheet Mobilization – Capital previously trapped in inventory and transit is unlocked, expanding the collateral universe and strengthening liquidity without increasing leverage. The Technological Architecture of the Intelligent Enterprise Capital optimization at this level requires architectural convergence across SAP’s ecosystem: Physical Layer (SAP Business Network & IoT) – Establishes factual truth regarding asset location, condition, and custody. Intelligence Layer (SAP IBP & S/4HANA) – Provides business intent, demand context, and financial recording within the digital core. Financial Optimization Layer (SAP FPSL & IFRA) – Performs high-performance valuation, accounting, and risk alignment, extending collateral management to newly visible physical assets. Together, these layers enable a shift from static collateral allocation to continuous, balance-sheet-wide optimization. Transforming the Role of the Collateral Manager Within this architecture, the collateral manager evolves from an administrative function into a Capital Optimization Architect. Through a global collateral dashboard, cash and securities are viewed alongside live supply-chain assets, enabling dynamic rebalancing across asset classes. Scenario A: A margin call is satisfied using a high-value shipment nearing secure delivery, avoiding cash outflow. Scenario B: A market shock erodes equity collateral, automatically offset by newly validated WIP that has crossed a quality threshold. Such rebalancing is only possible when supply chain and treasury silos are fully dismantled and real-time data flows into FPSL and IFRA. Regulatory Acceptance Path: From Physical Visibility to Eligible Collateral Collateral mobilization succeeds only if it aligns with prudential regulation. This architecture does not redefine regulatory frameworks; it operationalizes them. Basel III/IV does not reject physical assets—it rejects opacity. Assets become eligible when existence, valuation, control, and liquidity are demonstrable. SAP Business Network provides continuous proof of these attributes, while FPSL and IFRA ensure auditable valuation and risk alignment. For banks using Internal Models (IMM), this data supports explainability, stress testing, and supervisory validation. Haircuts evolve from static penalties into risk-sensitive instruments reflecting real conditions. Integrated audit trails establish enforceability and custody comparable to traditional financial instruments. As supervisors increasingly focus on operational resilience, supply-chain risk, and climate transition exposure, collateral mobilization emerges not as an exception, but as a natural evolution of prudential supervision. Strategic Benefits for the Global Economy Mobilizing capital trapped in global supply chains delivers systemic advantages: Resilience in low-growth environments through non-inflationary liquidity. Support for the energy transition by freeing operational capital for sustainable investment. Diversification of financial risk, reducing systemic dependence on a narrow set of collateral instruments. Conclusion: Bridging the Gap for a Sustainable Future The "perfect storm" of high debt, low growth, and the energy transition is not a temporary hurdle; it is the new reality of the 2020s. In this environment, capital is the most precious resource, and its mismanagement is the greatest risk. The strategic convergence of SAP Business Network, SAP FPSL, IFRA, and the broader Capital Optimization framework offers a roadmap for navigating this complexity. By turning the "invisibility" of the supply chain into the "transparency" of the balance sheet, we can mobilize billions in trapped assets, reduce systemic risk, and provide the liquidity needed to fund the future. The future of finance is not just in digital coins or complex derivatives; it is in the intelligent, real-time orchestration of the physical world. By bridging supply chain and financial intelligence, we are not just optimizing capital—we are building a more resilient, transparent, and productive global economy. Through the lens of Capital Optimization, every "Stock in Transit" is no longer just a cost to be managed, but a source of power to be mobilized. "Capital Optimization is the bridge between today's debt-heavy constraints and tomorrow's growth; by mobilizing every asset in transit, we aren't just managing risk—we are fueling the energy transition." Connect and Stay Informed: Join the Conversation: Connect with fellow professionals in the SAP Banking Group on LinkedIn. https://www.linkedin.com/groups/92860/ Stay Updated: Subscribe to the SAP Banking Newsletter for the latest insights. https://www.linkedin.com/newsletters/sap-banking-6893665983048081409/ Join my readers on Medium where I explore Capital Optimization in depth. Follow for actionable insights and fresh perspectives https://medium.com/@ferran.frances Explore More: Visit the SAP Banking Blog for in-depth articles and analyses. https://sapbank.blogspot.com/ Connect Personally: Feel free to send a LinkedIn invitation; I'm always open to connecting with like-minded individuals. ferran.frances@gmail.com I look forward to hearing your perspectives. Kindest Regards, Ferran Frances-Gil. #CapitalOptimization #SAPBusinessNetwork #SAPFPSL #IFRA #SupplyChainFinance #TreasuryManagement #FinancialIntelligence #AssetMobilization #S4HANA #Liquidity #ferranfrances