Dear,
Bloomberg published an article indicating that 60% of British factories are at risk of going under as energy bills soar.
https://www.business-standard.com/article/international/60-of-british-factories-at-risk-of-going-under-as-energy-bills-soar-122090300111_1.html
This is not a surprise, since the financial crisis of October 2008 the world has entered a new systemic phase of Capital scarcity. Just look at the evolution of the balance sheet of the Federal Reserve in this period and you will see it.
https://www.statista.com/statistics/1121448/fed-balance-sheet-timeline/
There are two main factors determining this new environment of capital scarcity.
The lack of growth, as a consequence of the shortage of energy (peak-oil) and the excess of debt (public and private debt).
The excess of debt over-consumes capital and the lack of growth prevents it from being generated. Both factors are structural and therefore determine the new economic environment.
But capital is the most important resource in the financial system, and if it has become scarce, the priority is to optimize it.
The Second Law of Thermodynamics teaches us that to optimize a resource in a system it is necessary to reduce its entropy and that entropy is reduced with information.
And information theory teaches us that the exchange of information requires a common language between sender and receiver.
The highest level of information exchange to reduce entropy is process integration, when the sender and receiver collaborate on the process and share the information needed to plan and execute it efficiently.
SAP has been since its foundation the leader in process integration. First integrating the processes of the departments of a company, then the information of the companies within a group and finally integrating processes between groups of companies until reaching 70% of the World GDP.
Financial services have remained isolated from this integration process, very few banks have transformed their processes to SAP and none have integrated their processes with those of their clients.
But the new economic environment of scarcity of capital has come with new challenges. Since the start of the COVID-19 pandemic, supply chains have suffered severe tensions and those tensions have been exacerbated by the war in Ukraine and the energy crisis.
For instance, when more than half of the companies in the United Kingdom announce that they have solvency problems, traditional credit analysis is insufficient.
SAP has excellent solutions for Credit Risk management in the area of Financial Supply Chain Management, but these solutions are limited to the analysis of the historical performance of counterparties and the volume of risk exposure.
In times of systemic change, history changes direction and historical default data is insufficient to estimate future credit risk. As an example, just look at the credit risk of online retail companies and physical stores in the last 3 years.
If looking at the historical performance of our counterparties is not enough, we will have to estimate their future.
SAP systems provide a lot of useful information to estimate the future result and performance of a company. It is about analyzing it in a systematic way to draw conclusions about its future performance.
For example, a company that produces and distributes perishable products will reduce waste and improve the level of service with efficient management of the shelf-life of its products. SAP offers us powerful tools for the efficient management of the shelf-life of perishable products. Available to Promise with Product Allocations functionalities, consensus based planning and forecasting, vendor-managed-inventory scenarios, etc. It seems reasonable to think that companies with the know-how and technology to carry out these processes improve their stock management, which puts them on the path to better future results.
But we will only reduce the risk by moving from intuitive to systematic analysis. The uncertainty of these difficult times requires moving from reactive to proactive management and only the integration of processes can take us to that level of efficient capital management.
Our proposal measures the Capital and Liquidity consumed and generated by the processes of the real economy managed with SAP Systems, detecting the deficits and surpluses of capital and liquidity of the process. With this information, it proposes financial instruments to offset these deficits and surpluses, optimizing the consumption of capital and liquidity of the system.
We are working on presenting our system to the market and looking for business partners and investors. If you are interested, do not hesitate to contact me at ferran.frances@capitency.com
Looking forward to reading your opinions.
Kindest Regards,
Ferran Frances.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
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